Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.24.3
Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The following table summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis as required by ASC 820, by level, within the fair value hierarchy as of September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024
Fair Value Level 1 Level 2 Level 3
Liability
Convertible debt, current $ 42,640  $ —  $ —  $ 42,640 
Derivative liability, non-current $ 9,888  $ —  $ —  $ 9,888 
Warrant liability, non-current $ 26,618  $ —  $ 26,618  $ — 
December 31, 2023
Fair Value Level 1 Level 2 Level 3
Liability
Contingent earnout shares liability $ 41  $ —  $ —  $ 41 
Derivative liability, current $ 860  $ —  $ —  $ 860 
Convertible debt, current $ 16,052  $ —  $ —  $ 16,052 
Derivative liability, non-current $ 25,919  $ —  $ —  $ 25,919 
Warrant liability, non-current $ 17,390  $ —  $ 17,390  $ — 
    
The Company’s Contingent Earnout liability, convertible debt, derivative liabilities are considered “Level 3” fair value measurement. Refer to Note 2 for discussion of the Company’s methods for valuation.
The Company entered into the Ninth Pre-Paid Advance, Tenth Pre-Paid Advance, June Prepaid Advance, Initial July Prepaid Advance and First Supplemental Advance as discussed in Note 10, whereby the Company elected to account for the transactions under the fair value option of accounting upon issuance. The Ninth Pre-Paid Advance and June Prepaid Advance were fully paid off as of the end of the reporting period. The Company estimated the fair value of the Tenth Pre-Paid Advance, Initial July Prepaid Advance, and First Supplemental Advance based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period:

Tenth Pre-Paid Advance
Initial July Prepaid Advance
First Supplemental Advance
Stock price $ 0.98  $ 0.98  $ 0.98 
Risk free interest rate 4.8  % 4.6  % 4.5  %
Interest rate 5.0  % 5.0  % 5.0  %
Expected volatility 106.2  % 115.7  % 111.6  %
Expected dividend yield —  % —  % —  %
Remaining term (in years) 0.2 0.3 0.4
Following is a summary of the change in fair value of the Convertible Debt for the nine months ended September 30, 2024 and September 30, 2023 (in thousands).
Nine months ended September 30,
Convertible Debt 2024 2023
Beginning fair value $ 16,052  $ — 
Additions during the period 87,046  71,438 
Payments in cash and common stock during the period (97,091) — 
Change in fair value during the period 36,633  1,339 
Ending fair value $ 42,640  $ 72,777 
As the proceeds of the freestanding instruments identified within the Ninth Pre-Paid Advance exceeded the fair value, a gain on issuance on convertible debt was recognized. As the fair value of the freestanding instruments identified within the Tenth Pre-Paid Advance, June Prepaid Advance and Initial July Prepaid Advance exceeded the proceeds received, losses on issuance on convertible debt were recognized. Refer to Note 10 for further information.
The Company has a contingent obligation to issue shares of Common Stock to certain stockholders and employees upon the achievement of certain market share price milestones within specified periods. Issuances are made in three tranches of approximately 0.2 million shares, for a total of 0.7 million shares, each upon reaching share price targets within specified time frames from December 21, 2020 ("Earnout Date"). The first tranche was not issued given the share price did not reach the specified threshold as of December 21, 2022. The second tranche will be issued if the share price reaches $575.00 within four years of the closing of the Earnout Date. The third tranche will be issued if the share price reaches $690.00 within five years of the Earnout Date. The tranches may also be issued upon a change of control transaction that occurs within the respective timeframes and results in per share consideration exceeding the respective share price target. As of September 30, 2024, the Company has a remaining contingent obligation to issue 0.4 million shares of Common Stock, the ending fair value of which is nominal based on changes in the fair value of the Earnout Shares liability, driven primarily by changes in the share price of the Company's Common Stock.
Following is a summary of the change in fair value of the Earnout Shares liability for the nine months ended September 30, 2024 and September 30, 2023 (in thousands).
Nine months ended September 30,
Earnout Shares Liability 2024 2023
Beginning fair value $ 41  $ 3,013 
Change in fair value during the period (41) (2,843)
Ending fair value $ —  $ 170 
The Company entered into a Lease Agreement ("Lease Agreement") with I-40 OKC Partners LLC ("I-40") which contained a "Market Value Shortfall" provision that meets the definition of a derivative, valued at $0.6 million at inception. The shortfall expired in April 2024, upon which the Company recorded a gain on the derecognition of the liability of $1.6 million. The amount was included within Gain (Loss) on extinguishment of debt and other. The fair value of the Market Value Shortfall derivative measured as of December 31, 2023 and immediately prior to expiration was $0.9 million and $1.6 million, respectively, resulting in a loss of $0.7 million during the nine months ended September 30, 2024 which is included within Gain on fair value change in warrant and derivative liability within the Condensed Consolidated Statement of Operations.
The Company entered into the Series B Preferred Stock Purchase Agreement with the Series B Preferred Stock Purchaser whose conversion feature meets the definition of a derivative liability which requires bifurcation (refer to Note 14). The Company estimated the fair value of the conversion feature derivative embedded in the Series B Preferred Stock Purchase Agreement based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period: the price of the Company’s Common Stock of $0.98; a risk-free interest rate of 3.6%; expected volatility of the Company’s Common Stock of 117.3%; expected dividend yield of 0.0%; and remaining term of 4.03 years. The fair value of the conversion feature derivative measured as of December 31, 2023 and September 30, 2024 was $25.9 million and $2.4 million, respectively, resulting in a gain of $23.6 million during the nine months ended September 30, 2024 included within the Condensed Consolidated Statement of Operations.
The Company entered into the Series C Preferred Stock Purchase Agreement with the Series C Preferred Stock Purchasers (as defined in Note 14) whose conversion feature meets the definition of a derivative liability which requires bifurcation. The Company estimated the fair value of the conversion feature derivative embedded in the Series C Preferred Stock Purchase Agreement based on assumptions used in the Monte Carlo simulation model using the following inputs as of the end of the reporting period: the price of the Company’s Common Stock of $0.98; a risk-free interest rate of 3.6%; expected volatility of the Company’s Common Stock of 117.3%; expected dividend yield of 0.0%; and remaining term of 4.59 years. The fair value of the conversion feature derivative measured as of issuance and September 30, 2024 was $24.9 million and $7.5 million, respectively, resulting in a gain of $17.3 million during the nine months ended September 30, 2024 included within the Condensed Consolidated Statement of Operations.
Following is a summary of the change in fair value of the derivative liability for the nine months ended September 30, 2024 and September 30, 2023 (in thousands).
Nine months ended September 30,
Derivative liability 2024 2023
Beginning fair value $ 26,779  $ — 
Additions during the period 24,857  4,310 
Derecognition of liability upon expiration of agreement (1,604) (774)
Change in fair value during the period (40,144) (2,998)
Ending fair value $ 9,888  $ 538 

Refer to Note 16 for discussion related to warrants fair value measurements.