Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Financial Instruments

v3.24.1.1.u2
Fair Value of Financial Instruments
 3 Months Ended
Mar. 31, 2024
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 3 – FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company accounts for financial instruments in accordance with ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

 

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data.

 

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

 

There were no changes in the fair value hierarchy levelling during the three months ended March 31, 2024 and year ended December 31, 2023.

 

The following table summarizes the fair value of our financial assets and liabilities that were accounted for at fair value on a recurring basis, by level within the fair value hierarchy: 

 

    March 31, 2024  
    Level 1     Level 2         Level 3     Fair Value  
Assets:                        
Cash equivalents:                        
Money market funds     37,124      
-
      
-
       37,124  
Foreign exchange contracts receivable             99      
-
       99  
      37,124       99      
-
       37,223  
Liabilities:                                
Contingent consideration                     153       153  
Private Placement Warrants                     36,755       36,755  
      -               36,908       36,908  

 

   

 

 

December 31, 2023

  
    Level 1     Level 2      Level 3       Fair Value  
Assets:                        
Cash equivalents:                        
Money market funds     11,377      
-
      
-
       11,377  
Foreign exchange contracts receivable             256      
-
       256  
      11,377       256      
-
       11,633  
Liabilities:                                
Contingent consideration    
-
      
-
       155       155  
     
-
      
-
       155       155  

 

The changes in the fair value of the Company’s Level 3 financial liabilities, which are measured on a recurring basis are as follows:

 

    Three Months Ended
March 31,
2024		     Three Months Ended
March 31,
2023		  
Beginning balance  
-
    
-
  
Private Placement Warrants     28,745      
        -
  
Revaluation recorded in financial expense     8,010      
-
  
Ending balance     36,755      
-
  

 

Financial instruments with carrying values approximating fair value include cash and cash equivalents, restricted cash, short-term deposits, other current assets, trade accounts payable and other accounts payable, due to their short-term nature. 

 

The Company determined the fair value of the liabilities for the contingent consideration based on a probability discounted cash flow analysis. This fair value measurement is based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration is based on several factors, such as: the attainment of future clinical, developmental, regulatory, commercial and strategic milestones relating to product candidates for treatment of primary sclerosing cholangitis. The discount rate applied ranged from 3.60% to 4.4%. The contingent consideration is evaluated quarterly, or more frequently, if circumstances dictate. Changes in the fair value of contingent consideration are recorded in consolidated statements of operations. Significant changes in unobservable inputs, mainly the probability of success and cash flows projected, could result in material changes to the contingent consideration liability. Changes in contingent consideration for the three months ended March 31, 2024 and March 31, 2023, resulted from the passage of time and discount rate revaluation.

 

The Company uses foreign exchange contracts (mainly option and forward contracts) to hedge cash flows from currency exposure. These foreign exchange contracts are not designated as hedging instruments for accounting purposes. In connection with these foreign exchange contracts, the Company recognizes gains or losses that offset the revaluation of the cash flows also recorded under financial expenses (income), net in the condensed consolidated statements of operations. As of March 31, 2024, the Company had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $1,711 with a fair value asset of $99. As of December 31, 2023, the Company had outstanding foreign exchange contracts for the exchange of USD to NIS in the amount of approximately $4,136 with a fair value asset of $256.

 

The Company determined the fair value of the liabilities for the Private Placement Warrants using the Black-Scholes model, a Level 3 measurement, within the fair value hierarchy.

 

The main assumptions used are as follows:

 

    Three Months Ended
March 31,		  
    2024     2023  
Underlying value of Common Stock ($)     0.37-0.45       -  
Exercise price ($)     0.23       -  
Expected volatility (%)     117.7-117.8       -  
Expected terms (years)     2.3-2.25       -  
Risk-free interest rate (%)     4.5-4.6       -