v3.24.3
Fair Value
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Fair Value
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. U.S. GAAP sets forth a three-level fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three levels are as follows:
Level 1 – defined as observable inputs, such as quoted market prices in active markets.
Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.
Our financial assets and liabilities subject to the three-level fair value hierarchy consist principally of cash and cash equivalents, accounts receivable, accounts payable, contingent consideration, and derivative liabilities. The estimated fair value of cash and cash equivalents, accounts receivable, and accounts payable approximates their carrying value.
On April 4, 2022, the Company issued common stock, a convertible note, and warrants in a SPA with Crom (“2022 Crom SPA”). The Company had evaluated the conversion option liability in the convertible note and the warrants to determine proper accounting treatment and determined them to be derivative liabilities ("Derivative Liabilities").
On February 13, 2023, the 2022 Crom SPA was terminated through an induced conversion thereby extinguishing the conversion option liability associated with the 2022 Crom note; the warrants were not affected. Concurrent with the termination of the 2022 Crom SPA, the Company issued common stock, the 2023 Note Payable, and warrants in the 2023 SPA with Crom. The Company evaluated the conversion option in the 2023 Note Payable and these warrants to determine proper accounting treatment and determined them to be derivative liabilities (also “Derivative Liabilities”). The Derivative Liabilities had and have been accounted for utilizing ASC 815, Derivatives and Hedging.

On February 13, 2024, the Company paid the outstanding principal and accrued interest owed on the 2023 Note Payable to Crom, thereby extinguishing the conversion feature associated with this note; the warrants were not affected.

The Company recognized liabilities for the estimated fair values of the Derivative Liabilities. The estimated fair values of these liabilities were calculated using a binomial pricing model with key input variables by an independent third party, as of the date of issuance, with changes in fair value recorded as gains or losses on revaluation in other income (expense). The Company determined that the significant inputs used to value the Derivative Liabilities fall within Level 3 of the fair value hierarchy.

In connection with the MFSI Divestiture, as discussed in Note 3, "Acquisition and Disposition". Management estimated the present value of future consideration to be received, using a probability-weighted analysis to determine the amount of the receivable and applying a discount rate that captures the risks associated with the duration of the consideration. The Company determined that the significant inputs used to value the Anticipated Receivable fall within Level 3 of the fair value hierarchy.
The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:
Fair Value Measurements at September 30, 2024
Level 1Level 2Level 3Total
Anticipated Receivable $- $- $296,009 $296,009 
Derivative Liabilities$— $— $40,000 $40,000 
Fair Value Measurements at December 31, 2023
Level 1Level 2Level 3Total
Derivative Liabilities$- $- $157,600 $157,600 
The Company’s derivative liabilities as of September 30, 2024 and December 31, 2023 associated with the Derivative Liabilities are as follows.
September 30, 2024December 31,
2023		Inception
Fair value of 656,250 warrants issued on April 4, 2022
$15,000 $66,000 $378,000 
Fair value of conversion option of Crom convertible note— 200 162,000 
Fair value of 700,000 warrants issued on February 13, 2023
25,000 91,400 259,000 
$40,000 $157,600 
Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each Derivative Instrument is estimated using a binomial valuation model. The following assumptions were used for the period as follows:
September 30,
2024
Expected term - warrants
2.51 years - 3.40 years
Stock price as of measurement date$0.17 
Volatility (observed)
115.40% - 117.20%
Incremental discount5.0 %
Selected volatility – post haircut
89.8% - 98.5%
Risk-free interest rate
3.55% - 3.59%