XML 21 R10.htm IDEA: XBRL DOCUMENT v3.23.2
FAIR VALUE OF FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2023
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS
4)
FAIR VALUE OF FINANCIAL INSTRUMENTS
 

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between willing market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:


 
●
Level 1 Inputs – Valued based on quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
 
 
●
 Level 2 Inputs – Valued based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
 
 
●
Level 3 Inputs – Valued based on inputs for which there is little or no market value, which require the reporting entity to develop its own assumptions.


The carrying amounts reported on the balance sheet for cash and cash equivalents, other receivable, prepaid assets and other current assets, accounts payable and accrued expenses, other current liabilities and other liabilities approximate fair value based due to their short maturities.



The following tables summarize the liabilities that are measured at fair value as of June 30, 2023 and December 31, 2022 (in thousands):

Description
  
Level
     June 30,
2023
     December 31,
2022
  
Liabilities:
                  
Warrant liabilities - Common Warrants
    
3
    
$
185
    
$
331
  
Market Cap Contingent Consideration
    3     $ 107     $ -  



The Company has Common Warrants related to the March PIPE, as defined and discussed in Note 12, that are recognized as liabilities.  The Company uses a Black-Scholes option pricing model to estimate the fair value of the Common Warrants, which is considered a Level 3 fair value measurement.



The Company also has contingent consideration liabilities related to the Exacis Acquisition, as discussed in Note 3.  The Market Cap Contingent Consideration is indexed to or settled in the Company’s own shares.  As a result, the Company classified the Market Cap Contingent Consideration as a liability measured at fair value because the financial instrument embodies a conditional obligation (the Company would only issue the shares on the condition that the market capitalization thresholds are met), and at inception, the monetary value of the obligation is based solely on a fixed monetary amount ($2.0 million of shares for each target), which will be settleable with a variable number of the Company’s shares.  The Company uses a Monte Carlo simulation model to estimate the fair value of the Market Cap Contingent Consideration, which is considered a Level 3 fair value measurement.  As of the acquisition date, the fair value of the Market Cap Contingent Consideration was approximately $0.2 million.  The Company remeasured the fair value of the Market Cap Contingent Consideration as of June 30, 2023, which resulted in a decrease of $0.1 million to approximately $0.1 million.  The following assumptions were used in the fair valuation calculation as of the acquisition date and June 30, 2023:


   
Acquisition Date
    
June 30, 2023
  
Stock price
  
$
3.00
    
$
2.26
  
Risk-free rate
    
3.58
%
    
4.46
%
Volatility
    
100
%
    
90
%
Dividend yield
    
0
%
    
0
%
Expected term
  
3.0 years
    
2.82 years
  


The License Contingent Consideration is to be settled in cash and is generally recognized when the liability is probable and estimable.  As of the acquisition date and as of June 30, 2023, the Company concluded that paying the License Contingent Consideration was not probable or estimable.  Therefore, there was no applicable contingent consideration liability recognized.



Certain inputs used in this Black-Scholes and Monte Carlo pricing models may fluctuate in future periods based upon factors that are outside of the Company’s control.  A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of the Company’s warrant liabilities or contingent consideration liabilities, which could also result in material non-cash gains or losses being reported in the Company’s consolidated statement of operations.


The following table presents the changes in the warrant liabilities from January 1, 2023 through June 30, 2023, as well as the initial measurement of the Market Cap Contingent Consideration as of the acquisition date of the Exacis Assets and the changes in such contingent consideration as of June 30, 2023 (in thousands):


 
  
Warrant
Liabilities
     Contingent Consideration
 
             
Fair value at January 1, 2023
  
$
331
     $ -  
Initial measurement of Market Cap Contingent Consideration
    -       225  
Change in fair value
    
(146
)
     (118 )
Fair value at June 30, 2023
  
$
185
     $ 107