XML 21 R9.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Fair Value Measurements
 6 Months Ended
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 1Level 2Level 3Total
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 1Level 2Level 3Total
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,
2024202320242023
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)2024202320242023
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)2024202320242023
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)