Candel Therapeutics, Inc. Fair Value Disclosure
3. Fair Value of Financial Assets and Liabilities
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):
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FAIR VALUE MEASUREMENTS AS OF |
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LEVEL 1 |
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LEVEL 2 |
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LEVEL 3 |
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TOTAL |
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Liabilities: |
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Warrant liabilities |
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— |
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— |
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15,598 |
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15,598 |
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Total |
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$ |
— |
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$ |
— |
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$ |
15,598 |
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$ |
15,598 |
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FAIR VALUE MEASUREMENTS AS OF |
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LEVEL 1 |
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LEVEL 2 |
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LEVEL 3 |
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TOTAL |
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Liabilities: |
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Warrant liability |
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— |
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— |
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21,718 |
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21,718 |
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Total |
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$ |
— |
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$ |
— |
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$ |
21,718 |
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$ |
21,718 |
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Valuation of Warrant Liabilities
Series B Warrants
In connection with the November 13, 2018 issuance of Series B convertible preferred stock, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet, see Note 10. The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the warrant liability use various valuation methods, including the Monte Carlo method, the option-pricing method, probability-weighted expected return and the hybrid method, all of which incorporate assumptions and estimates, to value the common stock warrants. The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of common stock, risk-free interest rate, expected dividend yield, expected volatility of the price of the underlying common stock, and the remaining contractual term of the warrants. The most significant assumption in the model impacting the fair value of the common stock warrants is the fair value of the Company’s common stock as of each remeasurement date.
Lender Warrants
In connection with the October 14, 2025 Trinity LSA, the Company is required to issue to the Lenders warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet, see Note 10. The fair value of the associated warrant liability is determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the warrants is determined using a hybrid Monte Carlo simulation and Black-Scholes methodology, which incorporates assumptions and estimates to value the common stock warrants. Key inputs, estimates, and assumptions impacting the fair value measurement include the Company stock price, risk-free interest rate, expected dividend yield, volatility, remaining contractual term of the warrants, timing of milestone achievements, and expected stock price increases and decreases in success and failure scenarios related to the milestones. The most significant assumptions in the model impacting the fair value of the common stock warrants is the volatility of the Company’s common stock, and expected stock price increases or decreases on the respective milestone dates.
The following table provides a roll forward of the aggregate fair values of the Company’s warrant liabilities, for which fair value is determined by Level 3 inputs (in thousands):
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WARRANT |
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Balance at December 31, 2023 |
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$ |
916 |
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Change in fair value |
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20,802 |
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Balance at December 31, 2024 |
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$ |
21,718 |
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Lender warrants in connection with debt financing |
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2,079 |
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Change in fair value |
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(8,199 |
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Balance at December 31, 2025 |
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$ |
15,598 |
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 29, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.