Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value MeasurementsFair 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 market participants at the measurement date. Assets and liabilities recorded at fair value in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure fair value. The fair

value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I) and the lowest priority to unobservable inputs (Level III). The three levels of the fair value hierarchy are described below:


Level Input						Input Definition
Level I						Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level II						Inputs, other than quoted prices included in Level I, that are observable for the asset or liability through corroboration with market data at the measurement date.
Level III						Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following tables summarize fair value measurements by level for assets and liabilities measured at fair value on a recurring basis as of the periods presented (in thousands):


	Balance as of September 30, 2021
	Level I		Level II		Level III		Total
Letter of credit (1)	$	408	$	—	$	—	$	408
Total assets	$	408	$	—	$	—	$	408

Contingent consideration (2)	$	—	$	—	$	1,790	$	1,790
Total liabilities	$	—	$	—	$	1,790	$	1,790


	Balance as of December 31, 2020
	Level I		Level II		Level III		Total
Letter of credit (1)	$	408	$	—	$	—	$	408
Total assets	$	408	$	—	$	—	$	408

Contingent consideration (2)	$	—	$	—	$	485	$	485
Total liabilities	$	—	$	—	$	485	$	485

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(1) $408,000 was included in "Restricted cash - long term" on our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

(2) Contingent consideration was included in "Other accrued liabilities" on our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

Financial instruments classified as Level III in the fair value hierarchy as of September 30, 2021 and December 31, 2020 represent liabilities measured at market value on a recurring basis and include contingent consideration relating to a stock price guarantee provided in an acquisition (see further discussion below regarding this contingent consideration). In accordance with current accounting rules, the contingent consideration liability is being marked-to-market each quarter-end until it is completely settled or expire. The fair value of contingent consideration liability is valued using the Monte Carlo simulation model, using both observable and unobservable inputs and assumptions.

The carrying value of the 2024 Notes is estimated to approximate their fair value as the variable interest rate of the Senior Secured Notes approximates the market rate for debt with similar terms and risk characteristics.

The fair value measurements using significant Level III inputs, and changes therein, was as follows (in thousands):


	Level III Contingent Consideration
Balance as of December 31, 2020	$	485
Change in fair value	1,305
Balance as of September 30, 2021	$	1,790

The $1.8 million of contingent consideration as of September 30, 2021 relates to a stock price guarantee provided as a part of our acquisition of LifeDojo, Inc. in October 2020. The stock price guarantee is based on a computation, as defined in the merger agreement, in the event the daily closing price per share of our common stock falls below a specified target price of $60 on two consecutive trading days during a six month period beginning on the sixth month anniversary to the twelfth month anniversary of the closing date (measurement period). The contingent consideration amount, if any, is payable within five business days following the completion of the measurement period, at the Company's option, in cash or Company's common stock, or any combination thereof.

- 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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