XML 30 R20.htm IDEA: XBRL DOCUMENT v3.23.2
Fair Value Measurements
 6 Months Ended
Jun. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The table below presents activity within Level 3 of the fair value hierarchy, our liabilities carried at fair value for the six months ended June 30, 2023:
Level 3
(In thousands)Contingent
liabilities		WarrantsTotal
Balance at January 1, 2023$1,280 $— $1,280 
Total change in foreign exchange24  24 
Fair value of the warrant liability issued— 4,940 4,940 
Warrant liability fair value adjustment— (1,160)(1,160)
Balance at June 30, 2023$1,304 $3,780 $5,084 
Contingent liabilities are re-measured to fair value each reporting period using projected financial targets, discount rates, probabilities of payment, and projected payment dates. Projected contingent payment amounts are discounted back to the current period using a discounted cash flow model. Projected financial targets are based on our most recent internal operational budgets and may take into consideration alternate scenarios that could result in more or less profitability for the respective service line. Increases or decreases in projected financial targets and probabilities of payment may result in significant changes in the fair value measurements. Increases in discount rates and the time to payment may result in lower fair value measurements. Increases or decreases in any of those inputs in isolation may result in a significantly lower or higher fair value measurement.
As disclosed in Note 9 and Note 10 of the Company’s consolidated financial statements, the Company allocated part of the proceeds of the Series F Preferred Offering to warrant liability issued in connection with the transaction. The valuations of the warrants were determined using option pricing models. The Company concluded that the Preferred Warrants were not in the scope of Accounting Standards Codification (ASC 480), Distinguishing Liabilities from Equity (ASC 480,) since the Preferred Warrants are not mandatorily redeemable; and do not have obligations to issue a variable number of shares of preferred stock. The Company determined the Preferred Warrants met the definition of a derivative in accordance with ASC 815 but were not considered indexed to the Company’s common stock since the warrants require early settlement by repurchasing the preferred warrants for cash in an amount equal to the Black-Scholes value in the event of a Fundamental Transaction at pre-specified volatility of 100% as an input to the Black-Scholes calculation. The Company determined to record the Preferred Warrants at fair value with subsequent changes in fair value recorded in earnings at the end of each reporting period. For the three and six months ended June 30, 2023, the Company recorded other income of $1.2 million related to the change in fair value of the warrant liability. These models use inputs such as the underlying price of the shares issued at the measurement date, volatility, risk free interest rate and expected life of the instrument. The Company has classified the warrants as a long-term liability due to certain provisions relating to the holders’ ability to exercise the warrants beyond twelve months of the reporting date.
The fair value of the preferred and common warrants at June 30, 2023 and March 29, 2023 was determined by using option pricing models assuming the following:
March 29, 2023June 30, 2023
Risk free interest rate
3.80% - 4.80%
4.39% - 5.29%
Expected term (years)
0.5 - 3.0
0.3 - 2.8
Expected volatility
70% - 75%
65% - 70%
Expected dividends0.00 %0.00 %
Additionally, the Company has determined that the warrant liability should be classified within Level 3 of the fair-value hierarchy by evaluating each input for the option pricing models against the fair-value hierarchy criteria and using the lowest level of input as the basis for the fair-value classification as called for in ASC 820. There are six inputs: closing price of the Company’s stock on the day of evaluation; the exercise price of the warrants; the remaining term of the warrants; the volatility of the Company’s stock over that term; annual rate of dividends; and the risk-free rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily observable in the warrant agreements. The annual rate of dividends is based on the Company’s historical practice of not granting dividends. The closing price of the Company’s stock would fall under Level 1 of the fair-value hierarchy as it is a quoted price in an active market (ASC 820-10). The risk-free rate of return is a Level 2 input as defined in ASC 820-10, while the historical volatility is a Level 3 input as defined in ASC 820. Since the lowest level input is a Level 3, the Company determined the warrant liability is most appropriately classified within Level 3 of the fair value hierarchy.
The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value as of June 30, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value. In general, the fair values were determined using Level 3:
(In thousands)
Quoted Prices in
Active Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)		June 30,
2023
Liabilities:    
Contingent liability$— $— $1,304 $1,304 
Warrant liability— — 3,780 3,780 
Total liabilities$— $— $5,084 $5,084 
(In thousands)Quoted Prices in
Active Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)		December 31,
2022
Liabilities:    
Contingent liability$— $— $1,280 $1,280 
Total liabilities$— $— $1,280 $1,280