Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

v3.24.3
Fair Value Measurement
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurement Fair Value Measurement
The following tables present the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024, and December 31, 2023:
September 30, 2024
(in thousands) (Level 1) (Level 2) (Level 3) Total
Assets:
Money market funds (1)
$ 13,233  $ —  $ —  $ 13,233 
U.S. government securities 5,868  —  —  5,868 
Total assets $ 19,101  $ —  $ —  $ 19,101 
Liabilities:
Debt derivative liabilities $ —  $ —  $ 2,445  $ 2,445 
Total liabilities $ —  $ —  $ 2,445  $ 2,445 
(1) Money market funds are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheet.
December 31, 2023
(in thousands) (Level 1) (Level 2) (Level 3) Total
Assets:
Money market funds(1)
$ 24,977  $ —  $ —  $ 24,977 
Total assets $ 24,977  $ —  $ —  $ 24,977 
Liabilities:
Debt derivative liabilities $ —  $ —  $ 2,987  $ 2,987 
Total liabilities $ —  $ —  $ 2,987  $ 2,987 
(1) Money market funds are included in Cash and cash equivalents on the Condensed Consolidated Balance Sheet.
The changes in Level 3 liabilities measured at fair value on a recurring basis for the three and nine months ended September 30, 2024, were as follows (in thousands):
Three Months Ended September 30, 2024
Beginning Balance, July 1, 2024 $ 2,458 
Change in fair value included in net loss (13)
Ending Balance, September 30, 2024 $ 2,445 
Nine Months Ended September 30, 2024
Beginning Balance, January 1, 2024 $ 2,987 
Change in fair value included in net loss (542)
Ending Balance, September 30, 2024 $ 2,445 
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 were $47,272 and $51,274 at September 30, 2024, and $46,603 and $51,486 at December 31, 2023, respectively. See Note 8 - 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 features and the fair value of a plain vanilla note with the same terms. The fair value of the Credit Facility including the identified embedded derivative features was determined
using a probability-weighted expected return model based on four potential settlement scenarios, one of which ended December 31, 2023, for the financing agreement as disclosed in the table below. The estimated settlement value of each scenario, which would include any required make-whole payment, (see Note 8 - 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 financing agreement 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:
September 30, 2024 December 31, 2023
Input
Remaining term (years) 2.75 years 3.5 years
Maturity date June 30, 2027 June 30, 2027
Coupon rate
9.5% - 13.0%
9.5% - 13.2%
Revenue participation payments Maximum each year Maximum each year
Discount rate 11.56%  (1) 12.06%  (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(2)
80.0%  (1) 80.0%  (1)
(1)Represents a significant unobservable input.
(2) See Maturity date in table.
The significant inputs that are included in the valuation of the debt derivative liability - second tranche include:
September 30, 2024 December 31, 2023
Input
Remaining term (years) 3.75 years 4.5 years
Maturity date June 30, 2028 June 30, 2028
Coupon rate
9.5% - 13.0%
9.5% - 13.2%
Revenue participation payments Maximum each year Maximum each year
Discount rate 14.92  % (1) 15.60  % (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 held-to-maturity(2)
80.0%  80.0% 
(1)Represents a significant unobservable input.
(2)See Maturity date in table.