Annual report pursuant to Section 13 and 15(d)

Fair Value Measurement

v3.24.0.1
Fair Value Measurement
 12 Months Ended
Dec. 31, 2023
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 December 31, 2023, and 2022:
(in thousands) Level 1 Level 2 Level 3 Total
December 31, 2023
Assets:
Money market funds $ 24,977  $ —  $ —  $ 24,977 
Total assets $ 24,977  $ —  $ —  $ 24,977 
Liabilities:
Debt derivative liabilities $ —  $ —  $ 2,987  $ 2,987 
Total liabilities $ —  $ —  $ 2,987  $ 2,987 
December 31, 2022 Level 1 Level 2 Level 3 Total
Assets:
Money market funds $ 10,354  $ —  $ —  $ 10,354 
U.S. government securities 12,316  —  —  12,316 
Commercial paper —  21,189  —  21,189 
Total assets $ 22,669  $ 21,189  $ —  $ 43,859 
Liabilities:
Debt derivative liability $ —  $ —  $ 4,518  $ 4,518 
Total liabilities $ —  $ —  $ 4,518  $ 4,518 
The changes in Level 3 liabilities measured at fair value on a recurring basis were as follows:
(in thousands) Debt Derivative Liabilities
Balance, December 31, 2021 $ 5,562 
Change in fair value included in net loss (1,044)
Balance, December 31, 2022 4,518 
Change in fair value included in net loss (1,531)
Balance, December 31, 2023 $ 2,987 
There were no changes in the levels or methodology of the measurement of financial assets or liabilities during the years ended December 31, 2023, and 2022.
The fair value of cash, restricted cash, accounts receivable, accounts payable and accrued expenses approximates the carrying values because of the short-term nature of these instruments. The carrying value and fair value of the Credit Facility was $46,603 and $51,486 at December 31, 2023, respectively, and $45,712 and $50,293 at December 31, 2022, respectively. See Note 9 - Long-Term Debt, Net of Debt Discount and Financing Fees.
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 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 four potential settlement scenarios for the Credit Facility included in the table 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 that are included in the valuation of the debt derivative liability - first tranche include:
December 31, 2023 December 31, 2022
Input
Remaining term (years) 3.5 years 4.5 years
Maturity date June 30, 2027 June 30, 2027
Coupon rate
9.5% - 13.2%
9.5% - 12.7%
Revenue participation payments Maximum each year Maximum each year
Discount rate 12.06%  1 13.90  % 1
Probability of mandatory prepayment before 2024 N/A 2 5.0%  1
Estimated timing of mandatory prepayment event before 2024 N/A 2 December 31, 2023 1
Probability of mandatory prepayment 2024 or after 15.0%  1 15.0%  1
Estimated timing of mandatory prepayment event 2024 or after March 31, 2026 1 March 31, 2026 1
Probability of optional prepayment event 5.0%  1 5.0%  1
Estimated timing of optional prepayment event December 31, 2025 1 December 31, 2025 1
Probability of note held-to-maturity 3
80  % 1 75  % 1
1 Represents a significant unobservable input.
2 Scenario ended on December 31, 2023.
3 See Maturity date in table.
The significant inputs that are included in the valuation of the debt derivative liability - second tranche include:
December 31, 2023 December 31, 2022
Input
Remaining term (years) 4.5 years 5.5 years
Maturity date June 30, 2028 June 30, 2028
Coupon rate
9.5% - 13.2%
9.5% - 12.7%
Revenue participation payments Maximum each year Maximum each year
Discount rate 15.60  % 1 17.56  % 1
Probability of mandatory prepayment before 2024 N/A 2 5.0%  1
Estimated timing of mandatory prepayment event before 2024 N/A 2 December 31, 2023 1
Probability of mandatory prepayment 2024 or after 15.0%  1 15.0%  1
Estimated timing of mandatory prepayment event 2024 or after March 31, 2026 1 March 31, 2026 1
Probability of optional prepayment event 5.0%  1 5.0%  1
Estimated timing of optional prepayment event December 31, 2025 1 December 31, 2025 1
Probability of note held-to-maturity3
80  % 1 75  % 1
1 Represents a significant unobservable input.
2 Scenario ended on December 31, 2023.
3 See Maturity date in table