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Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]

Note 15 — Fair Value Measurements

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based upon these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

 

Level 1:

Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2:

Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3:

Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

 

In instances where the determination of the fair value measurement is based upon inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based upon the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

The following tables summarize the Company's financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 (in thousands):

 

           

Fair Value Measurements

  
   

Carrying Amount as of

    

As of September 30, 2024

  
   

September 30, 2024

    

Level 1

    

Level 2

    

Level 3

  

Money market funds

   $ 2,000     $ 2,000     $ —     $ —  

Investments in employee deferred compensation trusts

     1,688       1,688       —       —  

 

 

           

Fair Value Measurements

  
   

Carrying Amount as of

    

As of December 31, 2023

  
   

December 31, 2023

    

Level 1

    

Level 2

    

Level 3

  

Money market funds

   $ 45,130     $ 45,130     $ —     $ —  

Investments in employee deferred compensation trusts

     41       41       —       —  

Preferred stock derivative liability

     29,947       —       —       29,947  

 

The following tables provide a reconciliation of the beginning and ending balances of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (in thousands):

 

Preferred stock derivative liability

  

2024

    

2023

  

Balance, January 1,

   $ 29,947     $ 21,918  

Change in fair value

     —       6,668  

Extinguishment through redemption of preferred stock

     (29,947 )     —  

Balance, September 30,

   $ —     $ 28,586  

 

The Company’s Series A Preferred derivative liability was classified within Level 3 of the fair value hierarchy because unobservable inputs were used in estimating the fair value. The fair value of the redemption provision embedded in the Series A Preferred Stock is estimated based on a discounted cash flow model and probability assumptions based on management’s estimates of a change of control event occurring. The value of the redemption provision explicitly considered the present value of the potential premium that would be paid related to, and the probability of, an event that would trigger its payment. In subsequent periods, the derivative liability was accounted for at fair value, with changes in fair value recognized as other income (expense) on the Company's condensed consolidated statements of operations.

 

The following table provides quantitative information of liabilities measured at fair value and the significant unobservable inputs (Level 3), the range of the significant unobservable inputs, and the valuation techniques.

 

The preferred stock derivative liability was extinguished on March 11, 2024.

 

   

Fair Value

As of December 31, 2023

  

Valuation

Technique

  

Unobservable

Inputs

  

Range

(Weighted Average)

  
   

(In thousands)

              

Preferred Stock Derivative Liability

   $ 29,947  

Discounted Cash Flow

  

Change-in-control probability assumptions

  

Range: 0% to 100%

  
             

Timing of change-in-control assumptions

  

Range: 1 to 10 years

  
             

Discount Rate

  

Range: 8% to 10%

  
             

Market yield*

   6.3%*  

 

*Represents the hypothetical market yield

 

The Company’s cash and cash equivalents including restricted cash, accounts receivable, accounts payable, accrued expenses and short-term debt represent financial instruments. The carrying value of these financial instruments is a reasonable approximation of fair value due to the short-term nature of the instruments. The carrying amount of short-term debt at September 30, 2024 approximates fair value because the interest rate approximates the current market interest rate.