Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2023

Fair Value of Financial Instruments [Abstract]

9)	Fair Value of Financial Instruments

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

			As of December 31,
Description	Level		2023		2022
Liabilities:
Warrant liabilities - Common Warrants		3	$	116	$	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 in the liabilities measured at fair value from January 1, 2023, or from the initial measurement date if later than January 1, 2023, through December 31, 2023 (in thousands):

	Warrant Liabilities			Contingent Consideration

Fair value at January 1, 2023	$	331		$	-
Initial measurement		-			225
Change in fair value		(215	)		(118	)
Fair value at December 31, 2023	$	116		$	107

The Black-Scholes valuation assumptions used at December 31, 2023 for the warrant liabilities were 3.69 years expected term, 3.93% risk-free rate, 103% volatility and 0% dividend yield.

With the assistance of a third-party specialist, the Company assesses the fair value of the Market Cap Contingent Consideration at each quarterly reporting period using the Monte Carlo model, and as of June 30, 2023, determined that the fair value of the contingent consideration had been reduced by approximately $0.1 million from the initial measurement. The Company assessed the fair value of the Market Cap Contingent Consideration as of September 30, 2023 and as of December 31, 2023, and determined that there was no material change to the Market Cap Contingent Consideration for either period, and therefore, did not recognize a change in the fair value of the Market Cap Contingent Consideration since the June 30, 2023 remeasurement. The Company assessed the fair value as of December 31, 2023, and the inputs used for that assessment was risk-free rate of 4.07%, expected term of 2.3 years, stock price of $1.80, volatility of 108% and dividend yield of 0%.

The table below is provided for comparative purposes only and presents information about the fair value of the convertible notes relative to the carrying values recognized in the consolidated balance sheet as of December 31, 2023 (in thousands). The Company did not have any of the convertible notes or similar instruments outstanding as of December 31, 2022.

			December 31, 2023
	Level		Carrying Value		Fair Value
Convertible Notes		3	$	16,616	$	17,594

The carrying value in the table above is shown before the allocation of the proceeds to the note warrants. The Company assesses the fair value of the convertible notes using the binomial model, which is considered a Level 3 measurement. The weighted average inputs used in the binomial model as of December 31, 2023 was stock price of $1.80, credit spread of 1,891, volatility of 109% and risk-free rate of 3.87%.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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