Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 3. FAIR VALUE MEASUREMENTS

The Company measures certain financial assets and liabilities at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value: 

● Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

● Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

● Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. 

The fair value of Level 1 securities is determined using quoted prices in active markets for identical assets. Level 1 securities consist of highly liquid money market funds. In addition, restricted cash collateralized by money market funds is a financial asset measured at fair value and is a Level 1 financial instrument under the fair value hierarchy.

Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data, such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. The Company had no financial instruments classified at Level 2 as of September 30, 2024 and December 31, 2023.

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques and at least one significant model assumption or input is unobservable. Level 3 liabilities that are measured at fair value on a recurring basis included earnout liability as of December 31, 2023, which was recognized in connection with the business combination in September 2021 and expired in September 2024. The Company had no financial instruments classified at Level 3 as of September 30, 2024.

During the periods presented, the Company has not changed the manner in which it values liabilities that are measured at estimated fair value using Level 3 inputs. There were no transfers within the hierarchy during the three and nine months ended September 30, 2024 and 2023.

The following tables set forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy (in thousands): 

	September 30, 2024
	Level 1		Level 2		Level 3		Total
Financial assets
Money market funds	$	91,502	$	—	$	—	$	91,502
Total fair value of assets	$	91,502	$	—	$	—	$	91,502

	December 31, 2023
	Level 1		Level 2		Level 3		Total
Financial assets
Money market funds	$	85,887	$	—	$	—	$	85,887
Total fair value of assets	$	85,887	$	—	$	—	$	85,887
Financial liabilities
Earnout liability	$	—	$	—	$	—	$	—
Total fair value of financial liabilities	$	—	$	—	$	—	$	—

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands):

	Earnout Liability
Fair Value as of December 31, 2022	$	18
Change in the fair value included in other expense		764
Fair Value as of March 31, 2023	$	782
Change in the fair value included in other income		(420	)
Fair Value as of June 30, 2023	$	362
Change in the fair value included in other income		(334	)
Fair Value as of September 30, 2023	$	28
Fair Value as of December 31, 2023	$	—
Change in the fair value included in other expense		20
Fair Value as of March 31, 2024	$	20
Change in the fair value included in other expense		—
Fair Value as of June 30, 2024	$	20
Change in the fair value included in other income		(20	)
Fair Value as of September 30, 2024	$	—

The estimated fair value of the earnout liability was determined using a Monte Carlo simulation model, which uses a distribution of potential outcomes on a monthly basis over the earnout period prioritizing the most reliable information available. The assumptions utilized in the calculation were based on the achievement of certain stock price milestones, including the Company’s current common stock price, expected volatility, risk-free rate and expected term. On September 24, 2024, the earnout liability expired and the Earnout Shares (as defined in Note 7) that were previously held in escrow were forfeited and cancelled.

As of December 31, 2023, the fair value of the earnout liability was minimal. The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements classified in Level 3 of the fair value hierarchy as of December 31, 2023:

	Fair value (in thousands)		Valuation methodology	Significant unobservable input
Earnout liability	$	—	Monte Carlo Simulation	Common stock price	$	7.89
				Expected term (in years)		0.73
				Expected volatility		94.0	%
				Risk-free interest rate		4.92	%