Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair 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 March 31, 2022
	Level I		Level II		Level III		Total
Letter of credit (1)	$	306	$	—	$	—	$	306
Total assets	$	306	$	—	$	—	$	306

Contingent consideration (2)	$	—	$	—	$	144	$	144
Warrant liability (3)	—		—		45		45
Total liabilities	$	—	$	—	$	189	$	189


	Balance as of December 31, 2021
	Level I		Level II		Level III		Total
Letter of credit (1)	$	306	$	—	$	—	$	306
Total assets	$	306	$	—	$	—	$	306

Contingent consideration (2)	$	—	$	—	$	357	$	357
Total liabilities	$	—	$	—	$	357	$	357

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(1) $0.3 million was included in "Restricted cash - long term" on our condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

(2) Contingent consideration was included in "Other accrued liabilities" on our condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

(3) Relates to Ticking Warrant issued on March 31, 2022 in connection with the Eight Amendment executed on March 8, 2022, as discussed in Notes 7 and 9 above, and included in "Other accrued liabilities" on our condensed consolidated balance sheet as of March 31, 2022.

Financial instruments classified as Level III in the fair value hierarchy as of March 31, 2022 and December 31, 2021 represent liabilities measured at market value on a recurring basis and include warrant liabilities relating to Ticking Warrant issued in connection with an amendment to our debt agreement, as discussed in Note 9, and 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 warrant liability and contingent consideration liability are being marked-to-market each quarter-end until they are completely settled or expire. The fair value of the warrant liability is valued using the Black-Scholes pricing model, using both observable and unobservable inputs and assumptions consistent with those used in the estimate of fair value of employee stock options. The fair value of the 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, 2021	$	357
Settlement of contingent consideration	(213)
Balance as of March 31, 2022	$	144

The $0.1 million of contingent consideration, which resulted from a stock price guarantee provided as a part of our acquisition of LifeDojo, Inc. in October 2020, remaining as of March 31, 2022 relates to 16,510 shares of common stock remaining to be issued, pending response for stockholder information.

Warrant Liabilities


	Level III Warrant Liabilities
Balance as of December 31, 2021	$	—
Warrant issued - Ticking Warrant	45

Balance as of March 31, 2022	$	45

The assumptions used in the Black-Scholes warrant-pricing model were determined as follows:


	March 31, 2022
Volatility	100.0	%
Risk-free interest rate	2.45	%
Weighted average expected life (in years)	4.55
Dividend yield	0	%

- 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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