Fair Value

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

Fair Value

9. Fair Value

The Company estimates the fair value of financial instruments using available market information and valuation methodologies the Company believes to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts the Company would realize upon disposition.

The fair value hierarchy consists of three broad levels of inputs that may be used to measure fair value, which are described below:

Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2. Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable; and

Level 3. Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates.

Fexy Put Option – The Company accounted for certain common stock issued in connection with the Fexy Studios acquisition that is subject to a put option (the “Fexy Put Option”), which provides for a cash payment to the sellers on the first anniversary date of the closing (on January 11, 2024) in the event the common stock trading price on such date is less than the common stock trading price on the day immediately preceding the acquisition date of $8.10 per share, as a derivative liability, which requires the Company to carry such amounts on the condensed consolidated balance sheets as a liability at fair value, as adjusted at each reporting period-end.

On February 15, 2024, in connection with the contingent consideration related to the acquisition of Fexy Studios, the Company agreed to pay the amount due of $2,478 in four (4) equal installments of approximately $620 starting February 16, 2024 (paid $620 in February 2024) and then on the 15th day of each March (paid $620 in March 2024), April (paid $620 in April 2024) and May (paid $620 in May 2024) of 2024 comprised of the following: (i) $2,225 pursuant to the Fexy Put Option where the Company gave the recipients of the contingent consideration a right to put their 274,692 shares of the Company’s common stock; (ii) $200 deferred payment due under the purchase agreement; and (iii) $53 in other costs and reimbursable transition expenses payable. During the six months ended June 30, 2024, the Company paid the Fexy Put Option and recorded the repurchase of 274,692 shares of the Company’s common stock issued in connection with the acquisition, resulting in a loss of $379 as reflected on the condensed consolidated statements of stockholders’ deficiency.

The Company’s current debt, carried at amortized cost, consists of the Simplify Loan, the 2023 Notes and the Debt (all as further described below) with a carrying value of $12,748, $8,000 and $102,372 as of June 30, 2024, respectively, and $0, $7,887 and $102,309 as of December 31, 2023, respectively, which approximates fair value due to their short term nature and based on current market interest rates for debt instruments of similar credit standing.

Liabilities measured at fair value on a recurring basis consisted of the following as of December 31, 2023:

	Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Contingent consideration	$	1,571	$	-	$	1,571	$	-

Contingent Consideration – The fair value of the contingent consideration was primarily dependent on the common stock trading price on the first anniversary of the closing of Fexy Studios, or January 11, 2024. As of December 31, 2023, the estimated fair value was calculated based on the $8.10 put option amount based on the exercise price of the Company’s common stock at the acquisition date, less the $2.38 the Company’s common stock trading price as of the reporting date, or $5.72 per share, multiplied by the number of shares subject to the put option of 274,692, which approximated the value if the Black-Scholes option-pricing model was used given the proximity date of the put option.

For the six months ended June 30, 2024 and 2023, the change in valuation of the contingent consideration of $313 and $409, respectively, was recognized in other expense on the condensed consolidated statements of operations. For the three months ended June 30, 2024 and 2023, the change in valuation of the contingent consideration of $0 (the Fexy Put Option was called in the three months ended March 31, 2024) and $90, respectively, was recognized in other expense on the condensed consolidated statements of operations.