6. FAIR VALUE MEASUREMENTS

The Company uses the following three-tier fair value hierarchy, which prioritizes the inputs used in measuring the fair values for certain of its assets and liabilities:

Level 1 is based on observable inputs, such as quoted prices in active markets;

Level 2 is based on inputs other than the quoted prices in active markets that are observable either directly or indirectly; and

Level 3 is based on unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Items measured at fair value on a recurring basis include money market funds. The following fair value hierarchy table presents information about the Company’s financial assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs the Company utilized to determine such fair value (in thousands):

​

​

​

The Company has determined that the estimated fair value of its commercial paper, corporate bonds, U.S Treasury securities, government bonds, and asset-backed securities are reported as Level 2 financial assets as they are based on model-driven valuations in

which all significant inputs are observable, or can be derived from or corroborated by observable market data for substantially the full term of the asset.

​

Equity securities include investments made via publicly-traded securities. The Company has determined that the estimated fair value of its equity securities is reported as Level 1 financial assets as they are based on quoted market prices in active markets for identical assets. During the years ended December 31, 2023 and 2022, the Company recognized a loss on its equity security of $0.5 million and $6.3 million, respectively, due to the change in fair value of the equity securities in interest and other (expense) income, net in the consolidated statements of operations. Additionally, for the year ended December 31, 2021, the Company recorded an initial subscription agreement liability of $0.5 million related to this investment and recognized a loss on the subscription agreement liability of $2.4 million, for a total loss of $12.6 million on its equity security. The initial subscription liability was recorded as a Level 3 liability as a result of the discount for lack of marketability. Upon investment, the liability was derecognized and the investment was recorded as a Level 3 investment because the equity security was not registered for resale and a discount for lack of marketability was still applied. Subsequently, the security was registered and the investment was transferred from Level 3 to Level 1.

​

Other investments include investments made via convertible debt instruments totaling $2.0 million and $2.0 million for the years ended December 31, 2023 and 2022. The other investments are reported as a Level 3 financial asset because the methodology used to develop the estimated fair values includes significant unobservable inputs reflecting management’s own assumptions. Assumptions used in determining the fair value of convertible debt instruments include the rights and obligations of the notes the Company holds as well as the probability of a qualified financing event, acquisition, or change in control. During the year ended December 31, 2023, the Company did not recognize a gain or loss on convertible debt instruments. During the year ended December 31, 2022, the Company recognized a loss of $1.6 million on convertible debt instruments. During the year ended December 31, 2022, $3.1 million of the outstanding convertible debt instruments was repaid in full.

​

The Aerosint acquisition included contingent consideration related to revenue metrics and technical milestones, with a fair value of $6.1 million as of the date of acquisition and no remaining fair value as of December 31, 2023. The contingent consideration liability was valued using a Monte Carlo simulation in a risk-neutral framework as well as a scenario-based approach (both special cases of the income approach), based on key inputs that are not all observable in the market and is classified as a Level 3 liability. The Company assesses the fair value of the contingent consideration liability at each reporting period, with any subsequent changes to the fair value of the liability reflected in the consolidated statement of operations until the liability is settled. During the year ended December 31, 2023, the Company derecognized the remaining contingent consideration of $0.2 million upon the sale of Aerosint. During the year ended December 31, 2022, the Company recognized a gain in fair value of contingent consideration of $1.6 million. During the year ended December 31, 2023, the Company paid $1.6 million in cash and $0.8 million in shares to Aerosint in connection with the achievement of revenue and technical milestones. During the year ended December 31, 2022, based on the relevant revenues earned during the first year of the three-year contingent consideration period, the Company paid $1.0 million in cash and $0.5 million in shares to Aerosint. As of December 31, 2023, no contingent consideration is recorded in accrued expenses and other current liabilities in the consolidated balance sheets.

​

The fair value of the Private Placement Warrants, defined in Note 19. Stockholders’ Equity, was estimated using the Black-Scholes option pricing model and was classified as a Level 3 financial instrument. The significant assumptions used in the model were the Company’s stock price, exercise price, expected term, volatility, interest rate, and dividend yield. During the year ended December 31, 2021, the Company recognized a loss of $56.6 million on the Private Placement Warrants. The Private Placement Warrants were all exercised as of March 2, 2021.

​

There were no transfers between fair value measure levels during the years ended December 31, 2023 and 2022. The following table presents information about the Company’s movement in Level 3 assets measured at fair value (in thousands):

​

​

The following table presents information about the Company’s movement in Level 3 liabilities measured at fair value (in thousands):