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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants at the measurement date. ASC 820, Fair Value Measurement and Disclosures, establishes a hierarchy whereby inputs to valuation techniques used in measuring fair value are prioritized, or the fair value hierarchy. There are three levels to the fair value hierarchy based on reliability of inputs, as follows: •Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets. •Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. •Level 3 — Unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions. The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The carrying values of cash, prepaid expenses and other current assets, accounts payable and accrued expenses as of June 30, 2024 and December 31, 2023 approximated their fair values due to the short-term nature of these items. The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period, utilizing valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The determination requires significant judgments to be made by the Company. The Company’s assets and liabilities that were measured at fair value on a recurring basis were as follows:
($ in thousands) |  | Fair Value Measured as of June 30, 2024
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Cash equivalents (money market funds) |  | $ | 91,748 |  |  | $ | — |  |  | $ | — |  |  | $ | 91,748 |
Total financial assets |  | $ | 91,748 |  |  | $ | — |  |  | $ | — |  |  | $ | 91,748 |
Liabilities: |  |  |  |  |  |  |  |
Contingent Earnout Liability |  | $ | — |  |  | $ | — |  |  | $ | 68,080 |  |  | $ | 68,080 |
Contingent derivative liability |  | — |  |  | — |  |  | 4,266 |  |  | 4,266 |
Private Placement Warrants liability |  | — |  |  | — |  |  | 285 |  |  | 285 |
Option Agreement liability |  | — |  |  | — |  |  | 75 |  |  | 75 |
JDRF Agreement derivative liability |  | — |  |  | — |  |  | 126 |  |  | 126 |
Total financial liabilities |  | $ | — |  |  | $ | — |  |  | $ | 72,832 |  |  | $ | 72,832 |
($ in thousands) |  | Fair Value Measured as of December 31, 2023
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |  |
Cash equivalents (money market funds) |  | $ | 78,995 |  |  | $ | — |  |  | $ | — |  |  | $ | 78,995 |
Total financial assets |  | $ | 78,995 |  |  | $ | — |  |  | $ | — |  |  | $ | 78,995 |
Liabilities: |  |  |  |  |  |  |  |
Contingent Earnout Liability |  | $ | — |  |  | $ | — |  |  | $ | 37,916 |  |  | $ | 37,916 |
Contingent derivative liability |  | — |  |  | — |  |  | 2,636 |  |  | 2,636 |
Private Placement Warrants liability |  | — |  |  | — |  |  | 78 |  |  | 78 |
Option Agreement liability |  | — |  |  | — |  |  | 35 |  |  | 35 |
JDRF Agreement derivative liability |  | — |  |  | — |  |  | 28 |  |  | 28 |
Total financial liabilities |  | $ | — |  |  | $ | — |  |  | $ | 40,693 |  |  | $ | 40,693 |
The fair value of the Contingent Earnout Liability, Private Placement Warrants liability (as defined in Note 8 — Stockholders’ Equity), contingent derivative liability related to the Put Option (as defined in Note 6 — Revenue Interest Purchase Agreement and discussed below), Option Agreement liability (as defined in Note 6 — Revenue Interest Purchase Agreement), and the derivative liability associated with the JDRF Agreement Disposition Payment are based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The fair values of the Private Placement Warrants liability, the Option Agreement liability and the derivative liability associated with the JDRF Agreement Disposition Payment, are included in other long-term liabilities on the condensed consolidated balance sheets. Contingent Earnout Liability The following table presents a summary of the changes in the fair value of the Contingent Earnout Liability:
($ in thousands) |  | Contingent Earnout Liability
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Fair value as of beginning of period |  | $ | (42,509) |  |  | $ | (42,084) |  |  | $ | (37,916) |  |  | $ | (27,893) |
Change in fair value included in other income (expense), net |  | (25,571) |  |  | 3,627 |  |  | (30,164) |  |  | (10,564) |
Fair value as of end of period |  | $ | (68,080) |  |  | $ | (38,457) |  |  | $ | (68,080) |  |  | $ | (38,457) |
In determining the fair value of the Contingent Earnout Liability, the Company used the Monte Carlo simulation value model using a distribution of potential outcomes on a monthly basis over a 10-year period prioritizing the most reliable information available. The assumptions utilized in the calculation were based on the achievement of certain stock price milestones, including the current Common Stock price, expected volatility, risk-free rate, expected term and expected dividend yield (see Note 8 — Stockholders’ Equity). Contingent earnout payments involve certain assumptions requiring significant judgment and actual results can differ from assumed and estimated amounts. Private Placement Warrants Liability The following table presents a summary of the changes in the fair value of the Private Placement Warrants liability:
|  | Private Placement Warrants
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
($ in thousands) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Fair value as of beginning of period |  | $ | (121) |  |  | $ | (122) |  |  | $ | (78) |  |  | $ | (80) |
Change in fair value included in other income (expense), net |  | (164) |  |  | (36) |  |  | (207) |  |  | (78) |
Fair value as of end of period |  | $ | (285) |  |  | $ | (158) |  |  | $ | (285) |  |  | $ | (158) |
In determining the fair value of the Private Placement Warrants liability, the Company used the Monte Carlo simulation valuation model to estimate the fair value utilizing assumptions including the current Company stock price, expected volatility, risk-free rate, expected term and expected dividend yield (see Note 8 — Stockholders’ Equity). Derivative liabilities Contingent derivative liability The debt pursuant to the Purchase Agreement, as defined in Note 6, contains an embedded derivative related to the Put Option, as defined in Note 6, requiring bifurcation as a single compound derivative instrument. The Company estimated the fair value of the derivative liability using a “with-and-without” methodology. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative was the fair value of the derivative liability at issuance and each subsequent reporting period. In determining the fair value of the contingent derivative liability, the Company used the Monte Carlo simulation value model using a distribution of potential outcomes on a monthly basis over a 10-year period. The estimated probability and timing of underlying events triggering the exercisability of the Put Option contained within the Purchase Agreement, forecasted cash flows and the discount rates are significant unobservable inputs used to determine the estimated fair value of the entire instrument with the embedded derivative. As of June 30, 2024, the discount rates used to calculate the value of the contingent derivative liability were 14.1% to calculate the present-value of the revenue forecast and 17.9% to calculate the present-value of the payoff of the Put Option. As of December 31, 2023, the discount rates used to calculate the value of the contingent derivative liability were 14.5% to calculate the present-value of the revenue forecast and 17.1% to calculate the present-value of the payoff of the Put Option. Changes in fair value of the contingent derivative liability are recognized as other income (expense) in the condensed consolidated statements of operations and comprehensive loss, classified in change in fair value of derivative liabilities. The following table presents a summary of the changes in the fair value of the contingent derivative liability, which is classified as a Level 3 financial instrument.
|  | Contingent Derivative Liability
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
($ in thousands) |  | 2024 |  | 2023 |  | 2024 |  | 2023
Fair value as of beginning of period |  | $ | (4,079) |  |  | $ | — |  |  | $ | (2,636) |  |  | $ | — |
Fair value of embedded derivative upon issuance of debt |  | — |  |  | (2,354) |  |  | (1,552) |  |  | (2,354) |
Change in fair value included in other income (expense), net |  | (187) |  |  | (38) |  |  | (78) |  |  | (38) |
Fair value as of end of period |  | $ | (4,266) |  |  | $ | (2,392) |  |  | $ | (4,266) |  |  | $ | (2,392) |

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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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