Fair Value Measurements
The Company’s assets and liabilities that are measured at fair value on a recurring basis include the following as of December 31, 2025 and 2024, set forth by level within the fair value hierarchy:
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| As of December 31, 2025 |
| (in thousands) | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | | | | | | | |
| Money market funds | $ | 9,416 | | | $ | — | | | $ | — | | | $ | 9,416 | |
| Short-term investments | — | | | 11,078 | | | — | | | 11,078 | |
| Total Assets | $ | 9,416 | | | $ | 11,078 | | | $ | — | | | $ | 20,494 | |
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| As of December 31, 2024 |
| (in thousands) | Level 1 | | Level 2 | | Level 3 | | Total |
| Assets | | | | | | | |
| Money market funds | $ | 12,305 | | | $ | — | | | $ | — | | | $ | 12,305 | |
| Short-term investments | — | | | — | | | — | | | — | |
| Total Assets | $ | 12,305 | | | $ | — | | | $ | — | | | $ | 12,305 | |
| Liabilities | | | | | | | |
| Redeemable convertible preferred stock tranche liability | — | | | — | | | 3,417 | | | 3,417 | |
| Total Liabilities | $ | — | | | $ | — | | | $ | 3,417 | | | $ | 3,417 | |
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The fair value of the Redeemable Convertible Preferred Stock Tranche Liability was based on significant inputs not observable in the market, which represent a level 3 measurement within the fair value hierarchy. The fair value of the Redeemable Convertible Preferred Stock Tranche Liability was determined using a Monte Carlo simulation forecasting the timing and likelihood of certain development milestone events being achieved and discounting the probability adjusted payments using an appropriate discount rate based on market interest rates. The main assumptions when determining the fair value of the Redeemable Convertible Preferred Stock Tranche Liability is the timing of and probability of achieving certain milestones, the estimated volatility of the Company’s common stock, and the discount rate. The estimated fair value presented is not necessarily indicative of an amount that could be realized in a current market exchange. The use of alternative inputs and estimation methodologies could have a material effect on these estimates of fair value.
Significant unobservable inputs for the Redeemable Convertible Preferred Stock Tranche Liability as of December 31, 2024 are as follows:
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| Preferred Equity Tranche Liability | | Valuation Technique | | Unobservable Input | | Range/Average |
| Development Milestones | | Monte Carlo Simulation | | Probability of achieving certain development milestones | | 95 | % |
| | | | Volatility | | 60 | % |
| | | | Discount Rate | | 4.26 | % |
| | | | Timing of achieving certain development milestones | | 0.16 years |
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The following table reflects the fair value of the Company's level 3 Redeemable Convertible Preferred Stock Tranche Liability for the year ended December 31, 2025:
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| (in thousands) | |
| Fair value of the Redeemable Convertible Preferred Stock Tranche Liability as of December 31, 2024 | $ | 3,417 | |
| Change in fair value of the Redeemable Convertible Preferred Stock Tranche Liability in March 2025 | 1,526 | |
| Settlement of tranche in March 2025 | (4,943) | |
| Fair value of the Redeemable Convertible Preferred Stock Tranche Liability as of December 31, 2025 | $ | — | |
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Short-term investments consist of fixed income U.S. treasury securities and certificates of deposit with maturities primarily between three and twelve months. The United States Treasury securities and Certificate of Deposit investments are classified as held-to-maturity and are reported at amortized cost, plus any additional costs incurred, as of December 31, 2025 and 2024. The amortized cost and fair value of held-to-maturity securities approximated each other at December 31, 2025 and 2024.
During the years ended December 31, 2025 and 2024, there were no transfers between level 1, level 2 and level 3.
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.