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Fair Value Measurements

12 Months Ended

Dec. 31, 2023

3. Fair Value Measurements

The following table sets forth marketable securities for the year ended December 31, 2023 (in thousands). The Company did not hold any marketable securities during the year ended December 31, 2022.


	As of December 31, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses		Total
U.S. Treasury-backed money market funds		29,622		11		—		29,633
Total	$	29,622	$	11	$	—	$	29,633

The following table set forth the fair value of the Company’s financial assets measured at fair value on a recurring basis and indicates the level within the fair value hierarchy utilized to determine such values (in thousands):


	As of December 31, 2023
	Total		Level 1		Level 2		Level 3
Cash Equivalents:
U.S. Treasury-backed money market funds	$	64,397	$	64,397		—		—
U.S. Treasury notes	$	11,980	$	11,980		—		—
Marketable Securities:
U.S. Treasury notes	$	29,633	$	29,633		—		—
Total	$	106,010	$	106,010	$	—	$	—


	As of December 31, 2022
	Total		Level 1		Level 2		Level 3
U.S. Treasury-backed money market funds	$	18,645	$	18,645		—		—
Total	$	18,645	$	18,645	$	—	$	—

Money market funds are highly liquid investments that are valued based on quoted market prices in active markets, which represent a Level 1 measurement within the fair value hierarchy. These money market funds are classified on the balance sheet under cash and cash equivalents.

Preferred Stock Warrant Liability

In connection with the November 24, 2020 Stock Purchase Agreement (see Note 9), the Company granted warrants to purchase up to 35,529 shares of Series A-2 convertible preferred stock at a price per share equal to $11.42 and with a term ending upon the earlier of an underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, the consummation of a Deemed Liquidation Event, as such term is defined in the Company’s Restated Certificate of Incorporation, or 10 years. As the warrants were for preferred stock, which did not qualify for equity classification, the warrants were recorded as a liability and were required to be remeasured to fair value at each reporting date. The warrants were exercised on May 4, 2022, just prior to the completion of the IPO, for proceeds of $0.4 million. Immediately prior to the consummation of the IPO, the warrants were converted into 34,901 shares of the Company's common stock.

As there are several inputs that are not observable in the market, the warrant valuation represented a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the preferred stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the preferred stock warrants.

The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock warrant liability included the fair value per share of the underlying Series A-2 convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. The most significant assumption in the Black-Scholes option-pricing model impacting the fair value of the preferred stock warrants was the fair value of the Company’s Series A-2 convertible preferred stock as of each remeasurement date. The Company determined the fair value per share of the underlying preferred stock by taking into consideration its most recent sales of its convertible preferred stock. The Company historically had been a private company and lacked company-specific historical and implied volatility information of its stock. Therefore, it estimated its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company had estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.

The Company recognized changes in the fair value of the warrant liability as a component of other income (expense) in its consolidated statements of operations and comprehensive loss.

A reconciliation of the Level 3 warrant liability through exercise in the second quarter of 2022 was as follows (in thousands):


	Series A-2 Preferred Stock Warrant Liability
Balance as of December 31, 2021	$	226
Change in fair value		(58	)
Exercise of preferred stock warrants		(168	)
Balance as of December 31, 2022	$	—

- 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.

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