Quarterly report [Sections 13 or 15(d)]

Fair Value of Financial Instruments

v3.26.3
Fair Value of Financial Instruments
 9 Months Ended
Sep. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
Note D – Fair Value of Financial Instruments
Cash, cash equivalents and restricted cash, accounts receivable, contract assets, inventories, prepaid expenses and other current assets, accounts payable, accrued expenses, deferred revenue and other current liabilities are reflected on the condensed consolidated balance sheets at amounts that approximate fair value because of the short-term nature of these financial assets and liabilities. Money market funds are highly liquid investments that are valued based on quoted market prices in active markets, which represent a Level 1 measurement within the fair value hierarchy. During the three and nine months ended September 30, 2026, the Company earned $3.8 million and $5.0 million of interest income, respectively, primarily from interest earned on money market funds, which is included in interest (income) expense, net on the condensed consolidated statements of operations and comprehensive income (loss).

The fair value of the Company’s debt approximates its carrying value and is classified as Level 2 within the fair value hierarchy as it is based on discounted cash flows using a current borrowing rate.

Private Warrants
In September 2021, the Company issued 7,732,168 private warrants in a transaction exempt from registration under securities regulations. The warrants, which were not listed for trading on a stock exchange, entitled the holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share, subject to adjustment. The warrants expired on September 2, 2026, at 5:00 p.m., New York City time. The private warrants were established as a liability at issuance. Classification of the private warrants as liability instruments was based on an analysis of the guidance in accordance with U.S. GAAP and a statement issued by the Staff of the SEC regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies.” The Company considered whether the private warrants display the three characteristics of a derivative, and concluded the private warrants meet the definition of a derivative. However, the private warrants failed to meet the equity scope exception and thus were classified as a liability measured at fair value, subject to remeasurement at each reporting period. The changes in fair value of the private warrant liability were a decrease of $0.6 million and $14.2 million for the three months ended September 30, 2026 and 2025, respectively, and an increase of $14.1 million and a decrease of $11.5 million for the nine months ended September 30, 2026 and 2025, respectively. These changes in fair value are recognized as other (income) expense, net in the condensed consolidated statements of operations and comprehensive income (loss).

During the three and nine months ended September 30, 2026, 130,000 and 2,430,000 private warrants, respectively, were exercised on a cashless basis for 15,915 and 1,084,766 shares of the Company’s common stock, respectively, and a nominal amount of private warrants were exercised and converted into shares of the Company’s common stock on a one for one basis at the exercise price of $11.50 per share for proceeds of $0.4 million and $1.9 million, respectively. On September 2, 2026, the remaining private warrants expired and as of September 30, 2026, the Company had no private warrants outstanding. During the nine months ended September 30, 2025, 4,631,799 private warrants were exercised on a cashless basis for 2,293,739 shares of the Company’s common stock and 467,174 private warrants were exercised and converted into 467,174 shares of the Company’s common stock at the exercise price of $11.50 per share for proceeds of $5.4 million. Upon exercise and expiration, the Company remeasured the fair value of the related private warrants, which was recognized as other (income) expense, net in the condensed consolidated statements of operations and
comprehensive income (loss), and then released the associated liability upon issuance of the Company’s common stock and expiration of the liability. At expiration, the fair value of the private warrants was equal to the difference between the current stock price and the exercise price. As the exercise price was greater than the current stock price, the fair value per share on the expiration date was equal to zero. Refer to Note J – Warrants and Capital Stock Transactions for additional information.

The private warrants were valued using a modified Black-Scholes OPM. As certain inputs are not observable in the market, the private warrants are classified as Level 3 instruments within the fair value hierarchy. The table below presents the fair value per warrant and the valuation assumptions under the Black-Scholes OPM:
May 26, 2026 to August 24, 2026(1)
December 31, 2025 February 25, 2025
Fair value per share
$0.31 to $11.34
 $ 1.60  $ 6.84 
Warrants outstanding
35,000 to 202,069
 2,633,195  5,098,978 
Exercise price
$11.50
 $ 11.50  $ 11.50 
Common stock price
$11.38 to $22.04
 $ 7.60  $ 14.34 
Expected option term
0.03 to 0.3 years
 0.7 years 1.5 years
Expected volatility
49.80% to 144.59%
 104.60  % 82.90  %
Risk-free rate of return
3.68% to 3.79%
 3.52  % 4.05  %
Expected annual dividend yield
—%
 —  % —  %
(1) Represents assumptions used in determining the fair value of warrants upon each exercise and conversion during the nine months ended September 30, 2026.

The table below presents the Company’s financial instruments measured at fair value on a recurring basis:
September 30, 2026
Balance Sheet Location Level 1 Level 2 Level 3 Total
Assets:
Money market funds Cash, cash equivalents and restricted cash $ 404,680  $ —  $ —  $ 404,680 
Total assets $ 404,680  $ —  $ —  $ 404,680 
Liabilities:
Private warrants Warrant liabilities $ —  $ —  $ —  $ — 
Total liabilities $ —  $ —  $ —  $ — 
December 31, 2025
Balance Sheet Location Level 1 Level 2 Level 3 Total
Liabilities:
Private warrants Warrant liabilities $ —  $ —  $ 4,213  $ 4,213 
Total liabilities $ —  $ —  $ 4,213  $ 4,213 
Changes in the fair value of Level 3 financial liabilities were as follows:
Liabilities:
Private Warrants
Total Level 3
December 31, 2025 $ 4,213  $ 4,213 
Changes in fair value 14,147  14,147 
Settlements (18,360) (18,360)
September 30, 2026 $ —  $ —