Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Fair Value Measurements

Fair Value Measurements

(5) Fair Value Measurements

The Company reports all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are as follows:

Level 1—Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access 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.

Level 3—Inputs are unobservable inputs for the asset or liability.

The following tables present the fair value hierarchy used to measure the Company’s financial assets and liabilities as of June 30, 2024 and December 31, 2023, respectively (in thousands):

	June 30, 2024
	Level 1		Level 2		Level 3
Assets:
Cash equivalents:
Money market funds	$	12,315	$	—	$	—
Short-term investments:
U.S. treasury securities		—		76,796		—
Corporate bonds		2,996		—		—
Total Assets	$	15,311	$	76,796	$	—
Liabilities:
Derivative warrant liability – Public Warrants	$	1,446	$	—	$	—
Derivative warrant liability – Private Warrants		—		—		1,964
Earn-out liabilities		—		—		2,461
Total Liabilities	$	1,446	$	—	$	4,425

	December 31, 2023
	Level 1		Level 2		Level 3
Assets:
Cash Equivalents:
Money Market Funds	$	15,681	$	—	$	—
Short-term investments:
U.S treasury securities		—		45,270		—
U.S. government agency bonds		—		7,927		—
Corporate bonds		25,340		—		—
Total Assets	$	41,021	$	53,197	$	—
Liabilities:
Derivative warrant liability – Public Warrants	$	1,323	$	—	$	—
Derivative warrant liability – Private Warrants		—		—		1,604
Earn-out liabilities		—		—		2,155
Total Liabilities	$	1,323	$	—	$	3,759

As of June 30, 2024 and December 31, 2023, the Company has recorded the following financial instruments subject to fair value measurements: 1) Derivative warrant liabilities—Public Warrants and Private Warrants, 2) Available-for-sale securities and 3) Earn-out liabilities.

The Company also has long-term debt that provides for variable interest, and therefore, the carrying value approximates the fair value. The carrying values of the long-term debt as of June 30, 2024 and December 31, 2023, respectively, represent the original principal amounts borrowed, accretion of final payments fees, less principal payments and unamortized debt issuance costs.

The fair value of the Public Warrants has been measured based on the observable listed prices for such Warrants, a Level 1 measurement. Long-term debt issued by the Company is classified within Level 2. The fair value of the Company’s Level 2 financial assets are determined by using inputs based on quoted market prices for similar instruments. The carrying value of the long-term debt approximates its fair value given their maturity and variable interest rates.

All other financial instruments are classified as Level 3 instruments as they all include unobservable inputs. The Private Warrants are measured at fair value using a Black Scholes model. The Company estimates the volatility of its ordinary share Warrants based on the implied volatility from the Company’s publicly traded Warrants and from historical volatility of select peer company ordinary shares that matches the expected remaining life of the Warrants. The fair value of the Earn-out liabilities is estimated using a Monte Carlo simulation model.

The Company estimated the fair value of a Forward Warrant Agreement that was in place throughout most of 2023 using a forward analysis with unobservable inputs which included selected risk-free rate and probability outcomes. The Forward Warrant Agreement had no value as of December 31, 2023 because the Forward Warrant Agreement expired in October 2023 without taking effect. See Note 6 for further discussion regarding the Forward Warrant Agreement.

There were no changes in fair value measurement techniques during the three and six months ended June 30, 2024. The Company reduced the estimated probability of occurrence for the Forward Warrant Agreement from 50% to 0% during the nine months ended September 30, 2023 to account for expiration of the Forward Warrant Agreement in October 2023. There were no changes in fair value measurement techniques during the year ended December 31, 2023, other than the change in the estimated probability of occurrence for the Forward Warrant Agreement described above. There were no transfers in or out of Level 3 of the fair value hierarchy during the three and six months ended June 30, 2024 or 2023, except that in the six months ended June 30, 2023, the derivative liability for 450,000 Warrants was transferred from Level 3 to Level 1 of the fair value hierarchy because such Warrants were converted from Private to Public Warrants. The transfer had a $0.1 million favorable impact on the Company’s net loss in the six months ended June 30, 2023. The fair value estimates are based on pertinent information available to management as of June 30, 2024 and December 31, 2023. Current estimates of fair value may differ from the amounts presented.

A summary of the changes in the fair value of the Company’s Level 3 financial instruments during the six months ended June 30, 2024, and 2023 respectively, is as follows (in thousands):

	Derivative		Forward
	Warrant Liability -		Warrant		Earn-out
	Private Warrants		Agreement		Liabilities
Balance – December 31, 2023	$	1,604	$	—	$	2,155
Change in fair value - three months ended March 31, 2024		1,505		—		1,621
Change in fair value - three months ended June 30, 2024		(1,145)		—		(1,315)
Balance – June 30, 2024	$	1,964	$	—	$	2,461
Balance – December 31, 2022	$	1,068	$	(2,229)	$	1,206
Change in fair value - three months ended March 31, 2023		623		1,100		281
Transfer from Private Warrants to Public Warrants		(158)		—		—
Change in fair value - three months ended June 30, 2023		(133)		44		350
Balance – June 30, 2023	$	1,400	$	(1,085)	$	1,837