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Contingent Consideration

12 Months Ended

Dec. 31, 2021

The following table summarizes information about the Company’s contingent consideration arrangements measured at fair value on a recurring basis, grouped into Level 1 to 3 based on the degree to which the input to fair value is observable (in thousands):


	December 31, 2021
	Level 1		Level 2		Level 3		Total
DBOT - Contingent Considerationa	$	—	$	—	$	649	$	649
Tree Technology - Contingent Considerationb	—		—		250		250
Solectrac - Contingent Considerationc	—		—		100		100
Total	$	—	$	—	$	999	$	999


	December 31, 2020
	Level 1		Level 2		Level 3		Total
DBOT - Contingent Considerationa	$	—	$	—	$	649	$	649
Tree Technology - Contingent Considerationb	—		—		250		250
Total	$	—	$	—	$	899	$	899

Note

a.This represents the liability incurred in connection with the acquisition of DBOT shares during the three months ended September 30, 2019 and as remeasured as of April 17, 2020. The contractual period which required periodic remeasurement has expired, and therefore the Company will not remeasure this liability in the future. The fair value of DBOT contingent consideration was valued using the Black-Scholes Merton method. The Company issued 13.1 million

shares during the year ended December 31, 2020 and partially satisfied this liability. No shares have been issued in the year ended December 31, 2021.

b.This represents the liability incurred in connection with the acquisition of Tree Technologies during the three months ended December 31, 2019 and as subsequently remeasured as of December 31, 2021 and 2020. The fair value of the Tree Technology contingent consideration was valued using a probability-weighted discounted cash flow approach.

c.This represents the liability incurred in connection with the acquisition of Solectrac. The liability represents the fair value of the three contingent considerations that were entered into at closing. The fair value was determined using Monte-Carlo simulations.

DBOT Contingent Consideration

The fair value of the DBOT contingent consideration as of March 31, 2020 and December 31, 2019, was valued using the Black-Scholes Merton model.

The significant unobservable inputs used in the fair value measurement of the contingent consideration includes the risk-free interest rate, expected volatility, expected term and expected dividend yield. The following table summarizes the significant inputs and assumptions used in the model:


	March 31, 2020		December 31, 2019
Risk-free interest rate	0.1%		1.6	%
Expected volatility	30%		30	%
Expected term (years)	0.08		0.25
Expected dividend yield	—	%	—	%

Tree Technologies Contingent Consideration

The fair value of the Tree Technologies contingent consideration as of December 31, 2021 and 2020, was valued using a probability-weighted discounted cash flow approach which incorporates various estimates, including projected gross revenue for the periods, probability estimates, discount rates and other factors. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement.

The following table summarizes the significant inputs and assumptions used in the probability-weighted discounted cash flow approach:


	December 31, 2021	December 31, 2020
Weighted-average cost of capital	15.0%	15.0%
Probability	5%-10%	20%-55%

Solectrac Contingent Consideration

The fair value of the Solectrac contingent consideration as of December 31, 2021, was valued using a Monte-Carlo simulation model. The significant unobservable inputs include volatility, discount rate and the risk free rate. Significant increases or decreases in any of those inputs in isolation would result in a significantly different fair value measurement. The following table summarizes the significant inputs and assumptions used in the model:


	December 31, 2021
Risk-free interest rate	3.4	%
Expected volatility	25.0	%
Expected discount rate	13.1	%

The following table summarizes the reconciliation of contingent consideration measured using Level 3 inputs (in thousands):


	Contingent Consideration
January 1, 2019	$	—
Addition	19,562
Measurement period adjustment	5,094
December 31, 2020	24,656
Measurement period adjustment	(1,990)
Settlement	(8,203)
Remeasurement loss/(gain) recognized in the income statement	(5,503)
December 31, 2020	8,960
Addition	1,639
Net remeasurement loss/(gain) recognized in the income statement	(9,600)
December 31, 2021	$	999

- 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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