v3.26.1
Fair Value Measurements
 6 Months Ended
Jul. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements
6.
Fair Value Measurements

The following tables present the Company’s liabilities that are measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuations:

 

 

July 31, 2026

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$

 

—

 

 

$

 

—

 

 

$

 

501

 

 

$

 

501

 

MW Call Option

 

 

 

—

 

 

 

 

—

 

 

 

 

12,540

 

 

 

 

12,540

 

Total

 

$

 

—

 

 

$

 

—

 

 

$

 

13,041

 

 

$

 

13,041

 

 

`

 

January 31, 2026

 

 

 

(in thousands)

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$

 

—

 

 

$

 

—

 

 

$

 

399

 

 

$

 

399

 

MW Call Option

 

 

 

—

 

 

 

 

—

 

 

 

 

12,858

 

 

 

 

12,858

 

Total

 

$

 

—

 

 

$

 

—

 

 

$

 

13,257

 

 

$

 

13,257

 

 

Derivative Liability

As a result of features embedded in the secured promissory notes (“Senior Secured Promissory Notes”), the Company recognized embedded derivative liabilities as of July 31, 2026 and January 31, 2026. The derivative liability associated with the Senior Secured Promissory Notes is classified as a non-current liability in the condensed consolidated balance sheets as of July 31, 2026 and January 31, 2026.

The Company recognized losses of $0.1 million related to the change in fair value of the derivative liabilities during both the three and six months ended July 31, 2026, which was recorded in (Gain) loss from change in fair value of financial instruments. There were no other components to the change in its fair value during the three and six months ended July 31, 2026. During the three and six months ended July 31, 2025, the Company recognized a gain of $0.3 million and gain of $0.4 million, respectively. The Company estimated the fair value of the derivative liabilities using the “With and Without” method, which involves modeling the expected cash flows to the noteholder under both default and non-default scenarios and measuring the fair value differential between a note with and without the embedded features. The valuation of the derivative liabilities incorporated significant unobservable inputs, including the timing and probability of potential liquidity events, discount rate, illiquidity discount, and expected volatility. Other inputs include prevailing interest and risk-free rates, which are not considered significant unobservable estimates.

Midwestern Call Option

The Company recognized a loss of $0.4 million and gain of $0.3 million related to the change in fair value of the freestanding call option agreement (“MW Call Option”) during the three and six months ended July 31, 2026, respectively, which was recorded in (Gain) loss from change in fair value of financial instruments. There were no other components to the change in its fair value during the three and six months ended July 31, 2026. During the three and six months ended July 31, 2025, the Company recognized a gain of $0.1 million and loss of $0.5 million, respectively. The Company estimated the fair value of the MW Call Option using a Monte Carlo simulation, using a correlation between the Company’s equity value and Midwestern’s equity value. The valuation of the MW Call Option incorporated significant unobservable inputs, including the starting equity value of Midwestern, the correlation coefficient, dividend yield, and credit-risk-adjusted discount rate. Although some observable inputs were used in the fair value determination, primarily the equity value of the Company and the risk-free rate, the unobservable inputs are significant to the determination of fair value and, accordingly, the Company has classified the MW Call Option as a Level 3 fair value liability.