Fair Value
The Company’s financial instruments that are measured at fair value on a recurring basis consist of money market funds and the Convertible Grant Agreement. The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values (in thousands):
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| December 31, 2025 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Cash and cash equivalents: | | | | | | | |
| Money market funds | $ | 176,430 | | | $ | 176,430 | | | $ | — | | | $ | — | |
| Restricted cash: | | | | | | | |
| Money market funds | 500 | | | 500 | | | — | | | — | |
| Total assets | $ | 176,930 | | | $ | 176,930 | | | $ | — | | | $ | — | |
| Liabilities: | | | | | | | |
| Convertible Grant Agreement | $ | 2,227 | | | $ | — | | | $ | — | | | $ | 2,227 | |
| Total liabilities | $ | 2,227 | | | $ | — | | | $ | — | | | $ | 2,227 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| Assets: | | | | | | | |
| Cash and cash equivalents: | | | | | | | |
| Money market funds | $ | 168,136 | | | $ | 168,136 | | | $ | — | | | $ | — | |
| Restricted cash: | | | | | | | |
| Money market funds | 500 | | | 500 | | | — | | | — | |
| Total assets | $ | 168,636 | | | $ | 168,636 | | | $ | — | | | $ | — | |
| Liabilities: | | | | | | | |
| Convertible Grant Agreement | $ | 1,304 | | | $ | — | | | $ | — | | | $ | 1,304 | |
| Total liabilities | $ | 1,304 | | | $ | — | | | $ | — | | | $ | 1,304 | |
The Company classifies its money market funds, which are valued based on quoted market prices in an active market with no valuation adjustment, as Level 1 assets within the fair value hierarchy. The Company’s Convertible Grant Agreement is
classified as a Level 3 instrument under the fair value hierarchy as the fair values were determined based on significant inputs not observable in the market. See Note 8 for additional information on the Convertible Grant Agreement.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.