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FAIR VALUE MEASUREMENT
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENT FAIR VALUE MEASUREMENT
The following table presents the fair value of the Company's financial instruments that are measured or disclosed at fair value on a recurring basis (in thousands):
December 31, 2024
Level 1Level 2Level 3
Assets:
Cash equivalents:
Treasury bills$38,070 $— $— 
Money market funds131,767 $— $— 
Total assets$169,837 $— $— 
Liabilities:
Other current liabilities
Contingent holdback consideration
$— $— $4,076 
Contingent acquisition liabilities
Contingent earnout consideration
$— $— $286,898 
Total liabilities$— $— $290,974 
December 31, 2023
Level 1Level 2Level 3
Assets:
Cash equivalents:
Treasury bills$35,961 $— $— 
Money market funds54,542 $— $— 
Total assets$90,503 $— $— 
Equity Line of Credit
Liabilities:Equity Line of Credit
January 1, 2022$— 
Issuance of ELOC1,075 
December 31, 20221,075 
Change in fair value1,901 
Settlements(2,976)
December 31, 2023$— 
The Company estimated the Level 3 fair value of the liability related to the ELOC using contractual inputs of the commitment shares and reimbursement fees prior to the settlement. The Company determined that the ELOC was not indexed to the Company’s own common stock and, therefore, should be accounted for in accordance with ASC 815: Derivatives. Accordingly, the Company recorded a derivative liability with an initial fair value of $1.1 million based on the upfront commitment fee and the reimbursement amount to the investor as consideration for its irrevocable commitment to purchase up to 25,000,000 shares of the Company's common stock.
Subsequent changes in the fair value of the derivative liability are dependent upon, among other things, changes in the closing share price of the Company’s common stock, the quantity and purchase price of shares purchased during the reporting period, the unused capacity under the ELOC as of the balance sheet date and the cost of raising other forms of capital. The Company adjusts the previous fair value estimate of the committed equity facility at each reporting period based on changes in the weighted average purchase price of shares purchased during the period, the unused capacity available under the ELOC, expected stock price volatility and other macroeconomic factors which impact the cost of raising comparable forms of capital.
The changes in the fair value of the committed equity facility were an increase of $1.9 million for the year ended December 31, 2023, which is included in other (income) expense, net on the consolidated statements of operations and comprehensive income (loss). The fair value of the liability then is remeasured as of the settlement date equal to the difference between the volume weighted average price at a 3% discount compared to the fair value of the common stock.
Derivative Liability (SNAP June 2020 Note)
To determine the fair value of the embedded derivative associated with the SNAP June 2020 Note, the Company utilized the income approach model using the With and Without method. Using the With and Without method, the Company modeled expected cash flows to the noteholder under Next Equity Financing, Change in Control, SPAC/Private Investment in Public Equity, and IPO scenarios. The value of the embedded derivative was determined as the differential value from the perspective of the With and Without Method. The Company utilized the following assumptions at the valuation date:
December 31, 2021
Probability of Next Equity Financing3 %
Probability of SPAC/PIPE95 %
Probability of IPO2 %
100 %
Weighted average term (years)0.27
Weighted average discount rate25 %
The significant unobservable inputs used in the fair value measurement of the derivative liability are the remaining expected term, the discount rate, and the probability of financing for each scenario. Significant increases (decreases) in
the term would result in significantly lower (higher) fair value measurements. Significant increases (decreases) in the discount rate would result in significantly lower (higher) fair value measurements.
On April 26, 2022, the Closing of the Business Combination, the embedded derivative was valued at fair value which was equivalent to its intrinsic value. The embedded derivative had a fair value of $4.1 million. As the Closing of the Business Combination triggered the Conversion Feature contained within the SNAP June 2020 Note, therefore converting the note’s principal to equity, the embedded derivative associated with the note was extinguished. The Company recorded the remeasurement of derivative liabilities in other expense, net on the consolidated statements of operations and comprehensive loss. The fair value of the embedded derivative was recorded as additional paid-in capital upon extinguishment on the consolidated balance sheet.
The following table summarizes the fair value remeasurement of the embedded derivative for the year ended December 31, 2022 (in thousands):
Year Ended December 31,
2022
Remeasurement of conversion feature — loss $(606)
The following table sets forth a summary of changes in fair value of the Company’s derivative liability and warrant liability for which fair value was determined by Level 3 inputs:
Derivative LiabilityWarrant Liability
Balance as of December 31, 2021$3,488 $— 
Change in fair value$606 $— 
Extinguishment of embedded derivative upon conversion of convertible note$(4,094)$— 
Balance as of December 31, 2022$— $— 
Term Loan and Term Loan Warrant
The fair value of the Company's variable rate Term Loan approximates aggregate principal amount as the interest rate of the loan approximates market rates.
The Company issued a Class A Common Stock warrant in connection with the Term Loan (see Note 9 for additional information). The warrant was recorded based on the allocation of its relative fair value of the debt proceeds of $4.1 million. The warrants were classified as equity instruments at inception with a corresponding discount recorded at issuance against the outstanding note payable in connection with the Term Loan. The common stock warrant is not subject to remeasurement at each subsequent balance sheet date due to its classification as an equity instrument as it is considered indexed to the Company’s stock. The Term Loan warrant expires in April 2033.
The Company determined the fair value of the Term Loan common stock warrant at issuance using the Black-Scholes option-pricing model using the following assumptions:
Expected dividend rate— %
Risk-free interest rate3.60 %
Expected volatility52 %
Expected term (in years)5
All of the Term Loan Warrants had been exercised during the year ended December 31, 2024. No Term Loan Warrants had been exercised during the year ended December 31, 2023.
Contingent Acquisition Liabilities
Contingent Holdback Consideration
The reconciliation of the Company's Contingent Holdback Consideration measured at fair value, including the effect of measurement period adjustments, on a recurring basis using unobservable inputs (Level 3) is as follows:
Balance as of December 31, 2023$— 
Acquisition of SYNQ3981 
Change in the fair value of liability3,712 
Measurement period adjustments(411)
Settlement(206)
Balance as of December 31, 2024$4,076 
The fair value of the cash portion of the Contingent Holdback Consideration was estimated based upon the holdback period of 15 months, and discounted using the risk-free interest rate based on the U.S. Treasury zero-coupon yield curve on the valuation date for a maturity similar to the 15-month holdback period. The fair value of the equity portion of the Contingent Holdback Consideration was estimated based upon the value of the Company’s Class A Common Stock price. The fair value of the Contingent Holdback Consideration was initially measured on January 3, 2024, the date on which the Company completed the acquisition of SYNQ3. For the year ended December 31, 2024, the Company recognized a loss of $3.7 million related to the Contingent Holdback Consideration.
The fair value of the Contingent Holdback Consideration has been estimated as of the Closing Date and December 31, 2024, under the following assumptions:
January 3, 2024December 31, 2024
Risk-free interest rate
4.6 %4.0 %
Holdback period
1.25 years0.25 years
Contingent Earnout Consideration
The reconciliation of the Company's contingent earnout consideration measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:
Balance as of December 31, 2023$— 
Acquisition of SYNQ31,676 
Acquisition of Amelia66,269 
Change in the fair value of liability*218,953 
Balance as of December 31, 2024$286,898 
*The Company's year-end stock price increase resulted in an increase in its fair value of contingent acquisition liabilities where future Contingent Earnout Consideration is marked-to-market on a quarterly basis, significantly impacting net loss and net loss per share during the year ended December 31, 2024. The fluctuation is non-operating and non-cash in nature.
For the year ended December 31, 2024, the Company recognized a loss of $219.0 million related to the contingent earnout consideration, reflected in the change in fair value of contingent acquisition liabilities in the consolidated statement of operations and comprehensive loss.
The Company utilizes a Monte Carlo simulation to value the contingent earnout consideration. The Company selected this model as it believes it is reflective of all significant assumptions that market participants would likely consider in negotiating the transfer of the contingent earnout consideration. Such assumptions include, among other inputs, expected stock price volatility, risk-free rates, and change in control assumptions. The Company estimates the expected volatility of its common stock based on historical volatility of a peer group, considering the remaining term of the contingent earnout consideration. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the valuation date for a maturity similar to the expected remaining life of the contingent earnout consideration. The expected life of the contingent earnout consideration is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
The fair value of the Contingent SYNQ3 Earnout Consideration acquired from SYNQ3 Acquisition has been estimated as of the Closing Date and December 31, 2024, with the following assumptions for the unobservable inputs:
January 3, 2024December 31, 2024
Discount rate
12.6 %12.9 %
Expected stock price volatility
115.3 %130.0 %
Risk-free interest rate
4.2 %4.2 %
Expected dividend yield
0.0 %0.0 %
Expected life
0.5 - 2.5 years
0.50 - 1.50 years
The fair value of the Contingent Amelia Earnout Consideration acquired from Amelia Acquisition has been estimated as of the Closing Date and December 31, 2024, with the following assumptions for the unobservable inputs:
August 6, 2024December 31, 2024
Metric specific discount rate8.0 %9.5 %
Earnout payment discount rate3.8 %4.2 %
Expected stock price volatility73.0 %68.0 %
Expected metric volatility11.0 %12.0 %
Risk-free interest rate for target revenue4.0 %4.2 %
Risk-free interest rate for stock price3.8 %4.2 %
Expected dividend yield— %— %
Expected life
1.4 - 2.4 years
1.0 - 2.0 years
There were no transfers of financial instruments between Level 1, Level 2 and Level 3 during the years ended December 31, 2024 and 2023.