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WARRANTS | 9 Months Ended
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Sep. 30, 2024
Other Liabilities Disclosure [Abstract] |
WARRANTS | WARRANTS On February 14, 2023, the lenders under the Amended Credit Agreement (see Note 10 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 was subject to reduction based on the amount of Aggregate Paydowns. During 2023, the Company made $30 million of Aggregate Paydowns. Since Aggregate Paydowns were equal to or greater than $30 million, the number of Warrant Shares was reduced to 1,612,705. The following table summarizes the activity related to our Warrant Shares:
| Warrant Shares
Outstanding as of December 31, 2023 | 1,612,705 |
Exercised | (96,808) |
Outstanding as of September 30, 2024 | 1,515,897 |
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 were subject to a lock-up agreement, subject to customary exceptions, which expired on February 16, 2024. 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 Warrants were not considered to be indexed to the Company’s stock because the number of Warrant Shares varied based on Aggregate Paydowns. 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 based on their inception date fair value and subsequently re-measured at each reporting period with changes 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 was no longer variable. As a result, the Warrants were 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) (no comparative amount for the three and nine months ended September 30, 2024).

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