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Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Note 11. Fair Value Measurements

The Company measures certain liabilities at fair value on a recurring basis.

Earnouts associated with the acquisitions of Bonaccord and Hark

Included in total consideration of the acquisition of Bonaccord is an earnout payment not to exceed $20 million. The amount ultimately owed to the sellers is based on achieving specific fundraising targets and any amounts paid to the sellers will be paid by October 2027, at which point the earnout expires. As of June 30, 2023, $8.9 million has been paid in

contingent consideration associated with the earnout. Total expense recognized for the three and six months ended June 30, 2023 was $0.1 million and $0.5 million, respectively. Total expense recognized for the three and six months ended June 30, 2022 was $0 million and $0.1 million, respectively. This is included in contingent consideration expense on the Statements of Operations. The fair value of the contingent consideration is derived from an analysis of the option pricing model and the scenario based model. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the liability may differ materially from the current estimate. The most significant assumption used in the analysis is future fundraising projections. The Company's contingent consideration is considered to be a Level 3 fair value measurement as the significant inputs are unobservable and require significant judement or estimation. As of June 30, 2023, the estimated fair value of the remaining contingent consideration totaled $10.8 million. Following June 30, 2023, the Company has paid $2.7 million towards the remaining contingent consideration.

Included in the total consideration of the acquisition of Hark is an earnout not to exceed $5.4 million. Total expense recognized for the three and six months ended June 30, 2023 totaled $0 and $0.1 million, respectively. Total gain recognized for the three and six months ended June 30, 2022, respectively, totaled $0 million and $0.1 million, which was included in contingent consideration expense on the Statements of Operations. As of June 30, 2023, the contingent consideration associated with the earnout totaled $5.4 million and is considered earned but has not yet been paid. Following June 30, 2023, this was paid in entirety.

The following tables provide details regarding the classification of these liabilities within the fair value hierarchy as of the dates presented:


	As of June 30, 2023
	Level I		Level II		Level III		Total
Liabilities
Contingent consideration obligation	$	-	$	-	$	16,219	$	16,219
Total liabilities	$	-	$	-	$	16,219	$	16,219


	As of December 31, 2022
	Level I		Level II		Level III		Total
Liabilities
Contingent consideration obligation	$	-	$	-	$	17,337	$	17,337
Total liabilities	$	-	$	-	$	17,337	$	17,337

For the liabilities presented in the tables above, there were no changes in fair value hierarchy levels during the periods ended June 30, 2023 and December 31, 2022.

The changes in the fair value of Level III financial instruments are set forth below:


Contingent Consideration Liability	For the Six Months Ended June 30,
	2023			2022
Balance, beginning of year:	$	17,337		$	22,963
Additions		-			-
Change in fair value		470			(13	)
Settlements		(1,588	)		-
Balance, end of period:	$	16,219		$	22,950

The fair value of the contingent consideration liability represents the fair value of future payments upon satisfaction of performance targets. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the contingent consideration liability primarily relate to the expected future payments of obligations with a discount rate applied. The contingent consideration liability is included in contingent consideration on the Consolidated Balance Sheets. Changes in the fair value of the liability are included in contingent consideration expense on the Consolidated Statements of Operations.

- 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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