Company: VRCA
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0001660334-25-000006
Chunk: 27

Company: Verrica Pharmaceuticals Inc.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 27
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 on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be 

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received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:Level 1: Quoted prices in active markets for identical assets or liabilities.Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the     marketplace.Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.At September 30, 2025, the Company’s financial instruments included cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, notes payable and a derivative liability. The carrying amount of accounts payable, accounts receivable and accrued expenses approximates fair value due to the short-term maturities of these instruments. Notes payable are carried at amortized cost, which approximates fair value.The following table presents the Company’s fair value information for liabilities measured at fair value on a recurring basis. The Company had no liabilities measured at fair value on a recurring basis at September 30, 2024.As of September 30, 2025(Level 1)(Level 2)(Level 3)Recurring fair value measurementsDerivative liability$— $— $1,762 The following is a rollforward of the derivative liability:Balance at December 31, 2024$2,648 Change in fair value(886)Balance at September 30, 2025$1,762 The Company estimated the fair value of the derivative liability using a lattice model with an interest rate lattice consistent with the Hull-White model. The derivative liability was classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. The key inputs into the lattice model for the derivative liability were as follows:September 30, 2025Expected term (years)2.82Credit spread13.0 %Net Loss Per ShareNet loss per share is computed by dividing net loss attributable to common stockholders by the