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Fair Value Measurements | 3 Months Ended
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Mar. 31, 2022
Fair Value Measurements |
Fair Value Measurements | 4. Fair Value Measurements The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements at March 31, 2022
​ |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Money market funds | ​ | $ | 257,555 | ​ | $ | — | ​ | $ | — | ​ | $ | 257,555
​ | ​ | $ | 257,555 | ​ | $ | — | ​ | $ | — | ​ | $ | 257,555
Liabilities: | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Contingent earn-out liability | ​ | $ | — | ​ | $ | — | ​ | $ | 18,128 | ​ | $ | 18,128
Contingently issuable common stock liability | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 3,792 | ​ | ​ | 3,792
Public Warrant liability | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 5,444 | ​ | ​ | 5,444
​ | ​ | $ | — | ​ | $ | — | ​ | $ | 27,364 | ​ | $ | 27,364
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Fair Value Measurements as of December 31, 2021
​ |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Money market funds | ​ | $ | 297,536 | ​ | $ | — | ​ | $ | — | ​ | $ | 297,536
​ | ​ | $ | 297,536 | ​ | $ | — | ​ | $ | — | ​ | $ | 297,536
Liabilities: | ​ | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Contingent earn-out liability | ​ | $ | — | ​ | $ | — | ​ | $ | 20,809 | ​ | $ | 20,809
Contingently issuable common stock liability | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 5,264 | ​ | ​ | 5,264
Public Warrant liability | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 11,030 | ​ | ​ | 11,030
​ | ​ | $ | — | ​ | $ | — | ​ | $ | 37,103 | ​ | $ | 37,103
​ As of March 31, 2022 and December 31, 2021, respectively, money market funds are included in cash and cash equivalents on the condensed consolidated balance sheets. During the three months ended March 31, 2022 and 2021, respectively, there were no transfers between Level 1, Level 2 and Level 3. Valuation of Contingent Earn-out Pursuant to the Merger Agreement, the Legacy Evolv shareholders, immediately prior to the Merger, were entitled to receive additional shares of the Company’s common stock upon the Company achieving certain milestones as described in Note 2 of our consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2021. The Company’s contingent earn-out shares were recorded at fair value as contingent earn-out liability upon the closing of the Merger and are remeasured at each reporting period. As of March 31, 2022, no milestones have been achieved. The estimated fair value of the initial contingent earn-out was determined using a Monte Carlo analysis in order to simulate the future path of the Company’s stock price over the earn-out period. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated value. As of March 31, 2022, the contingent earn-out was revalued using a similar Monte Carlo analysis. The significant assumptions to the model as of December 31, 2021 were as follows: 55% expected stock price volatility, a drift rate of 1.2%, 25% likelihood of change in control and an expected term of 4.5 years. The significant assumptions to the model as of March 31, 2022 were as follows: 92.5% expected stock price volatility, a drift rate of 2.4%, 25% likelihood of change in control and an expected term of 4.3 years. The following table provides a rollforward of the contingent earn-out liability (in thousands):
​ | ​ | ​ | ​
Balance at December 31, 2021 | ​ | $ | 20,809
Change in fair value | ​ |  | (4,226)
Out-of-period adjustment | ​ | ​ | 1,545
Balance at March 31, 2022 | ​ | $ | 18,128
​ Valuation of Contingently Issuable Common Stock Prior to the Merger, certain NHIC shareholders owned 4,312,500 Founder Shares. 1,897,500 shares vested at the closing of the Merger, 517,500 shares were transferred back to NHIC and then contributed to Give Evolv LLC and the remaining 1,897,500 outstanding shares shall vest upon the Company achieving certain milestones as described in Note 2 of our consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2021. The Company’s contingently issuable common stock was recorded at fair value as contingent shares on the closing of the Merger and will be remeasured at each reporting period. As of March 31, 2022, no milestones have been achieved. The estimated fair value of the initial contingently issued common shares was determined using a Monte Carlo analysis in order to simulate the future path of the Company’s stock price over the vesting period. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability’s estimated value. As of March 31, 2022, the contingently issuable common shares were revalued using a similar Monte Carlo analysis. The significant assumptions to the model as of December 31, 2021 were as follows: 55% expected stock price volatility, a drift rate of 1.2%, 25% likelihood of change in control and an expected term of 4.5 years. The significant assumptions to the model as of March 31, 2022 were as follows: 92.5% expected stock price volatility, a drift rate of 2.4%, 25% likelihood of change in control and an expected term of 4.3 years. The following table provides a rollforward of the contingently issuable common shares (in thousands):
​ | ​ | ​ | ​
Balance at December 31, 2021 | ​ | $ | 5,264
Change in fair value | ​ |  | (1,472)
Balance at March 31, 2022 | ​ | $ | 3,792
​ Valuation of Public Warrant Liability Upon the closing of the Merger, the Company assumed the Public Warrants to purchase shares of the Company’s common stock (see Note 13). The Public Warrants are publicly traded and the initial fair value of the public warrants were based on the closing price as reported by Nasdaq on the date of the Merger and remeasured at each reporting period. The following table provides a rollforward of the public warrant liability (in thousands): ​
​ | ​ | ​ | ​
Balance at December 31, 2021 | ​ | $ | 11,030
Change in fair value | ​ |  | (5,586)
Balance at March 31, 2022 | ​ | $ | 5,444
​

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
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