Fair Value Measurements |
Note 5 – Fair Value Measurements The carrying amounts of certain financial instruments, such as cash equivalents, short-term investments, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to their relatively short maturities. Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis As of June 30, 2023 and December 31, 2022, the Company’s financial assets and liabilities measured and recorded at fair value on a recurring basis were classified within the fair value hierarchy as follows: | | | | | | | | | | | | | | | June 30, 2023 | | | Level 1 | | Level 2 | | Level 3 | | Total | Assets | | | | | | | | | | | | | Commercial Paper | | $ | 137,072 | | $ | — | | $ | — | | $ | 137,072 | Corporate Bonds | | $ | 216,390 | | $ | — | | $ | — | | $ | 216,390 | Government Bonds | | $ | 61,487 | | $ | — | | $ | — | | $ | 61,487 | U.S. Treasuries | | | — | | | — | | | — | | | — | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | Public Warrants | | $ | 3,932 | | $ | — | | $ | — | | $ | 3,932 | Private Placement Warrants | | $ | — | | $ | 2,859 | | $ | — | | $ | 2,859 |
| | | | | | | | | | | | | | | December 31, 2022 | | | Level 1 | | Level 2 | | Level 3 | | Total | Assets | | | | | | | | | | | | | Commercial Paper | | $ | 165,179 | | $ | — | | $ | — | | $ | 165,179 | Corporate Bonds | | $ | 227,957 | | $ | — | | $ | — | | $ | 227,957 | Government Bonds | | $ | 42,865 | | $ | — | | $ | — | | $ | 42,865 | U.S. Treasuries | | | 9,930 | | | — | | | — | | | 9,930 | | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | | Public Warrants | | $ | 4,900 | | $ | — | | $ | — | | $ | 4,900 | Private Placement Warrants | | $ | — | | $ | 4,217 | | $ | — | | $ | 4,217 |
The change in fair value of the Company’s marketable securities and long-term investments are included in other comprehensive loss. There were no transfers in and out of Level 3 fair value hierarchy during the three or six months ended June 30, 2023 or year ended December 31, 2022. For the three and six months ended June 30, 2023, the Company purchased $174,400 of marketable securities. Fair Value of Warrants The fair value of the Private Placement Warrants (defined below) has been estimated using a Black-Scholes model as of June 30, 2023 and December 31, 2022 Consolidated Balance Sheet dates. The fair value of the Public Warrants (defined below) has been measured based on the quoted price of such warrants on the Nasdaq Stock Market, a Level 1 input. The estimated fair value of the Private Placement Warrants is determined using Level 2 inputs. Inherent in a Black-Scholes model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. Material increases (or decreases) in any of those inputs may result in a significantly higher (or lower) fair value measurement. The Company estimates the volatility of its Private Placement Warrants based on implied volatility from the Company’s Public Warrants and from historical volatility of select peer companies’ common stock that matches the expected remaining life of the Warrants (defined below). The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve 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 dividend yield is based on the historical rate, which the Company anticipates remaining at zero. The following table provides quantitative information regarding Level 2 inputs used in the recurring valuation of the Private Placement Warrants as of their measurement dates: | | | | | | | | | | June 30, 2023 | | December 31, 2022 | | Exercise Price | | $ | 11.50 | | $ | 11.50 | | Stock Price | | $ | 2.54 | | $ | 2.54 | | Volatility | | | 70.0 | % | | 71.3 | % | Term | | | 3.44 | | | 3.94 | | Risk-free rate | | | 4.32 | % | | 4.03 | % |
The following table provides a reconciliation of the Public Warrants measured at fair value using Level 1 directly observable inputs and Private Placement Warrants measured at fair value using Level 2 directly or indirectly observable inputs: | | | | | | | | | Public Warrants | | Private Placement Warrants | | | Level 1 Fair Value | | Level 2 Fair Value | December 31, 2022 | | $ | 0.42 | | $ | 0.55 | Change in fair value | | $ | 0.04 | | $ | 0.31 | March 31, 2023 | | $ | 0.46 | | $ | 0.86 | Change in fair value | | $ | (0.15) | | $ | (0.43) | June 30, 2023 | | $ | 0.31 | | $ | 0.43 |
The following tables provides a reconciliation of the June 30, 2023 three and six month change in fair value for the Public Warrants and Private Placement Warrants: | | | | | | | | | | | | | | | | | | | | | | Three months change in | | | Warrant Class | | Level | | Warrants | | March 31, 2023 | | fair value | | June 30, 2023 | Public Warrants | | 1 | | 12,684,423 | | $ | 5,576 | | $ | (1,644) | | $ | 3,932 | Private Placement Warrants | | 2 | | 6,648,880 | | $ | 6,203 | | $ | (3,343) | | $ | 2,860 | Total | | | | 19,333,303 | | $ | 11,779 | | $ | (4,987) | | $ | 6,792 |
| | | | | | | | | | | | | | | | | | | | | | Six months change in | | | Warrant Class | | Level | | Warrants | | December 31, 2022 | | fair value | | June 30, 2023 | Public Warrants | | 1 | | 12,684,423 | | $ | 4,900 | | $ | (968) | | $ | 3,932 | Private Placement Warrants | | 2 | | 6,648,880 | | $ | 4,217 | | $ | (1,357) | | $ | 2,860 | Total | | | | 19,333,303 | | $ | 9,117 | | $ | (2,325) | | $ | 6,792 |
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