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WARRANTS | 9 Months Ended
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Sep. 30, 2023
Other Liabilities Disclosure [Abstract] |
WARRANTS | WARRANTS On February 14, 2023, the lenders under the Amended Credit Agreement (see Note 11 for additional information) received warrants (the “Warrants”) to purchase 3,223,851 shares of Altisource common stock (the “Warrant Shares”). The number of Warrant Shares is subject to reduction based on the amount of par paydowns on the senior secured term loans (“SSTL”) in the aggregate using proceeds from issuances of equity interests or from junior indebtedness made prior to February 14, 2024 (“Aggregate Paydowns”) as set forth in the table below.
Aggregate Paydowns | Warrant Shares
Less than $20 million | 3,223,851
$20 million+ but less than below | 2,578,743
$30 million+ | 1,612,705
During the first quarter of 2023, Company made $20 million of Aggregate Paydowns. In the third quarter of 2023, the Company made an additional $10 million of Aggregate Paydowns. As a result, the number of Warrant Shares as of September 30, 2023 is 1,612,705. The exercise price per share of common stock under each Warrant is equal to $0.01. The Warrants may be exercised at any time on and after February 14, 2024 and prior to their expiration date. The Warrants are exercisable on a cashless basis and are subject to customary anti-dilution provisions. The Warrants, if not previously exercised or terminated, will be automatically exercised on May 22, 2027. The Warrants are subject to a lock-up agreement, subject to customary exceptions, ending on February 16, 2024. The Company determined that the Warrants are free standing financial instruments that are legally detachable and separately exercisable from the term loans under the Amended Credit Agreement. At inception, the Company also determined that the Warrants were not considered to be indexed to the Company’s stock because the number of Warrant Shares varies based on Aggregate Paydowns and as such were required to be classified as a liability pursuant to ASC 815-40, Derivatives and Hedging–Contracts in Entity’s Own Equity. The outstanding Warrants were recognized as a warrant liability on the balance sheet and were measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income (expense) in the statement of operations. On September 18, 2023, the Company reached the $30 million in Aggregate Paydowns threshold and the number of Warrant Shares is no longer variable. As a result, the Warrants are considered to be indexed to the Company’s stock and the Warrant Liability was reclassified to equity. The fair value of the warrant liability was based on the number of Warrant Shares that were expected to be exercisable on and after February 14, 2024 and the Altisource share price less $0.01 at the measurement date. The fair value of the warrant liability at each of the respective valuation dates is summarized below:
Warrant Liability | Warrant Shares based on Aggregate Paydowns | Expected Warrant Shares that will be exercisable on February 14, 2024 | Fair Value per Warrant Share | Fair Value (in thousands)
Fair value at initial measurement date of February 14, 2023 | 3,223,851 | 1,612,705 | $5.02 | $ | 8,096 |
Gain on change in fair value of warrant liability |  |  |  | (694) |
Fair value at March 31, 2023 | 2,578,743 | 1,612,705 | $4.59 | 7,402 |
Loss on change in fair value of warrant liability |  |  |  | 1,774 |
Fair value at June 30, 2023 | 2,578,743 | 1,612,705 | $5.69 | $ | 9,176 |
Gain on change in fair value of warrant liability |  |  |  | (2,225) |
Fair value at September 18, 2023 | 1,612,705 | 1,612,705 | $4.31 | $ | 6,951 |
During the nine months ended September 30, 2023, the Company recorded a gain on changes in fair value of warrant liability of $1.1 million ($2.2 million for the third quarter of 2023). During the three and nine months ended September 30, 2022, there were no warrant liabilities outstanding.

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- Definition The entire disclosure for other liabilities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.20,24) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480566/210-10-S99-1 + Details
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