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FAIR VALUE OF FINANCIAL INSTRUMENTS
 9 Months Ended
Sep. 30, 2023
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS
7)
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 September 30, 2023 and December 31, 2022 (in thousands):

Description
  
Level
     September 30,
2023
     December 31,
2022
  
Liabilities:
                  
Warrant liabilities - Common Warrants
    
3
    
$
165
    
$
331
  
Market Cap Contingent Consideration
    3     $ 107     $ -  


The Company uses a Black-Scholes option pricing model to estimate the fair value of its warrant liabilities and a Monte Carlo simulation model to estimate the fair value of the Market Cap Contingent Consideration, both of which are considered a Level 3 fair value measurement. The Company remeasures the fair value of the warrant liabilities and the Market Cap Contingent Consideration at each reporting period and changes in the fair values are recognized in the statement of operations.

Certain inputs used in Black-Scholes, and Monte Carlo 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 liabilities measured at fair value from January 1, 2023, or from the initial measurement date if later than January 1, 2023, through September 30, 2023 (in thousands):


 
  
Warrant
Liabilities
    
Contingent
Consideration
 
             
Fair value at January 1, 2023
  
$
331
     $ -  
Initial measurement
    -       225  
Change in fair value
    
(166
)
     (118 )
Fair value at September 30, 2023
  
$
165
     $ 107  


The Company assessed the fair value of the Market Cap Contingent Consideration at September 30, 2023 and determined that there were no material changes to the inputs used in the June 30, 2023 remeasurement that would have resulted in a material change to the liability at September 30, 2023.  Therefore, the Company did not recognize a change in the fair value of the Market Cap Contingent Consideration for the three months ended September 30, 2023.


The table below is provided for comparative purposes only and presents information about the fair value of the Company’s Convertible Notes relative to the carrying values recognized in the condensed consolidated balance sheet as of September 30, 2023 (in thousands).  The Company did not have the Convertible Notes as of December 31, 2022.


   
September 30, 2023
  
 
  
Carrying
Value
    
Fair
Value
  
 
            
Convertible Notes
  
$
8,715
    
$
9,114
  



The Company assesses the fair value of the Convertible Notes using a binomial model, which is considered a Level 3 measurement.