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Fair Value Measurements

9 Months Ended

Sep. 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. Payments are made after each close. As of September 30, 2023, $9.7 million has been paid in total contingent consideration associated with the earnout. It is highly probable that the remainder of the earnout will be acheived. Total remeasurement expense recognized for the three and nine months ended September 30, 2023 was $0.1 million and $0.5 million, respectively. Total remeasurement expense recognized for the three and nine months ended September 30, 2022 was $0.2 million and $0.2 million, respectively. This is included in contingent consideration expense on the Statements of Operations. The Company's contingent consideration is considered to be a Level 3 fair value measurement as the significant inputs are unobservable and require significant judgment or estimation. As of September 30, 2023, the estimated fair value of the remaining contingent consideration totaled $8.2 million. Following September 30, 2023, the Company has paid $1.5 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 remeasurement expense recognized for the three and nine months ended September 30, 2023 totaled $0 and $0.1 million, respectively. Total remeasurement expense recognized for the three and nine months ended September 30, 2022, respectively, totaled $1.2 million and $1.2 million, which was included in contingent consideration expense on the Statements of Operations. The entirety of the Hark contingent consideration was paid during the quarter ended September 30, 2023.

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


	As of September 30, 2023
	Level I		Level II		Level III		Total
Liabilities
Contingent consideration obligation	$	-	$	-	$	8,201	$	8,201
Total liabilities	$	-	$	-	$	8,201	$	8,201


	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 September 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 Nine Months Ended September 30,
	2023			2022
Balance, beginning of year:	$	17,337		$	22,963
Additions		-			-
Change in fair value		550			1,367
Settlements		(9,686	)		-
Balance, end of period:	$	8,201		$	24,330

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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