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Fair Value
 3 Months Ended
Mar. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value

9. Fair Value

 

The Company estimates the fair value of financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts the Company would realize upon disposition.

 

The fair value hierarchy consists of three broad levels of inputs that may be used to measure fair value, which are described below:

 

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2. Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3. Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates.

 

The Company accounted for certain common stock issued in connection with the Fexy Studios acquisition that is subject to a put option (which provides for a cash payment to the sellers on the first anniversary date of the closing (or January 11, 2024) in the event the common stock trading price on such date is less than the common stock trading price on the day immediately preceding the acquisition date, or $8.10 per share), as a derivative liability, which requires the Company to carry such amounts on its condensed consolidated balance sheets as a liability at fair value, as adjusted at each reporting period-end.

 

Liabilities measured at fair value on a recurring basis consisted of the following as of March 31, 2023:

 

   Fair Value  

Quoted Prices in Active Markets for Identical Assets

(Level 1)

  

Significant Other Observable Inputs

(Level 2)

  

Significant Unobservable Inputs

(Level 3)

 
Contingent consideration  $1,060   $   -   $1,060   $     - 

 

Contingent Consideration – The fair value of the contingent consideration is primarily dependent on the common stock trading price on the first anniversary of the closing of Fexy Studios, or January 11, 2024. The estimated fair value was calculated using the Black Scholes option pricing model using the following inputs: (i) $8.10 exercise price equal to the closing price of the Company’s common stock at the acquisition date; (ii) $4.25 common stock price equal to the trading price of the Company’s common stock as of the reporting date; (iii) 0.78 years for the expected term; (iv) 4.77% annualized risk free rate; and (v) 70.00% selected volatility. For the three months ended March 31, 2023, the change in valuation of the contingent consideration of $499 was recognized in other expenses on the condensed consolidated statement of operations.