Note 9 - Fair Value Measurements

12 Months Ended

Dec. 29, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 9 — FAIR VALUE MEASUREMENTS

The Company's cash, cash equivalents and restricted cash balances were $21.9 million and $24.6 million, including amounts in money market funds, as of December 29, 2024 and December 31, 2023, respectively. The money market funds are collateral for the company's credit card debt and had a balance of $0.1 million at  December 29, 2024 and December 31, 2023. Interest in these funds is earned at a 0.01% annual percentage rate ( "APR"). Due to the short-term nature of the money market funds, the Company believes that carrying value approximates fair value.

On April 28, 2023, the Company converted accounts receivable for a customer in the amount of approximately $1.16 million to notes receivable (the "Original Note"). At the time, the Original Note bore an interest rate of 3.0% compounded monthly. On June 28, 2023, the Company cancelled the Original Note and entered into a revised promissory note ("Second Revised Note") with the customer, where the interest rate changed to 4.69% compounded monthly, or a 4.8% effective annual interest rate, accruing from the date of the Original Note. On June 27, 2024, the Company cancelled the Second Revised Note and entered into a revised promissory note ("Current Note") with the customer, where the interest rate changed to 10.0% per annum. Accrued but unpaid interest will be compounded monthly, accruing from the date of the Current Note. Additionally, if not prepaid prior to the Current Note maturity date of the earlier of (i) 24 months from June 28, 2024 or (ii) the closing of the customer's Series B financing, the principal and all accrued and unpaid interest will be due and payable to the Company. If an event of default occurs, the interest rate will increase to 15.31%. All other terms of the Original Note remained the same. As of December 29, 2024, the related note receivable balance was $1.29 million, including $129 thousand in accrued interest. The Company evaluated the note receivable under the current expected credit loss ("CECL") model, which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The CECL model does not specify a threshold for the recognition of an impairment allowance. The Company utilized the probability-of-default method to determine the current expected credit loss for the note receivable. The probability-of-default method represents the likelihood that a receivable that has reached the point of default will not be collected in full. The Company updates its loss rate and factors annually to incorporate the most recent historical data and qualitative factors, including knowledge of industry and technological trends and understanding of the customer's business and history as a start-up entity. Additionally, these factors may include forward-looking information. Using this method, the Company measured the current expected credit loss associated with the note receivable to be de minimis as of December 29, 2024.

In the third quarter of 2021, in connection with a revenue contract with the same non-affiliated customer, the Company received shares of the customer's common stock. The full transaction price under the revenue contract was cash plus a non-cash consideration, which consisted of a certain amount of the customer's equity. The Company considered the non-cash consideration to be an investment in the customer. The full transaction price was the amount of consideration which the Company received under the contract in exchange for transferring the promised goods and services to the customer. Since the non-cash consideration was shares of common stock that were not publicly traded, the fair value was not readily determinable. The Company considered various valuation methods such as market multiples, guideline public company method, and the Black-Scholes Option Pricing model. Due to limited data for the valuation, the Company ultimately selected the Black-Scholes method using back-solve techniques as that was determined to be the most suitable with the available data. The Black-Scholes Option Pricing model is a valuation approach that can be used to determine the value of common shares for companies in which there are no, or infrequent, transactions involving common shares. The Company believed that its valuation method for the non-public equity under this arrangement fell under Level 3 in the fair value hierarchy because the value method relied on unobservable market inputs. The initial fair value of the non-cash consideration is listed below: 

	Fair Value at Valuation Date Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Non-marketable equity investment	$	300	$	—	$	—	$	300

In arriving at the estimated value for the non-cash consideration, the Company utilized inputs relying on significant judgment in accordance with the AICPA Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation (2013). The key assumptions below were utilized:   

• Discount for lack of marketability: 34% - 41%.

• Expected Term: 4 - 5 Years.

• Risk Free Interest Rate: 0.75% - 0.92%.

• Dividend: 0.00.

• Volatility: 63% - 78%.

Volatility was estimated by utilizing a selected peer group of companies within the customer's industry with a valuation date as of  October 2021. 

After initial recognition fair value of the non-cash consideration, the Company elected to utilize the practical expedient under ASC 321 by which entities can elect to measure equity securities without readily determinable fair values at “cost minus impairment,” basis for periods subsequent to the acquisition date. Under the “cost minus impairment” methods, when the investment is determined to be impaired on the basis of a qualitative assessment or there is an observable price change in an orderly transaction, entities that have made the election in ASC 321 must remeasure such equity securities at fair value in accordance with ASC 820. ASC 321 indicates that the adjustments to the carrying value of an equity security without a readily determinable fair value should reflect the fair value of the security as of the date that the observable transaction for the similar security took place. 

Subsequent to the valuation date and through December 31, 2023, there were no observable price changes or indicators of impairment for the non-marketable equity investment. During Fiscal 2024, there were no observable price changes or indicators of impairment for the non-marketable equity investment. There was no change to the carrying value of the non-marketable equity investment of $0.3 million as of  December 29, 2024 and December 31, 2023.