Annual report [Section 13 and 15(d), not S-K Item 405]

Fair Value Measurement

v3.25.4
Fair Value Measurement
 12 Months Ended
Dec. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
The following tables represent the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of the periods presented:
December 31, 2025
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Money market funds $ 28,255  $ —  $ —  $ 28,255 
U.S. Treasuries 5,980  —  —  5,980 
Total assets $ 34,235  $ —  $ —  $ 34,235 
Liabilities:
Debt derivative liabilities $ —  $ —  $ 3,886  $ 3,886 
December 31, 2024
(in thousands) Level 1 Level 2 Level 3 Total
Assets:
Money market funds $ 19,399  $ —  $ —  $ 19,399 
U.S. Treasuries 5,928  —  —  5,928 
Total assets $ 25,327  $ —  $ —  $ 25,327 
Liabilities:
Debt derivative liability $ —  $ —  $ 2,400  $ 2,400 
The changes in Level 3 liabilities measured at fair value on a recurring basis are as follows for the periods presented:
(in thousands) Debt Derivative Liabilities
Balance, December 31, 2023 $ 2,987 
Change in fair value included in net loss (587)
Balance, December 31, 2024 2,400 
Change in fair value included in net loss 1,486 
Balance, December 31, 2025 $ 3,886 
There were no changes in the levels or methodology of the measurement of financial assets or liabilities during the years ended December 31, 2025 and 2024.
The debt derivative liabilities are measured using a ‘with and without’ valuation model to compare the fair value of each tranche of the credit facility the Company has with Oberland Capital and its affiliates, TPC Investments II LP and Argo LLC (“Credit Facility”) including the identified embedded derivative feature and the fair value of a plain vanilla note with the same terms. The fair value of the Credit Facility including the embedded derivative features was determined using a probability-weighted expected return model based on three potential settlement scenarios for the Credit Facility included in the tables below. The estimated settlement value of each scenario, which would include any required make-whole payment (see Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees), is then discounted to present value using a discount rate that is derived based on the initial terms of the Credit Facility at issuance and corroborated utilizing a synthetic credit rating analysis.
The significant inputs, as of the periods presented, that are included in the valuation of the debt derivative liability - first tranche include:
Input December 31, 2025 December 31, 2024
Remaining term (years) 1.5 years 2.5 years
Maturity date June 30, 2027 June 30, 2027
Coupon rate
9.5% - 13.0%
9.5% - 13.0%
Revenue participation payments Maximum each year Maximum each year
Discount rate 11.23% (1) 12.22  % (1)
Probability of mandatory prepayment after 2025 10.0% (1) 15.0% (1)
Estimated timing of mandatory prepayment event after 2025 March 31, 2026 (1) March 31, 2026 (1)
Probability of optional prepayment event 80.0% (1) 5.0% (1)
Estimated timing of optional prepayment event January 31, 2026 (1) December 31, 2025 (1)
Probability of note held-to-maturity (2)
10.0% (1) 80.0% (1)
__________
(1)Represents a significant unobservable input.
(2)See Maturity date in table.
The significant inputs, as of the periods presented, that are included in the valuation of the debt derivative liability - second tranche include:
Input December 31, 2025 December 31, 2024
Remaining term (years) 2.5 years 3.5 years
Maturity date June 30, 2028 June 30, 2028
Coupon rate
9.5% - 13.0%
9.5% - 13.0%
Revenue participation payments Maximum each year Maximum each year
Discount rate 14.49  % (1) 15.48  % (1)
Probability of mandatory prepayment after 2025 10.0% (1) 15.0% (1)
Estimated timing of mandatory prepayment event after 2025 March 31, 2026 (1) March 31, 2026 (1)
Probability of optional prepayment event 80.0% (1) 5.0% (1)
Estimated timing of optional prepayment event January 31, 2026 (1) December 31, 2025 (1)
Probability of note held-to-maturity (2)
10.0  % (1) 80.0  % (1)
__________
(1)Represents a significant unobservable input.
(2)See Maturity date in table.