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Fair Value Measurements and Financial Instruments | 9 Months Ended
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Sep. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measurements and Financial Instruments |
3. | Fair Value Measurements and Financial Instruments
For a description of the fair value hierarchy and the Company’s fair value methodology, see Note 2 – Summary of Significant Accounting Policies in the Annual Report. There were no significant changes in these methodologies during the nine months ended September 30, 2024. As of September 30, 2024, the Company’s highly liquid money market funds are included within cash equivalents. The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 (in thousands):
|  | September 30, 2024 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds(1) |  | $ | 3,183 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,183 |
Long-term receivable from GCBP |  |  | — |  |  |  | — |  |  |  | 4,900 |  |  |  | 4,900 |
Total financial assets |  | $ | 3,183 |  |  | $ | — |  |  | $ | 4,900 |  |  | $ | 8,083 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |
CVR derivative liability, noncurrent |  | $ | — |  |  | $ | — |  |  | $ | 4,900 |  |  | $ | 4,900 |
Warrant liability, noncurrent |  |  | — |  |  |  | — |  |  |  | 5,862 |  |  |  | 5,862 |
Total financial liabilities |  | $ | — |  |  | $ | — |  |  | $ | 10,762 |  |  | $ | 10,762 |
|  | December 31, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds(1) |  | $ | 5,860 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,860 |
Long-term receivable from GCBP |  |  | — |  |  |  | — |  |  |  | 4,722 |  |  |  | 4,722 |
Total financial assets |  | $ | 5,860 |  |  | $ | — |  |  | $ | 4,722 |  |  | $ | 10,582 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |
CVR derivative liability |  | $ | — |  |  | $ | — |  |  | $ | 4,722 |  |  | $ | 4,722 |
Warrant liability, noncurrent |  |  | — |  |  |  | — |  |  |  | 12,835 |  |  |  | 12,835 |
Total financial liabilities |  | $ | — |  |  | $ | — |  |  | $ | 17,557 |  |  | $ | 17,557 |
(1) Included in cash and cash equivalents on the accompanying condensed consolidated balance sheets. The carrying amounts of cash, accounts and note receivables, net, other receivables, accounts payable, due to related parties, CVR excess closing cash payable, and accrued liabilities approximate their fair values due to the short-term maturity of these instruments. During the nine months ended September 30, 2024 and the year ended December 31, 2023, there were no transfers of fair value measurement between Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and liabilities. Long-term Receivables and Derivative Liabilities Concurrent with the signing of the Business Combination Agreement on December 26, 2022, Catalyst and the Rights Agent (as defined in the CVR Agreement) executed a contingent value rights agreement (the “CVR Agreement”), as amended on March 29, 2023, pursuant to which each holder of Catalyst common stock as of January 5, 2023 (each, a “CVR Holder”), excluding GNI Japan and GNI Hong Kong Limited (“GNI HK”), received one contractual CVR for each share of Catalyst common stock held by such holder. Each CVR entitles the holder thereof to receive certain cash payments in the future. The long-term receivable and the corresponding CVR derivative liability, noncurrent relate to the asset purchase agreement with GC Biopharma Corp. (“GCBP”). The fair value of this long-term receivable and derivative liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The estimated fair value of the long-term receivable and CVR derivative liability, noncurrent was determined based on the anticipated amount and timing of projected cash flows to be received from GCBP pursuant to the GCBP asset purchase agreement discounted to their present values using an estimated discount rate of 5.05%. As of September 30, 2024, the Company expects to receive a $5.0 million hold-back payment from GCBP in the first quarter of 2025, which will be distributed, net of expenses, to the CVR Holders. The change in fair value of the long-term receivable from GCBP and the corresponding CVR derivative liability, noncurrent was recorded in interest and other income, net on the condensed consolidated statement of operations and comprehensive income. Warrant Liability In October 2023, Catalyst entered into a Securities Purchase Agreement for a private placement with GNI USA (the “Private Placement”). The Private Placement closed immediately following the Contributions, on October 30, 2023. Upon closing of the Private Placement, the Company issued 811 shares of Series X Convertible Preferred Stock, par value $0.001 per share (the “Convertible Preferred Stock”), and warrants to purchase up to 811 shares of Convertible Preferred Stock (the “Preferred Stock Warrants”) to GNI USA for an aggregate purchase price of approximately $5.0 million. The Preferred Stock Warrants are immediately exercisable at an exercise price of $4,915.00 per share of Convertible Preferred Stock and expire on October 30, 2033. The number of shares of common stock issuable upon exercise and conversion of the Preferred Stock Warrants is 540,666. The Company accounted for the Private Placement as a non-arm’s length transaction. The Preferred Stock Warrants were initially recognized at fair value upon issuance and the remaining proceeds from the Private Placement were allocated to the Convertible Preferred Stock. The Preferred Stock Warrants are freestanding financial instruments classified as a warrant liability on the Company’s condensed consolidated balance sheet. The Preferred Stock Warrants are revalued in each reporting period with the change in fair value recorded as change in fair value of warrant liability in other income (expense), net on the condensed consolidated statement of operations and comprehensive income. The fair value of the warrant liability is estimated based on the Black-Scholes option pricing model using the following weighted-average assumptions:
| September 30, 2024 |  |  | December 31, 2023 |
Share price | $ | 12.54 |  |  | $ | 25.70 |
Exercise price | $ | 4,915.00 |  |  | $ | 4,915.00 |
Dividend yield |  | — | % |  |  | — | %
Risk-free interest |  | 3.70 | % |  |  | 3.88 | %
Term (years) |  | 9.08 |  |  |  | 9.83 |
Expected volatility |  | 82.00 | % |  |  | 84.00 | %
The following table sets forth the changes in the estimated fair value of the Company’s Level 3 financial assets and liabilities (in thousands):
|  | Long-term receivable |  |  | CVR derivative |  |  | Warrant |
|  | from GCBP |  |  | liability, noncurrent |  |  | liability |
Balance at December 31, 2023 |  | $ | 4,722 |  |  | $ | 4,722 |  |  | $ | 12,835 |
Changes in fair value |  |  | 178 |  |  |  | 178 |  |  |  | (6,973 | )
Balance at September 30, 2024 |  | $ | 4,900 |  |  | $ | 4,900 |  |  | $ | 5,862 |
Financial Instruments Cash equivalents consisted of the following (in thousands):
September 30, 2024 |  | Amortized cost |  |  | Gross unrealized gains |  |  | Gross unrealized losses |  |  | Estimated fair value |
Money market funds (cash equivalents) |  | $ | 3,183 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,183 |
Total financial assets |  | $ | 3,183 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,183 |
Classified as: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  |  |  |  |  |  |  |  | $ | 3,183 |
Total financial assets |  |  |  |  |  |  |  |  |  |  | $ | 3,183 |
December 31, 2023 |  | Amortized cost |  |  | Gross unrealized gains |  |  | Gross unrealized losses |  |  | Estimated fair value |
Money market funds (cash equivalents) |  | $ | 5,860 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,860 |
Total financial assets |  | $ | 5,860 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,860 |
Classified as: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  |  |  |  |  |  |  |  |  |  | $ | 5,860 |
Total financial assets |  |  |  |  |  |  |  |  |  |  | $ | 5,860 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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