Note 8 - Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Note

- Fair Value Measurements

The following table

presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	Fair Value Measurement Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurement
December 31, 2019
Derivative Instrument
Interest rate swap liability	$	-	$	23	$	-	$	23

December 31, 2018
Derivative Instrument asset	$	-	$	75	$	-	$	75

Earn-Out Payment liability	$	-	$	-	$	44	$	44
Indemnity Holdback Payment liability		-		-		887		887
Total liabilities which are measured at fair value	$	-	$	-		931		931

The following table represents a reconciliation of our Level

liability measured at fair value (in thousands):

	Year Ended December 31,
	2019			2018

Fair value of Level 3 instrument at the beginning of the period		931			831
Warrant issues		-			-
Settlements		-			(1,371	)
Change in fair value of warrant liability		-			540
Add: Liabilities related to acquisition of Adler		-			931
Less: Settlement of Adler liability		(931	)		-
Fair value of Level 3 instrument at the end of period	$	-		$	931

Derivative Instruments

The fair value of the interest rate swap is estimated using a discounted cash flow model. Such models involve using market-based observable inputs, including interest rate curves. We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and respective counterparty’s nonperformance risk in the fair value measurements, which we have concluded are

not

material to the valuation. Due to the interest rate swaps being unique and

not

actively traded, the fair value is classified as Level

The fair value of the Indemnity Holdback Payment liability was estimated based on the present value using a risk-adjusted interest rate of

9.5%.

The fair value of the Earn-Out Payment liability was estimated using a financial projection with a risk-adjusted interest rate of

9.5%.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are

not

measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances. As of

December 31, 2019

and

2018,

the carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and interest approximates fair value due to the short-term nature of such items. The carrying value of the Company’s credit agreements are carried at cost which are approximately the fair value of the debt as the related interest rate are at the terms that approximate rates currently available to the Company.

The Company did

not

have any transfers of assets or liabilities between Level

Level

or Level

of the fair value measurement hierarchy during the years ended

December 31, 2019

and

2018.

- 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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