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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of the dates indicated:
| September 30, 2021
| Level 1 |  | Level 2 |  | Level 3 |  | Aggregate Fair Value
Assets: |
Money market funds | $ | 42,800 |  |  | $ | — |  |  | $ | — |  |  | $ | 42,800 |
Total assets | 42,800 |  |  | — |  |  | — |  |  | 42,800 |
Liabilities: |
Derivative liabilities, current | — |  |  | — |  |  | 547 |  |  | 547 |
Derivative liabilities, noncurrent | — |  |  | — |  |  | 2,205 |  |  | 2,205 |
Derivative warrant liabilities - Public Warrants | 23,402 |  |  | — |  |  | — |  |  | 23,402 |
Derivative warrant liabilities - Private Placement Warrants | — |  |  | — |  |  | 11,667 |  |  | 11,667 |
Total liabilities | $ | 23,402 |  |  | $ | — |  |  | $ | 14,419 |  |  | $ | 37,821 |
| December 31, 2020
| Level 1 |  | Level 2 |  | Level 3 |  | Aggregate Fair Value
Assets: |
Money market funds | $ | 25,016 |  |  | $ | — |  |  | $ | — |  |  | $ | 25,016 |
Total assets | 25,016 |  |  | — |  |  | — |  |  | 25,016 |
Liabilities: |
Derivative liabilities, noncurrent | — |  |  | — |  |  | 4,343 |  |  | 4,343 |
Class B Units - related party | — |  |  | — |  |  | 593,235 |  |  | 593,235 |
Total liabilities | $ | — |  |  | $ | — |  |  | $ | 597,578 |  |  | $ | 597,578 |
The level 3 liabilities that related to our Class B Units and certain employee and non-employee contracts with embedded derivatives, see Note 8, Derivative Financial Instruments and Note 9, Stock-Based Compensation. On the date of the Transactions, the fair value of the Public Warrants and the Private Placement Warrants was estimated using a Monte Carlo simulation model. The fair value of the Public Warrants was subsequently measured based on the listed market price of such warrants at the end of the reporting period. The fair value of the Private Placement Warrants was subsequently estimated using a Monte Carlo simulation model at the end of the reporting period. The Company estimates the fair value of the warrants at each reporting period, with changes in fair value recognized in the condensed consolidated statements of operations. The estimated fair value of the derivative warrant liabilities – Public Warrants is determined using Level 1 inputs. The estimated fair value of the derivative warrant liabilities – Private Placement Warrants is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life and risk-free interest rate. The Company estimates the volatility of its ordinary shares based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| As of |  |  |
| September 30, 2021 |  |  |
Stock price | $ | 8.26 |  |  |  |
Exercise Price | $ | 11.50 |  |  |  |
Expected life of the warrants to convert (years) | 4.81 |  |  |
Volatility | 27.80 | % |  |  |
Risk-free rate | 0.93 | % |  |  |
The following table summarizes the change in fair value of the derivative liabilities during the nine months ended September 30, 2021 and 2020:
Balance at January 1, 2021 | $ | 597,578 |
Incremental Class B Units | 206,914 |
Establishment of derivative warrant liabilities on July 21, 2021 (date of the Transactions) | 45,021 |
Change in fair value of derivative instruments | (11,543) |
Change in fair value of Class B Units | 728,079 |
Reclassification of Class B Units from liability to equity on July 21, 2021 (date of the Transactions) | $ | (1,528,228) |
Balance at September 30, 2021 | $ | 37,821 |
Balance at January 1, 2020 | $ | 119,307 |
Incremental Class B Units | 13,398 |
Change in fair value of derivative instruments | 1,874 |
Change in fair value of Class B Units | 113,866 |
Balance at September 30, 2020 | $ | 248,445 |
The following table summarizes the change in fair value of the Class B Units by income statement line item during the three and nine months ended September 30, 2021 and 2020:
| Three Months Ended September 30, |  | Nine Months Ended September 30, |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |  |  |  |
Cost of revenue | $ | 24,028 |  |  | $ | 12,167 |  |  | $ | 136,417 |  |  | $ | 22,052 |  |  |  |  |  |
Sales and marketing | 2,607 |  |  | 943 |  |  | 10,870 |  |  | 1,965 |  |  |  |  |  |
General and administrative | 102,911 |  |  | 50,960 |  |  | 580,792 |  |  | 89,849 |  |  |  |  |  |
Total change in fair value of Class B Units | $ | 129,546 |  |  | $ | 64,070 |  |  | $ | 728,079 |  |  | $ | 113,866 |  |  |  |  |  |
To derive the fair value of the Class B Units, we estimated the fair value of Class B Units using a valuation technique. For more information regarding the valuation of the Class B Units, see Note 9, Stock-Based Compensation. As more fully described in Note 1, we completed our Transactions in July 2021, and all Class B Units fully vested as of the transaction date, and the original operating agreement was terminated and replaced by a new operating agreement consistent with the Company’s Up-C structure. This new operating agreement does not contain the put and call options that existed under the previous operating agreement, and the Common Units under the new operating agreement are treated as common equity and do not generate stock-based compensation expense. The Class B Units liability was reclassified to equity as of the transaction date.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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