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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Basis of Presentation and Summary of Significant Accounting Policies

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting and are unaudited. Management believes that all adjustments necessary for the fair presentation of results, consisting of normally recurring items, have been included in the condensed consolidated financial statements for the interim periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year or any other future interim or annual periods. All intercompany balances and transactions have been eliminated in consolidation. As a result of the Business Combination completed on February 3, 2022, prior period share and per share amounts presented in the accompanying condensed consolidated financial statements and these related notes have been retroactively converted. The Company’s fiscal year ends on December 31.

The year-end balance sheet data was derived from audited consolidated financial statements. These unaudited financial statements do not include all of the annual disclosures required by U.S. GAAP; accordingly, they should be read in conjunction with the audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2023 (the “Annual Report”).

Use of estimates

The preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of commitments and contingencies, and the reported amounts of revenues, if any, and expenses. The Company bases its estimates on available historical experience and on various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from those estimates.

Significant estimates and assumptions include those related to the valuation of (i) certain equity awards, including common stock awards prior to the Business Combination, the Sponsor Earn-Out Shares, the Earn-Out Restricted Shares, restricted stock awards, and performance stock units, (ii) deferred tax assets and uncertain income tax positions, and (iii) and the measurement of operating lease liabilities. On an ongoing basis, the Company evaluates these judgments and estimates for reasonableness.

Investments

The Company has investments in marketable debt and marketable equity securities. Investments in marketable debt securities, which are comprised of U.S. treasury securities, are classified as available-for-sale and are recorded at fair value with any unrealized gains and losses

included as a component of accumulated other comprehensive loss in total stockholders’ equity on the consolidated balance sheets until realized or until a determination is made that an other-than-temporary decline in market value has occurred. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, with such amortization and accretion reported within interest income, net in the consolidated statement of operations and comprehensive loss. Investments in marketable debt securities with a stated maturity date of less than one year are classified as short-term investments, while those with a stated maturity date of more than one year, and that are not expected to be used in current operations, are classified as long-term investments on the consolidated balance sheet, respectively. Investments in marketable equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at fair value with changes to fair value reported within other income (expense), net in the consolidated statements of operations and comprehensive loss.

Fair Value Measurements

Fair value is defined as an exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded or disclosed at fair value, the Company considers the principal or most advantageous market in which it would transact, and it also considers assumptions that market participants would use when pricing the asset or liability.

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. GAAP establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is as follows:

Level 1 Observable inputs such as quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 Inputs other than the quoted prices in active markets that are observable either directly or indirectly.

Level 3 Unobservable inputs in which there are little or no market data and which require the Company to develop its own assumptions.

Certain of the Company’s financial instruments, including cash and cash equivalents, accounts payable, accrued expenses and other current liabilities are carried at cost, which approximates their fair value because of their short-term nature. The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:


(in thousands)	Level 1		Level 2		Level 3		Total
June 30, 2023
Current Assets
Cash equivalents in money market funds (Note 4)	$	41,776	$	—	$	—	$	41,776
U.S. treasury securities⁽¹⁾		304,591		—		—		304,591
Equity securities⁽²⁾		551		—		—		551
Total current assets at fair value	$	346,918	$	—	$	—	$	346,918

Non-current Assets
U.S. treasury securities⁽¹⁾	$	—	$	—	$	—	$	—
Restricted cash in money market funds		614		—		—		614
Total non-current assets at fair value	$	614	$	—	$	—	$	614
Total Assets at fair value	$	347,532	$	—	$	—	$	347,532

Liabilities
Sponsor Earn-Out Liability⁽³⁾	$	—	$	—	$	7,466	$	7,466
Total liabilities at fair value	$	—	$	—	$	7,466	$	7,466

December 31, 2022
Current Assets
Cash equivalents in money market funds (Note 4)	$	46,308	$	—	$	—	$	46,308
U.S. treasury securities⁽¹⁾		283,460		—		—		283,460
Total current assets at fair value	$	329,768	$	—	$	—	$	329,768

Non-current Assets
Restricted cash in money market funds	$	614	$	—	$	—	$	614
Total non-current assets at fair value	$	614	$	—	$	—	$	614
Total Assets at fair value	$	330,382	$	—	$	—	$	330,382

Liabilities
Sponsor Earn-Out Liability⁽³⁾	$	—	$	—	$	10,961	$	10,961
Total liabilities at fair value	$	—	$	—	$	10,961	$	10,961

⁽¹⁾ Fair value was determined using market prices obtained from third-party sources, see “Note 5 – Investments” for more details.

⁽²⁾ Fair value was determined using publicly quoted market prices obtained from third-party sources in their respective markets.

⁽³⁾See “Note 8 – Sponsor Earn-Out Liability” for details about inputs used in the fair value measurements of the Sponsor Earn-Out Liability.

There were no transfers in or out of Level 3 measurements during the three and six months ended June 30, 2023.

Recently Adopted Accounting Pronouncements

The Company has reviewed all accounting pronouncements issued during the three months ended June 30, 2023 and concluded they were either not applicable or not expected to have a material impact on the Company’s condensed consolidated financial statements.