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Fair Value Measurements

6 Months Ended

Jun. 30, 2021

Fair Value Measurements

11. Fair Value Measurements

11. Fair Value Measurements

We have financial instruments as of June 30, 2021 and December 31, 2020 for which the fair value is summarized below (in thousands):

		June 30, 2021								December 31, 2020
		Carrying Value				Estimated Fair Value				Carrying Value				Estimated Fair Value
Assets:
Trade receivables, net		$	1,451			$	1,451			$	538			$	538
Equipment financing receivables			1,098				1,098				1,192				1,192
Liabilities:
Finance lease obligations		$	418			$	418			$	84			$	84
Notes payable			1,908				1,908				1,944				1,944
Business acquisition contigent consideration			746				746				-				-

Liabilities for which fair value is recognized in the balance sheet on a recurring basis are summarized below as of June 30, 2021 and December 31, 2020 (in thousands):

						Fair value measurement at reporting date
Description		As of June 30, 2021				Level 1				Level 2				Level 3

Liabilities:
Business acquisition contingent consideration		$	746			$	-			$	-			$	746

Description		As of December 31, 2020				Level 1				Level 2				Level 3

Liabilities:
Asset acquisition contingent consideration		$	-			$	-			$	-			$	-

The recurring Level 3 measurement of our business acquisition contingent consideration liability includes the following significant unobservable inputs at June 30, 2021 (in thousands):

Contingent consideration liability		Fair Value at June 30, 2021				Valuation technique		Unobservable inputs		Range
Revenue - based payments		$	746			Discounted cash flow		Discount Rate			17.38	%

								Probability of milestone payment			90	%
								Projected year of payments			2021

Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s own assumptions in measuring fair value. Future changes in fair value of the contingent financial milestone consideration, as a result of changes in significant inputs such as the discount rate and estimated probabilities of financial milestone achievements, could have a material effect on the statement of operations and balance sheet in the period of the change.

During the three months ended March 31, 2021, the Company recorded $746,000 of contingent consideration in connection with the Centric Telecom business acquisition, to be paid based on the completion of the earn-out period. During the year ended December 31, 2020, the Company reduced the contingent consideration to be paid based on the completion of the earn-out period by $121,000 and recognized a reduction in the cost of the assets acquired in the DoubleHorn Asset Acquisition. The progression of the Company’s Level 3 instruments fair valued on a recurring basis for the three months ended June 30, 2021 and the year ended December 31, 2020 are shown in the table below (in thousands):

		Asset and Business Acquisition Contingent Consideration
Balance at January 1, 2020		$	175
Cash payments			(54	)
Adjustment			(121	)
Balance at December 31, 2020		$	-
Additions			746
Cash payments			-
Adjustment			-
Balance at June 30, 2021		$	746

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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