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Fair Value Measurements
 6 Months Ended
Jun. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements
4. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
Fair Value Measurements at
December 31, 2023
(In thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market mutual funds$887 $— $— $887 
Short-term investments849 70,381 — 71,230 
$1,736 $70,381 $— $72,117 
Liabilities:
       Warrant liability - public warrants$1,555 $— $— $1,555 
       Warrant liability - private placement warrants— 953 — 953 
$1,555 $953 $— $2,508 
Fair Value Measurements at
December 31, 2022
(In thousands)Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market mutual funds$515 $— $— $515 
Short-term investments— 69,448 — 69,448 
$515 $69,448 $— $69,963 
Liabilities:
Derivative liability$— $— $971 $971 
$— $— $971 $971 
The fair values of government money market funds have been measured on a recurring basis using Level 1 inputs, which are based on unadjusted quoted market prices within active markets. The short-term investments, including investments in fixed income securities, have been measured using quoted pricing on active markets for Level 1 investments and inputs based on alternative pricing sources and models utilizing observable market inputs for Level 2 investments.
The fair value of the Public Warrants is classified as Level 1 due to the use of an observable market quote in an active market. The fair value of the Private Placement Warrants is classified as Level 2 due to the use of an observable market quote for the Public Warrants, which are considered to be a similar asset in an active market. The warrant liability is calculated by multiplying the quoted market price of the Company’s Public Warrants by the total number of Public Warrants and Private Placement Warrants.
The Company’s Level 3 liability historically consisted of an embedded derivative liability associated with the Company’s Bridge Notes (as defined in Note 15, "Debt"). On October 17, 2022, the closing date of the Bridge Notes, the Company recorded the fair value of the embedded derivative liability associated with the Bridge Notes. The embedded derivative liability was subject to remeasurement at the end of each reporting period, with changes in fair value recognized as a component of other income (expense), net. The fair value of the derivative liability was determined using a Monte Carlo Simulation (“MCS”) analysis, which uses Level 3 inputs. The MCS analysis contains inherent assumptions related to expected stock price volatility, estimated Merger Closing Date, risk-free interest rate, estimated market yield and the probability of a successful transaction. Due to the use of significant unobservable inputs, the overall fair value measurement of the derivative liability was classified as Level 3. Upon the closing of the Merger, the convertible note was converted into shares of flyExclusive Class A Common stock, which triggered the termination of the derivative liability.
The fair value of the derivative liability as of October 17, 2022 and December 27, 2023 was determined using the following assumptions:
October 17, 2022
Exchange closing price$9.82 
Contractual conversion price$10.00 
Risk-free rate4.3 %
Estimated volatility4.5 %
December 27, 2023
Exchange closing price$11.98 
Contractual conversion price$10.00 
Risk-free rate5.6 %
Estimated volatility15.1 %
The following table shows the change in the fair value of the derivative liability for the year ended December 31, 2023 and December 31, 2022:
(In thousands)Amount
Balance as of December 31, 2021$— 
Issuance of derivative instrument$1,441 
Change in fair value of derivative liability$(470)
Balance as of December 31, 2022$971 
Change in fair value of derivative liability14,589 
Derecognition of derivative liability$(15,560)
Balance as of December 31, 2023$— 
There have been no changes in valuation techniques and related inputs. As of December 31, 2023 and December 31, 2022, there were no transfers between Level 1, Level 2, and Level 3.
5. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
Fair Value Measurements at
June 30, 2024
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market mutual funds$1,750 $— $— $1,750 
Investments in Securities842 68,589 — 69,431 
$2,592 $68,589 $— $71,181 
Liabilities:
       Warrant liability - public warrants$1,399 $— $— $1,399 
       Warrant liability - private placement warrants— 2,405 — 2,405 
Warrant liability - penny warrants— — 1,422 1,422 
$1,399 $2,405 $1,422 $5,226 
Fair Value Measurements at
December 31, 2023
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market mutual funds$887 $— $— $887 
Investments in Securities849 70,381 — 71,230 
$1,736 $70,381 $— $72,117 
Liabilities:
Warrant liability - public warrants$1,555 $— $— $1,555 
Warrant liability - private placement warrants— 953 — 953 
$1,555 $953 $— $2,508 
The fair values of government money market funds have been measured on a recurring basis using Level 1 inputs, which are based on unadjusted quoted market prices within active markets. The short-term investments, including investments in fixed income securities, have been measured using quoted pricing on active markets for
Level 1 investments and inputs based on alternative pricing sources and models utilizing observable market inputs for Level 2 investments.
The fair value of the Public Warrants is classified as Level 1 due to the use of an observable market quote in an active market. The fair value of the Private Placement Warrants is classified as Level 2 due to the use of an observable market quote for the Public Warrants, which are considered to be a similar asset in an active market. The warrant liability is calculated by multiplying the quoted market price of the Company’s Public Warrants by the total number of Public Warrants and Private Placement Warrants.
The Company’s Level 3 liability consists of the Penny Warrants associated with the issuance of Series A Preferred Stock. This liability has been classified as Level 3 due to the use of unobservable inputs within the valuation, namely volatility.
The fair value of the Penny Warrant liability as of March 4, 2024 and June 30, 2024 was determined utilizing a Monte Carlo simulation valuation method, using the following inputs and assumptions:
$ in thousands, except for Stock price, Strike price, and share amountsMarch 4, 2024
Warrant Shares 1,304,907 
Aggregate Value Cap$11,250 
Stock price$15.49 
Strike price$0.01 
Term (in years)5 years
Volatility95.0 %
Risk free rate4.2 %
Dividend Rate— %
$ in thousands, except for Stock price, Strike price, and share amountsJune 30, 2024
Warrant Shares1,270,242 
Aggregate Value Cap$11,250 
Stock price$4.03 
Strike price$0.01 
Term (in years)4.7 years
Volatility115.0 %
Risk free rate4.4 %
Dividend Rate— %
There have been no other changes in valuation techniques and related inputs. As of June 30, 2024 and December 31, 2023, there were no transfers between Level 1, Level 2, and Level 3.