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Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Financial instruments consist of cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, payment-dependent notes receivable, payment-dependent notes payable, and warrant liabilities. Cash equivalents, payment-dependent notes receivable, payment-dependent notes payable, and warrant liabilities are stated at fair value on a recurring basis. Restricted cash, accounts receivable, accounts payable, and accrued liabilities are stated at their carrying value, which approximates fair value, due to the short time these financial instruments are held to the expected receipt or payment date.

The Company classifies money market funds within Level 1 of the fair value hierarchy because the Company values these investments using quoted market prices. The Company classifies term deposits as level 2 of the fair value hierarchy because these investments are valued using observable market inputs without quoted market prices. The Company classifies the December 2023 Warrants within level 2 of the fair value hierarchy as these warrants are valued using a Black-Scholes option-pricing model with observable market inputs. The Company classifies Payment-dependent notes receivable and payable and its Private Placement Warrants as Level 3 of the fair value hierarchy as the fair value measurements are based on valuation techniques that use significant inputs that are unobservable which are described in more detail below.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands):


	As of March 31, 2024
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Money market funds	$	108,579	$	—	$	—	$	108,579
Term deposits (less than 90 days)	—		2,165		—		2,165
Term deposits (greater than 90 days)(1)(2)	—		7,621		—		7,621
Payment-dependent notes receivable, non-current	—		—		6,236		6,236
Total financial assets	$	108,579	$	9,786	$	6,236	$	124,601

Payment-dependent notes payable, non-current	$	—	$	—	$	6,236	$	6,236
December 2023 warrants(3)	—		2,067		—		2,067
Private placement warrants	—		—		3,102		3,102
Total financial liabilities	$	—	$	2,067	$	9,338	$	11,405


	As of December 31, 2023
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Money market funds	$	130,132	$	—	$	—	$	130,132
Term deposits (less than 90 days)	—		2,221		—		2,221
Payment-dependent notes receivable, non-current	—		—		5,593		5,593
Term deposits (greater than 90 days)(1)(2)	—		7,694		—		7,694
Total financial assets	$	130,132	$	9,915	$	5,593	$	145,640

Payment-dependent notes payable, non-current	$	—	$	—	$	5,593	$	5,593
December 2023 warrants(3)	—		4,889		—		4,889
Private placement warrants	—		—		4,727		4,727
Total financial liabilities	$	—	$	4,889	$	10,320	$	15,209

(1) Included in Prepaid expenses and other current assets on the unaudited condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.

(2) Includes $0.6 million and $1.0 million term deposits required to fulfill the Company's obligations in connection with real estate lease agreements as of March 31, 2024 and December 31, 2023, respectively.

(3) On December 18, 2023, the then outstanding Junior Preferred Stock Warrants were modified and replaced with the December 2023 Warrants. See Note 8, "Commitments and Contingencies" and Note 10, "Warrants" for additional information.

Payment-Dependent Notes Receivable and Payment-Dependent Notes Payable

The Company classifies payment-dependent notes receivable and payment-dependent notes payable within Level 3 of the fair value hierarchy if the underlying securities are equity of private companies whose regular financial and nonfinancial information is generally not available other than when it is publicly disclosed, or significant unobservable inputs are used to estimate fair value.

The Company estimates the fair value of payment-dependent notes receivable and payment-dependent notes payable utilizing completed transactions made through the Company’s platform for the relevant private securities as well as mutual fund valuations of private companies as relevant data inputs.

Private Placement Warrants

The Company classifies the Private Placement Warrants within Level 3 due to the valuation technique used to estimate fair value. To estimate the fair value of the Private Placement Warrants, the Company used a combination of a Monte Carlo simulation and a binomial lattice model for March 31, 2024 and December 31, 2023, respectively. The Company estimated the fair value of the Private Placement Warrant liabilities, as of March 31, 2024 and December 31, 2023, respectively, using the following key assumptions:


	March 31, 2024		December 31, 2023
Fair value of underlying securities	$	1.93	$	3.43
Expected term (years)	3.0		3.2
Expected volatility	120.0%		117.0%
Risk-free interest rate	4.4%		4.0%
Expected dividend yield	0.0%		0.0%

Fair value per warrant	$	0.42	$	0.64

The Company recorded changes in the fair value of the liability related to the Private Placement Warrants as of March 31, 2024, and 2023, respectively, in the following amounts (in thousands):


	Three months ended March 31,
	2024		2023
Balance as of December 31,	$	4,727	$	222
Change in fair value of warrant liability(1)	(1,625)		(32)
Balance as of March 31,	$	3,102	$	190

(1)The change in fair value of warrant liability is recorded in the unaudited condensed consolidated statements of operations within Change in fair value of warrant liabilities.

Transfers Into and Out of Level 3

The Company transfers financial instruments out of Level 3 on the date when underlying input parameters are readily observable from existing market quotes. On December 18, 2023, the Junior Preferred Stock Warrants were modified and replaced with the December 2023 Warrants and transferred from Level 3 to Level 2 upon modification as these warrants are valued using a Black-Scholes Option pricing model using observable market inputs. See Note 10, "Warrants" for additional information. For Payment-dependent notes payable and receivable, transfers from Level 3 to Level 1 generally relate to a company going public and listing on a national securities exchange. During the three months ended March 31, 2024, and 2023 there were no transfers of securities into or out of Level 3.

The following tables provide reconciliation for all financial assets and liabilities measured at fair value using significant unobservable inputs (Level 3) for three months ended March 31, 2024 and 2023 (in thousands):


	Total Level 3 Financial Assets		Total Level 3 Financial Liabilities
Balance as of December 31, 2023	$	5,593	$	10,320
Change in fair value of payment-dependent notes receivable	643		—
Change in fair value of payment-dependent notes payable	—		643
Change in fair value of Private Placement Warrants	—		(1,625)
Balance as of March 31, 2024	$	6,236	$	9,338


	Total Level 3 Financial Assets		Total Level 3 Financial Liabilities
Balance as of December 31, 2022	$	7,371	$	7,977
Change in fair value of payment-dependent notes receivable	(1,541)		—
Change in fair value of payment-dependent notes payable	—		(1,541)
Change in fair value of Junior Preferred Stock Warrants (1)	—		(137)
Change in fair value of Private Placement Warrants	—		(32)
Balance as of March 31, 2023	$	5,830	$	6,267

(1) On December 18, 2023, the Junior Preferred Stock Warrants were modified and replaced with the December 2023 Warrants and transferred from Level 3 to Level 2 upon modification as these warrants are valued using a Black-Scholes Option pricing model using observable market inputs. See Note 10, "Warrants" for additional information.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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