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Fair Value of Measurements

3 Months Ended

12 Months Ended

Mar. 31, 2024

Dec. 31, 2023

5.Fair Value of Measurements

Fair value hierarchy classifications of the financial instruments that are measured at fair value on a recurring basis are as follows (in thousands):


	March 31, 2024
	Level 1		Level 2		Level 3		Total

Convertible promissory notes	$	—	$	—	$	10,317	$	10,317
Warrant liabilities		—		—		10,584		10,584


	December 31, 2023
	Level 1		Level 2		Level 3		Total

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	March 31, 2024		December 31, 2023
Convertible promissory notes, current	Discounted Cash Flow Model (“DCF”)	Discount rate, risk-free rate, credit spread, contractual cash flows	$	5,645
	PWERM (“Probability-Weighted Expected Return Method”)	Scenario of initial public offering (“IPO”) and merger & acquisition (“M&A”)			$	27,794
Convertible promissory notes, net of current	Binomial Lattice Model (“BLM”)	Stock price, volatility, remaining term, risk-free rate, credit spread		4,672
	PWERM	Scenario of initial public offering (“IPO”) and merger & acquisition (“M&A”)				6,239
Warrant liabilities – private and public warrants	Black Scholes Merton Model (“BSM”) or BLM	Exercise price, term to expiration, volatility, risk-free rate		9,150		—
Warrant liabilities - other				1,434		—

As of March 31, 2024, the key inputs for the convertible promissory notes, current using the DCF were as follows: remaining term of 0.25 years and a discount rate of 10.2%. As of March 31, 2024, the key inputs for the convertible promissory notes, net of current using the BLM were as follows: stock price of $6.58, volatility of 32.2%, remaining term of 1.9 years, risk-free rate of 4.6%, and credit spread of 5.0%.

As of March 31, 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 5 years, volatility range of 19.4% and a risk-free rate of 4.2%. As of March 31, 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 5.0 years. As of March 31, 2024, the key inputs for the warrant liabilities – other using the BSM were as follows: an exercise price of $5.00 per share, or $10.00 per share or $18.75 per share, term to expiration ranging from 0.4 years to 2.6 years, volatility ranging from 29.5% to 32.7%, and a risk-free rate ranging from 4.4% to 5.4%.

As of December 31, 2023, the PWERM was used as Legacy GCT was a private company. After the Closing, and as of March 31, 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 Company’s Level 3 financial liabilities (in thousands):


	Three Months Ended March 31,
	2024		2023
Convertible promissory notes fair value - beginning of period	$	34,033	$	31,166
Change in fair value of convertible promissory notes		1,203		(549)
Conversion of convertible promissory notes		(41,209)		—
Borrowing of convertible promissory notes		16,290		—
Convertible promissory notes fair value - end of period	$	10,317	$	30,617


	Three Months Ended March 31,
	2024		2023
Warrant Liabilities Fair value - beginning of period	$	—	$	—
Private and public warrants assumed at Closing		5,958		—
Change in fair value of warrant liabilities		4,626		—
Warrant Liabilities Fair value - end of period	$	10,584	$	—

The gains and losses from fair value re-measurement of Level 3 financial liabilities are recorded as other income, net in the condensed consolidated statements of operations.

2.Fair Value of Measurements

Fair Value Hierarchy

Recurring fair value measurements

Fair value hierarchy classifications of the financial instruments that are measured at fair value on a recurring basis as of December 31, 2023 and 2022, are as follows:


	2023
(in thousands)	Level 1		Level 2		Level 3		Total
Convertible promissory notes	$	—	$	—	$	34,033	$	34,033

Recurring fair value measurements, continued


	2022
(in thousands)	Level 1		Level 2		Level 3		Total
Convertible promissory notes	$	—	$	—	$	31,166	$	31,166

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 as of December 31, 2023 and 2022.


(in thousands)	Valuation techniques	Inputs	2023		2022
Convertible promissory notes, current	PWERM	Scenario of initial public offering (“IPO”) and merger & acquisition (“M&A”)	$	27,794	$	31,166
Convertible promissory notes, net of current				6,239		—

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the years ended December 31, 2023 and 2022:


(in thousands)	2023		2022
Fair value as of beginning of period	$	31,166	$	56,996
Change in fair value of convertible promissory notes		1,428		450
Conversion of convertible promissory notes		(61)		(33,140)
Repayment of convertible promissory notes		(500)		(1,140)
Transfer of convertible promissory notes to bank borrowings		—		(1,000)
Borrowing of convertible promissory notes		2,000		9,000
Fair value as of end of period	$	34,033	$	31,166

The gains and losses from fair value re-measurement of Level 3 financial liabilities are recorded as other income (expense), net in the consolidated statements of operations.

- 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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