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Note 2 - Fair Value Measurement | 6 Months Ended
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Jun. 30, 2020
Notes to Financial Statements |
Fair Value Disclosures [Text Block] |
2. | Fair Value Measurement
In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” (“ASC Topic 820”), the Company measures its cash and cash equivalents and investments at fair value on a recurring basis. The Company also measures certain assets and liabilities at fair value on a non-recurring basis when applying acquisition accounting. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier value fair hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 – Observable inputs that reflect quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – Observable inputs other than quoted prices included in Level 1 for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Level 3 – Unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement. As of June 30, 2020 and December 31, 2019, the Company valued the Astero and CBS contingent consideration, investment in convertible debt, and warrant liability at fair value, which require Level 3 inputs For the Astero and CBS contingent consideration, the significant Level 3 inputs are the future projected revenue and revenue volatility from the acquired businesses. The company used best estimates in developing revenue forecasts. For the investment in convertible debt, the significant Level 3 inputs are the expected term of the instrument, the underlying credit worthiness of the issuer and the valuation of various embedded features in the note, which are based on future financings of the issuer. The expected term the range of our estimate is 3 to 5 years, with equal weighting over this term. There is currently no quantitative information concerning the creditworthiness of the issuer. For the warrant liability, the significant Level 3 inputs include the estimated term of the warrants and the volatility of the Company’s common stock. For the estimated term of the warrants, we used the actual terms of the warrants, which are all currently less than one year. For the volatility off the Company’s stock we used historical volatility for the remaining term of each warrant. These amounts ranged from 73.9% to 77.7%. We did not make any adjustments to the historical volatility. There were no remeasurements to fair value during the six months ended June 30, 2020 of financial assets and liabilities that are not measured at fair value on a recurring basis. The following tables set forth the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019, based on the three-tier fair value hierarchy: (In thousands)
As of June 30, 2020 |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 29,879 |  |  | $ | — |  |  | $ | — |  |  | $ | 29,879 |
Convertible debt held at fair value |  |  | — |  |  |  | — |  |  |  | 1,000 |  |  |  | 1,000 |
Total |  |  | 29,879 |  |  |  | — |  |  |  | 1,000 |  |  |  | 30,879 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration - business combinations |  |  | — |  |  |  | — |  |  |  | 387 |  |  |  | 387 |
Warrant liability |  |  | — |  |  |  | — |  |  |  | 963 |  |  |  | 963 |
Total |  | $ | — |  |  | $ | — |  |  | $ | 1,350 |  |  | $ | 1,350 |
As of December 31, 2019 |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 6,448 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,448 |
Convertible debt held at fair value |  |  | — |  |  |  | — |  |  |  | 1,000 |  |  |  | 1,000 |
Total |  |  | 6,448 |  |  |  | — |  |  |  | 1,000 |  |  |  | 7,448 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration - business combinations |  |  | — |  |  |  | — |  |  |  | 1,914 |  |  |  | 1,914 |
Warrant liability |  |  | — |  |  |  | — |  |  |  | 39,602 |  |  |  | 39,602 |
Total |  | $ | — |  |  | $ | — |  |  | $ | 41,516 |  |  | $ | 41,516 |
The fair values of money market funds classified as Level 1 were derived from quoted market prices as active markets for these instruments exist. The fair values of investments, warrant liability and contingent consideration classified as Level 3 were derived from management assumptions. There have been no transfers of assets or liabilities between the fair value measurement levels. The following table presents the changes in investments held at fair value which are measured using Level 3 inputs:
|  | June 30, |  |  | December 31, |
(In thousands) |  | 2020 |  |  | 2019 |
Beginning balance |  | $ | 1,000 |  |  | $ | 1,000 |
Purchases |  |  | — |  |  |  | — |
Change in fair value recognized in net income |  |  | — |  |  |  | — |
Total |  | $ | 1,000 |  |  | $ | 1,000 |
The following table presents the changes in fair value of contingent consideration liabilities which are measured using Level 3 inputs:
|  | June 30, |  |  | December 31, |
(In thousands) |  | 2020 |  |  | 2019 |
Beginning balance |  | $ | 1,914 |  |  | $ | — |
Additions |  |  | — |  |  |  | 2,347 |
Change in fair value recognized in net income |  |  | (1,526 | ) |  |  | 50 |
Payments earned, reclassified to accrued liabilities |  |  | — |  |  |  | (483 | )
Total |  | $ | 388 |  |  | $ | 1,914 |
The following table presents the changes in fair value of warrant liabilities which are measured using Level 3 inputs:
|  | June 30, |  |  | December 31, |
(In thousands) |  | 2020 |  |  | 2019 |
Beginning balance |  | $ | 39,602 |  |  | $ | 28,516 |
Exercised warrants |  |  | (33,167 | ) |  |  | (1,749 | )
Change in fair value recognized in net income |  |  | (5,472 | ) |  |  | 12,835 |
Ending balance |  | $ | 963 |  |  | $ | 39,602 |

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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