Fair Value Measures

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value Measures

Note 5 — Fair Value Measures 

Fair Values of Assets and Liabilities

The Company measures fair value at 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. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:

Level 1:	Observable inputs such as quoted prices for identical assets or liabilities in active markets.
Level 2:	Other inputs that are observable directly or indirectly, such as quoted prices for similar instruments in active markets or for similar markets that are not active.
Level 3:	Unobservable inputs for which there is little or no market data which require the Company to develop its own assumptions about how market participants would price the asset or liability.

Valuation techniques for assets and liabilities include methodologies such as the market approach, the income approach, or the cost approach, and may use unobservable inputs such as projections, estimates and management’s interpretation of current market data. These unobservable inputs are only utilized to the extent that observable inputs are not available or cost-effective to obtain.

At December 31, 2021 and December 31, 2020, the Company’s assets and liabilities measured at fair value on a recurring basis were as follows:

	December 31, 2021								December 31, 2020
	Fair Value Measurements Using Input Types								Fair Value Measurements Using Input Types
(Dollar Amounts in Thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Mutual funds (included in cash and cash equivalents)	$	178	$	—	$	—	$	178	$	—	$	—	$	—	$	—
Held to maturity securities
Municipal bonds		9,961		—		—		9,961		—		—		—		—
Corporate bonds		34,589		—		—		34,589		—		—		—		—
Total held to maturity securities	$	44,728	$	—	$	—	$	44,728	$	—	$	—	$	—	$	—
Liabilities
Notes payables, net of discount	$	—	$	—	$	—	$	—	$	—	$	—	$	12,493	$	12,493
Derivative liabilities		—		—		—		—		—		—		7,141		7,141
Contingent consideration		—		—		6,137		6,137		—		—		—		—
Total liabilities	$	—	$	—	$	6,137	$	6,137	$	—	$	—	$	19,634	$	19,634

Fair Value of Financial Instruments

The Company has certain financial instruments which consist of cash and cash equivalents, marketable securities, accounts receivable, loan receivable, accounts payable, notes payable, derivative liabilities, deferred revenue, and long-term debt. Fair value information for each of these instruments is as follows:

● Cash and cash equivalents, accounts receivable, accounts payable and deferred revenue liabilities fair values approximate their carrying values, due to the expected duration of these instruments.

● Marketable securities classified as held to maturity securities are recorded at amortized cost, which as of December 31, 2021, approximated fair value.

● The Company had certain derivative instruments accounted for at fair value. The Company held a convertible promissory note with a preferential conversion feature which qualifies as a derivative instrument. The fair value assumptions consider the nature of the conversion feature and the expected timeline to a qualifying conversion event.

● The Company’s deferred consideration was recorded in connection with acquisitions during the year ending December 31, 2021 using an estimated fair value discount at the time of the transaction. As of December 31, 2021, the carrying value of the deferred consideration approximated fair value.

Marketable Securities

As of December 31, 2021, the Company held investments consisting of mutual funds, municipal bonds, and corporate bonds. The mutual funds are recorded at fair value in the accompanying consolidated balance sheet as part of cash and cash equivalents. The municipal and corporate bonds are considered held to maturity and are recorded at amortized cost in the accompanying consolidated balance sheet. The fair values of these investments were estimated using recently executed transactions and market price quotations. The Company considers current assets those investments which will mature within the next 12 months including interest receivable on the long-term bonds.

The composition of the Company’s marketable securities are as follows:

(Dollar Amounts in Thousands)	December 31, 2021		December 31, 2020
Current marketable securities:
Municipal bonds	$	9,961	$	—
Corporate bonds		34,589		—
Total current marketable securities	$	44,550	$	—

The amortized cost and estimated fair value of held to maturity securities as of December 31, 2021, are as follows:

(Dollar Amounts in Thousands)	Amortized cost		Unrealized loss			Estimated fair value
Current marketable securities (due within 1 year)
Municipal bonds	$	9,961	$	(9	)	$	9,952
Corporate bonds		34,589		(72	)		34,517
	$	44,550	$	(81	)	$	44,469

Contingent Consideration

The Company has classified its net liability for contingent earnout considerations relating to the two acquisitions completed in Fiscal 2021. The fair value for the contingent consideration associated with these acquisitions is within Level 3 of the fair value hierarchy because the associated fair value is determined using significant unobservable inputs, which included the key assumptions to model future revenue, costs of goods sold and operating expense projections. A description of the Company’s acquisitions completed in Fiscal 2021 is included within Note 13 – Business Combinations included elsewhere in the notes to the consolidated financial statements.

The contingent earnout payments for each acquisition are based on the achievement of certain revenue thresholds. During the fourth quarter of 2021, the fair value of the contingent earnout consideration increased by $1.4 million due to the actual revenue achievement for the period ended December 31, 2021, being greater than the initially projected revenue achievement incorporated into our initial purchase price allocation. This amount, as required by ASC 805, was recorded as part of our operating expenses in the fourth quarter of 2021.

(Dollar Amounts in Thousands)	December 31, 2021
Contingent consideration – beginning of year	$	—
Accrued contingent consideration		4,725
Change in estimated fair value		1,412
Contingent consideration – end of year	$	6,137

Contingent consideration is included within accrued expense in the consolidated balance sheets as of December 31, 2021.