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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2021
Fair Value Measurements |
11. Fair Value Measurements | 11. Fair Value Measurements We have financial instruments as of September 30, 2021 and December 31, 2020 for which the fair value is summarized below (in thousands):
|  | September 30, 2021 |  |  | December 31, 2020 |
|  | Carrying Value |  |  | Estimated Fair Value |  |  | Carrying Value |  |  | Estimated Fair Value |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Trade receivables, net |  | $ | 1,307 |  |  | $ | 1,307 |  |  | $ | 538 |  |  | $ | 538 |
Equipment financing receivables |  |  | 1,161 |  |  |  | 1,161 |  |  |  | 1,192 |  |  |  | 1,192 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Finance lease obligations |  | $ | 367 |  |  | $ | 367 |  |  | $ | 84 |  |  | $ | 84 |
Notes payable |  |  | 1,891 |  |  |  | 1,891 |  |  |  | 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 September 30, 2021 and December 31, 2020 (in thousands):
|  | As of September 30, |  |  | Fair value measurement at reporting date |
Description |  | 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 September 30, 2021 (in thousands):
Contingent consideration liability |  | Fair Value at September 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 September 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 September 30, 2021 |  | $ | 746 |

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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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