FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2023

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The following tables represent the financial instruments measured at fair value on a recurring basis in the financial statements of the Company and the valuation approach applied to each class of financial instruments at September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	14,253	$	—	$	—	$	14,253
Total cash and cash equivalents	14,253		—		—		14,253
Equity investments:
Mutual funds	989		—		—		989
Total equity investments	989		—		—		989
Total assets measured at fair value	$	15,242	$	—	$	—	$	15,242


	December 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	7,194	$	—	$	—	$	7,194
Total cash and cash equivalents	7,194		—		—		7,194
Equity investments:
Mutual funds	928		—		—		928
Total equity investments	928		—		—		928
Debt securities available-for-sale:
Certificates of deposit	—		2,541		—		2,541
U.S. Treasury securities	3,009		—		—		3,009
Commercial paper	—		424		—		424
Corporate notes and bonds	—		3,754		—		3,754
Debt securities available-for-sale	3,009		6,719		—		9,728
Total assets measured at fair value	$	11,131	$	6,719	$	—	$	17,850

Highly liquid investments with an original maturity of three months or less at time of purchase are included in cash and cash equivalents on the condensed consolidated balance sheets.

Level 1 assets are priced using quoted prices in active markets for identical assets which include money market funds, U.S. Treasury securities and mutual funds as these specific assets are liquid.

Level 2 available-for-sale securities are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted

market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made any material adjustments to such inputs during the periods presented.

As of September 30, 2023, the Company’s Conversion Option, which is classified as a derivative liability, has a fair value of $25.6 million, using Level 3 measurement assumptions. See Note 9, Convertible Notes for further detail on the Conversion Option.

As of September 30, 2023, the Company’s Schuler Purchase Obligation, which is classified as a financial instrument asset, has a fair value of $2.2 million, using Level 3 measurement assumptions. See Note 17, Stockholders' Equity for further detail on the Schuler Purchase Obligation.

Liabilities for which Fair Value is only Disclosed

As of December 31, 2022, the Secured Note had an outstanding principal amount of $34.9 million, and a fair value of $16.0 million, using Level 3 measurement assumptions. The Secured Note was not outstanding as of September 30, 2023. See Note 10, Long-Term Debt Related-Party for further detail on the Secured Note.

As of September 30, 2023, the 5.00% Notes had an outstanding principal amount of $66.2 million, and a fair value of $37.0 million, using Level 3 measurement assumptions. See Note 9, Convertible Notes for further detail on the 5.00% Notes.

The 2.50% Notes matured on March 15, 2023 and became due and payable on such date. The amortized carrying amount of the 2.50% Notes is $0.7 million as of September 30, 2023 and approximates the related fair value due to the instrument being fully matured and payable. As of December 31, 2022, the 2.50% Notes represented a Level 2 measurement with an outstanding principal amount of $56.6 million and a fair value of $51.9 million. See Note 9, Convertible Notes for further detail on the 2.50% Notes.

- 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.

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