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Fair Value Measurement
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurement

18. Fair Value Measurement

 

The Company’s financial instruments consist of level 1, Level 2 and level 3 assets as of December 31, 2022 and 2021. As of December 31, 2022 and 2021, the Company’s cash and cash equivalents of $13,871 and $9,349, respectively, were Level 1 assets and included savings deposits, overnight investments, and other liquid funds with financial institutions.

 

Financial instruments measured at fair value during the year consisted of the following:

 

 

   As of December 31, 2022 
   Fair Value  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Senior Secured Notes  $61,787   $    -   $61,787   $       - 

 

   As of December 31, 2021 
   Fair Value  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Senior Secured Notes  $60,756   $    -   $60,756   $       - 

 

Senior Secured Notes – The carrying value of the Senior Secured Notes (as defined below) approximates fair value based on current market interest rates for debt instruments of similar credit standing and, consequently, their fair values are based on Level 2 inputs.

 

The quantitative information utilized in the fair value calculation of the Level 3 liabilities are as follows:

 

Unearned Revenue – The fair value of unearned revenue remaining in connection with the 2019 acquisitions of Sports Illustrated Licensed Brands, was determined with the following inputs: (1) projection of when unearned revenue will be earned; (2) expense necessary to fulfill the subscriptions; (3) gross up of the fulfillment costs to include a market participant level of profitability; (4) slight premium to the fulfillment-costs plus a reasonable profit metric; and (5) reduce projected future cash flows to present value using an appropriate discount rate. The unearned revenue remaining from the acquisitions as of December 31, 2022 and 2021 was $1,154 and $4,855, respectively.

 

The changes in unearned revenue with inputs classified as Level 3 of the fair value hierarchy are reflected within revenue on the consolidated statements of operations.

 

Warrant Derivative Liabilities – The Company accounted for certain warrants issued in connection with previously issued convertible debentures, as derivative liabilities, which required the Company carry such amounts on its consolidated balance sheets as a liability at fair value, as adjusted at each reporting period end.

 

The Company determined the fair value of the Strome Warrants and B. Riley Warrants (as described in Note 22) utilizing the Black-Scholes valuation model as further described below. These warrants were classified as Level 3 within the fair-value hierarchy prior to reclassification to equity (as described below). Inputs to the valuation model include the Company’s publicly quoted stock price, the stock volatility, the risk-free interest rate, the remaining life of the warrants, the exercise price or conversion price, and the dividend rate. The Company uses the closing stock price of its common stock over an appropriate period of time to compute stock volatility.

 

These assumptions are summarized as follows:

 

Strome Warrants – 2021 assumptions upon reclassification to equity: Black-Scholes option-pricing; expected life: 1.54 years; risk-free interest rate: 0.60%; volatility factor: 146.68%; dividend rate: 0.0%; transaction date closing market price: $0.62; exercise price: $0.50.

 

B. Riley Warrants – 2021 assumptions upon reclassification to equity: Black-Scholes option-pricing; expected life: 3.88 years; risk-free interest rate: 1.14%; volatility factor: 144.61%; dividend rate: 0.0%; transaction date closing market price: $0.62; exercise price: $0.33.

 

 

The following table represents the carrying amounts, change in valuation for the Company’s warrants accounted for as a derivative liability and classified within Level 3 of the fair-value hierarchy and fair value recorded upon reclassification to equity as of and during the year ended December 31, 2021:

 

 

   Carrying Amount at Beginning of Year   Change in Valuation   Reclassification to Equity    Carrying Amount at End of Year 
Strome Warrants  $    704   $      (75)  $(629)  $      - 
B. Riley Warrants   443    41    (484)   - 
Total  $1,147   $(34)  $(1,113)  $- 

 

For the year ended December 31, 2021, the change in valuation of warrant derivative liabilities recognized within other income on the consolidated statements of operations was $34. The Strome Warrants and B. Riley Warrants were reclassified to equity upon filing an effective registration statement during the year ended December 31, 2021, resulting in a $1,113 offset within additional paid-in capital on the consolidated statements of stockholders’ deficiency.