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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Measurements

Fair Value Measurements

3. Fair Value Measurements

The following tables present information about the Company’s liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets:

Quoted Prices in

Significant Other

SEPTEMBER 30,

Active Markets

Observable Inputs

Unobservable Inputs

Description

2023

(Level 1)

(Level 2)

(Level 3)

Liabilities:

(Unaudited)

Contingent consideration - cash settled

$

6,500

-

-

$

6,500

Contingent consideration - warrants

400

-

-

400

Total liabilities measured and recorded at fair value

$

6,900

$

-

$

-

$

6,900

						Quoted Prices in				Significant Other
		DECEMBER 31,				Active Markets				Observable Inputs				Unobservable Inputs
Description		2022				(Level 1)				(Level 2)				(Level 3)
Liabilities:
Contingent consideration - cash settled		$	6,500				-				-			$	6,500
Contingent consideration - warrants			400				-				-				400
Total liabilities measured and recorded at fair value		$	6,900			$	-			$	-			$	6,900

The Company’s contingent consideration is categorized as Level 3 within the fair value hierarchy. The contingent consideration has been recorded at their fair value using a Monte Carlo simulation model. This model incorporates probability of achievement of certain milestones, risk-free rates and volatility. The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s management with the assistance of a third-party valuation specialist.

Management estimates the fair value of the contingent consideration liability based on financial projections of IT Authorities, Inc.’s (ITA) business and forecasted results, including revenue growth rates, costs and expenses, volatility, and discount rates. The Company evaluates, on a routine, periodic basis, the estimated fair value of the contingent consideration and quarterly changes in estimated fair value are reflected in other income in the consolidated statements of operations. Changes in the fair value of contingent consideration obligations may result from changes in changes of any of the key assumptions that are used. Changes in the estimated fair value of contingent consideration liability may have a material impact on the Company’s operating results.

There was no change in fair value of contingent consideration for the three and nine month periods ended September 30, 2023.

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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