Annual report [Section 13 and 15(d), not S-K Item 405]

FAIR VALUE OF FINANCIAL INSTRUMENTS

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FAIR VALUE OF FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

 

The carrying amounts for certain of our financial instruments, including cash, accounts receivable, accounts payable and certain accrued expenses and other assets and liabilities, approximate fair value due to the short-term nature of these instruments.

 

As of December 31, 2023, we had contingent consideration that is required to be measured at fair value on a recurring basis.

 

Our financial instruments measured at fair value on a recurring basis were as follows at the dates indicated:

 

(in thousands)   Caption   Level 1     Level 2     Level 3     Total  
   

Consolidated

Balance Sheet

   Fair Value at December 31, 2023  
(in thousands)   Caption   Level 1     Level 2     Level 3     Total  
Liabilities:                            
Contingent consideration - current   Accrued expenses and other current liabilities   $ —     $ —     $ 1,000     $ 1,000  
Total Liabilities       $ —     $ —     $ 1,000     $ 1,000  

 

There were no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy during the years ended December 31, 2024 and 2023.

 

Contingent Consideration

 

Each period we revalue our contingent consideration obligations associated with business acquisitions to their fair value. The estimate of the fair value of Product Launch Contingent Payments using a form of the scenario-based method, which includes significant unobservable inputs such as management’s identification of probability-weighted outcomes and a risk-adjusted discount rate over the earn-out period. Significant increases or decreases in these inputs could result in a significantly lower or higher fair value measurement of the contingent consideration liability. Changes in the fair value of contingent consideration are included within “Other income (expense), net” in our consolidated statements of operations and comprehensive loss.

 

 

A reconciliation of our liabilities that are measured and recorded at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2024 and 2023 is as follows:

 

(in thousands)   Contingent Consideration  
Balance, December 31, 2022   $ 2,738  
Cash payments for earn contingent consideration     (350 )
Transfer to notes payable     (1,650 )
Loss from fair value adjustments included in results of operations     262  
Balance, December 31, 2023   $ 1,000  
Gain from fair value adjustments included in results of operations     (1,000 )
Balance, December 31, 2024   $ —  

 

Equity Securities Without a Readily Determinable Fair Value

 

Our investment in equity securities without readily determinable fair value consists of ownership interest in Airgraft Inc. We determined that our ownership interests do not provide the Company with significant influence over the operations of this investment. Accordingly, we account for our investment in this entity as equity securities.

 

Airgraft Inc. is a private entity and their equity securities do not have a readily determinable fair value. We elected to measure these equity securities under the measurement alternative election at cost minus impairment, if any, with adjustments through earnings for observable price changes in orderly transactions for the identical or similar investment of the same issuer. We did not identify any fair value adjustments related to these equity securities during the years ended December 31, 2024 and 2023.

 

As of December 31, 2024 and 2023, the carrying value of our investment in equity securities without a readily determinable fair value was approximately $1.9 million, included within “Other assets” in our consolidated balance sheets.