Fair value of financial instruments

3 Months Ended

Mar. 31, 2021

Fair value of financial instruments

Fair value of financial instruments

(4) Fair value of financial instruments

The Company measures the following financial liabilities at fair value on a recurring basis. There were no transfers between levels of the fair value hierarchy during any of the periods presented. The following tables set forth the Company’s financial assets and liabilities carried at fair value categorized using the lowest level of input applicable to each financial instrument as of March 31, 2021 and December 31, 2020:

			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
	Balance at		Identical		Observable		Unobservable
	March 31,		Assets		Inputs		Inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Warrant liability	$	2,360	$	—	$	—	$	2,360
Contingent consideration – Long term portion	$	6,260	$	—	$	—	$	6,260
	$	8,620	$	—	$	—	$	8,620

			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
	Balance at		Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Liabilities:
Warrant liability	$	490	$	—	$	—	$	490
Contingent consideration – Long term portion	$	6,984	$	—	$	—	$	6,984
	$	7,474	$	—	$	—	$	7,474

The Company’s recurring fair value measurements using Level 3 inputs relate to the Company’s contingent consideration liability and warrant liability. In those circumstances where an acquisition involves a contingent consideration arrangement, the Company recognizes a liability equal to the fair value of the contingent payments the Company expects to make as of the acquisition date. The Company re-measures this liability each reporting period and records changes in the fair value through changes in fair value of Contingent consideration on the Company’s consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount rates, periods, timing and amount of projected revenue.

The Company uses the Black-Scholes option pricing model to value the warrant liability for the Series D Preferred Stock warrant. The Black Scholes option pricing model is based on the estimated market value of the underlying redeemable convertible preferred stock at the valuation measurement date, the remaining contractual term of the warrant, risk-free interest rates, expected dividends, and expected volatility of the price of the underlying redeemable convertible preferred stock.

Changes in the fair value of the Company’s long-term portion of the contingent consideration liability during the three months ended March 31, 2021 and 2020 were as follows:

Balance as of December 31, 2019	$	8,139
Contingent consideration paid		(171)
Reclassification of FY 2020 payment to accrued expenses		(1,590)
Change in contingent consideration value		(1,474)
Balance as of March 31, 2020	$	4,904

Balance as of December 31, 2020	$	6,984
Reclassification of FY 2021 payment to accrued expenses		(1,150)
Change in contingent consideration value		426
Balance as of March 31, 2021	$	6,260

The difference between the amount paid in 2020 and the amount included in accrued expenses at December 31, 2019 is $87 and is included in the change in fair value of contingent consideration in our March 31, 2020 consolidated statement of operations.

The recurring Level 3 fair value measurements of the Company’s contingent consideration liability include the following significant unobservable inputs:

		Fair Value
		as of
		March 31,	Valuation	Unobservable
Contingent Consideration Liability		2021	Technique	Inputs
Revenue-based Payments	$	6,260	Discounted Cash Flow Analysis under the Income Approach	Revenue discount factor, discount rate

Changes in the fair value of the Company’s warrant liability during the three months ended March 31, 2021 and 2020 were as follows:

Balance as of December 31, 2019	$	192
Change in fair value of warrant liability		—
Balance as of March 31, 2020	$	192

Balance as of December 31, 2020	$	490
Change in fair value of warrant liability		1,870
Balance as of March 31, 2021	$	2,360

The recurring Level 3 fair value measurements of the Company’s warrant liability include the following significant unobservable inputs:

	Fair Value
	as of
	March 31,		Valuation	Unobservable
Warrant Liability	2021		Technique	Inputs
Warrant to purchase 368,780 shares of Series D Preferred Stock	$	2,360	Black Scholes option pricing model	Expected volatility, term, risk-free rate