v3.25.1
Note 5 - Fair Value Measurement
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

5. Fair Value Measurements

 

The fair value of the Company's cash, cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate their carrying values because of the short-term nature of these instruments. Restricted cash includes a separately maintained cash account, as required under the terms of a lease agreement the Company entered into on  October 10, 2018 for office space in New York City.

 

As of March 31, 2025, the Company regards the fair value of its long-term debt to approximate its carrying value.

 

The following tables present the Company’s fair value hierarchy for assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024:

 

  

March 31, 2025

  

December 31, 2024

 
  

Level 1

  

Level 2

  

Level 3

  

Level 1

  

Level 2

  

Level 3

 

Assets:

                        

Restricted cash

 $1,255   —   —  $1,255   —   — 

Liabilities:

                        

Long term debt, net(1)

  —   23,017   —   —   33,045   — 

Convertible Notes with related parties

  —   —   3,800   —   —   3,720 

Contingent consideration in connection with TAPP consolidation(2)

  —   —   21   —   —   988 

 

(1)

Inclusive of the credit facilities and note payable. The debt fair value does not include debt issuance costs or debt discount. See Note 4, Long-term debt, net.

(2)

Balance recorded in accrued expenses and other current liabilities with changes to the balance as a result of adjustment of the fair value related to the initial discount rate and payments made. See Note 11, Variable Interest Entity, for initial assumptions of the fair value.

 

Convertible Notes with related parties

 

The Company issued the Convertible Notes on August 19, 2024 and elected the fair value option. See Note 4, Long-term debt, net. The following is a reconciliation of the fair value from December 31, 2024 to March 31, 2025:

 

  

Amount

 

Fair value as of December 31, 2024

 $3,720 

Loss on change in fair value reported in the consolidated statement of operations

  80 

Fair value as of March 31, 2025

 $3,800 

 

 

As the Convertible Notes mature on  April 2, 2029, and bear interest at 13% per annum paid in kind but may be converted into shares of the Company’s common stock (the "call option"), the estimated fair value is computed as the sum of (a) the present value of the expected interest and principal payments using the discounted cash flow method based on an estimated discount rate and (b) the fair value of the call option computer using the Black-Scholes model. Both approaches are based on the following assumptions:

 

Assumptions

 

March 31, 2025

 

Face value of principal payable

 $2,217 

Strike price

  3.01 

Value of common stock

  2.18 

Expected term (years)

  4.0 

Volatility

  79.0%

Risk free rate

  4.0%

Discount rate

  11.7%

 

Contingent Consideration 

 

In connection with the contingent consideration received related to the consolidation of TAPP, the Company had to determine the fair value of the identified assets acquired and liabilities assumed. The Company determined that the estimated fair value of the net assets acquired, excluding the net working capital, was a Level 3 measurement, as certain inputs to determine fair value were unobservable.

 

  

Amount

 

Fair value as of December 31, 2024

 $988 

Adjustment to compensation expense

 $21 

Payment of compensation expense

  (988)

Fair value as of March 31, 2025

 $21 

 

The fair value of certain long-lived non-financial assets and liabilities may be required to be measured on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. As of March 31, 2025, certain non-financial assets have been measured at fair value subsequent to their initial recognition. The Company determined the estimated fair value to be a Level 3 measurement, as certain inputs used to determine fair value are unobservable. See Note 1(f), Goodwill.