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Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Fair Value Measurements

Fair Value Measurements

Note 9 – Fair Value Measurements

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities).

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis and indicates the level within the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value as of March 31, 2023 and December 31, 2022:


			March 31,					December 31,
			2023					2022
(in thousands)			Level		Balance			Level		Balance
Cash equivalents
Money market funds			1		$	125,125		1		$	150,125
Liabilities
Earnout liability			3		$	3,793		3		$	1,730
Warrant liability – Public Warrants			1			15,399		1			10,164
Warrant liability – Private Placement Warrants			3			3,285		2			2,140
Total liabilities					$	22,477				$	14,034

The earnout liability was valued using a Monte Carlo simulation methodology. Assumptions used in the valuation of the earnout liability are as follows:


		March 31,
		2023
Stock price		$	7.79
Risk-free interest rate			3.75	%
Expected term (in years)			2.5
Expected volatility			100	%
Dividend rate			—	%

The warrants are accounted for as liabilities in accordance with ASC 815, Derivatives and Hedging, and are presented as warrant liabilities on the condensed consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed consolidated statements of operations. The close price of the Public Warrants was used as its fair value as of each relevant date.

As of March 31, 2023, the Private Placement Warrants were valued using a Monte Carlo simulation methodology, which is considered a Level 3 fair value measurement. As of December 31, 2022, the fair value of the Private Placement Warrants was measured by reference to the trading price of the Public Warrants, which is considered a Level 2 fair value measurement. Assumptions used in the valuation of the Private Placement Warrant liability are as follows:


		March 31,
		2023
Stock price		$	7.79
Risk-free interest rate			3.78	%
Expected term (in years)			3.3
Expected volatility			33	%
Dividend rate			—	%
Exercise price		$	11.50

The following table presents a reconciliation for all liabilities measured and recognized at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2023:


		Private
		Placement
		Warrant			Earnout
(in thousands)		Liability			Liability
Fair value as of December 31, 2022		$	—		$	1,730
Change in fair value of liability			—			2,063
Transfers into Level 3			3,285			—
Fair value as of March 31, 2023		$	3,285		$	3,793

There were no other transfers between levels of the fair value hierarchy for the three months ended March 31, 2023.

The carrying values of certain accounts such as accounts receivable, accounts payable and accrued expenses are deemed to approximate their fair values due to their short-term nature. The fair values of the Company’s money market funds are based on quoted prices in active markets for identical assets. There were no assets measured on a recurring basis using significant unobservable inputs (Level 3) as of March 31, 2023 or December 31, 2022.

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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