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Fair Value of Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value of Measurements  
Fair Value of Measurements

5. Fair Value of Measurements

Recurring Fair Value Measurements

The following financial instruments are measured at fair value on a recurring basis (in thousands):

 

 

September 30, 2024

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Convertible promissory notes

 

$

—

 

 

$

—

 

 

$

8,838

 

 

 

8,838

 

Warrant liabilities

 

 

—

 

 

 

—

 

 

 

3,197

 

 

 

3,197

 

Common stock forward liability

 

 

—

 

 

 

—

 

 

 

451

 

 

 

451

 

 

 

December 31, 2023

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Convertible promissory notes

 

$

—

 

 

$

—

 

 

$

34,033

 

 

$

34,033

 

 

Valuation techniques and the inputs

The table below presents valuation techniques and inputs used in the fair value measurement categorized within Level 3 of the fair value hierarchy (in thousands):

 

 

Valuation techniques

 

Inputs

 

September 30, 2024

 

 

December 31, 2023

 

Convertible promissory notes, current

 

Discounted Cash Flow Model (“DCF”)

 

Discount rate, risk-free rate, credit spread, contractual cash flows

 

$

4,008

 

 

$

—

 

 

PWERM

 

Scenario of initial public offering (“IPO”) and merger and acquisition (“M&A”)

 

 

—

 

 

 

27,794

 

Common stock forward liability

 

DCF

 

Various utilization scenarios, risk-free rate, remaining term

 

 

451

 

 

 

—

 

Convertible promissory notes, net of current

 

Binomial Lattice Model (“BLM”)

 

Stock price, volatility, remaining term, risk-free rate, credit spread

 

 

4,830

 

 

 

—

 

 

PWERM

 

Scenario of initial public offering (“IPO”) and merger and acquisition (“M&A”)

 

 

—

 

 

 

6,239

 

Warrant liabilities

 

Black Scholes Merton
Model (“BSM”) or BLM

 

Exercise price, term to expiration, volatility, risk-free rate

 

 

3,197

 

 

 

—

 

 

As of September 30, 2024, the key inputs for the convertible promissory notes valuation using the DCF model were as follows: remaining term ranging from 0.08 to 0.25 years and a discount rate of 10.07%. As of September 30, 2024, the key inputs for the convertible promissory notes, net of current, using the BLM were as follows: stock price of $3.35, volatility of 35.5%, remaining term of 1.4 years, risk-free rate of 3.85%, and credit spread of 5.6%.

As of September 30, 2024, the key inputs for the common stock forward valuation using the DCF model were as follows: a remaining term of 1.6 years and future risk-free rate estimates ranging from 3.78 to 4.93% for this period.

As of September 30, 2024, the key inputs for the private placement warrants using the BSM were as follows: exercise price of $11.50 per share, term to expiration of 4.5 years, volatility of 35.5%, and a risk-free rate of 3.55%. As of September 30, 2024, the key inputs for the public warrants using the BLM were as follows: exercise price of $11.50 per share and term to expiration of 4.5 years. As of September 30, 2024, the key inputs for the other warrant liabilities using the BSM were as follows: an exercise price of $10.00 per share, or $18.75 per share, term to expiration ranging from 1.41 years to 2.1 years, volatility ranging from 38.1% to 39.0%, and a risk-free rate ranging from 3.62% to 3.81%.

As of December 31, 2023, the PWERM was used as Legacy GCT was a private company. After the Closing, and as of September 30, 2024, the valuation techniques used reflect that the Business Combination was consummated.

The following table sets forth a summary of the changes in the fair value of the convertible promissory notes (in thousands):

 

As of December 31, 2023

 

$

34,033

 

Conversion

 

 

(41,209

)

Borrowing

 

 

16,290

 

Change in fair value

 

 

1,203

 

As of March 31, 2024

 

 

10,317

 

Repayment

 

 

(630

)

Change in fair value

 

 

(14

)

As of June 30, 2024

 

 

9,673

 

Repayment

 

 

(1,000

)

Change in fair value

 

 

165

 

As of September 30, 2024

 

$

8,838

 

 

The following table sets forth a summary of the changes in the fair value of the warrant liabilities (in thousands):

 

As of December 31, 2023

 

$

—

 

Fair value of warrants assumed at Closing

 

 

5,958

 

Change in fair value

 

 

4,626

 

As of March 31, 2024

 

 

10,584

 

Change in fair value

 

 

(6,628

)

As of June 30, 2024

 

 

3,956

 

Change in fair value

 

 

(759

)

As of September 30, 2024

 

$

3,197

 

 

The following table sets forth a summary of the changes in the fair value of the common stock forward liability (in thousands):

 

As of March 31, 2024

 

$

—

 

Loss from initial recognition

 

 

586

 

Settlement in equity

 

 

(51

)

As of June 30, 2024

 

 

535

 

Settlement in equity

 

 

(84

)

As of September 30, 2024

 

$

451