Annual report pursuant to Section 13 and 15(d)

Financial Instruments

v3.22.0.1
Financial Instruments
 12 Months Ended
Dec. 31, 2021
Fair Value Disclosures [Abstract]  
Financial Instruments Financial Instruments
The composition of financial instruments were as follows:
December 31, 2021 December 31, 2020
(in thousands)
Liabilities
Contingent consideration (Note 3) $ 2,700  $ — 
The fair values of the Company’s financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants and is recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The levels are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available.
The contingent consideration liability is associated with the Company’s acquisition of Company X (Note 3) and is classified as a Level 3 financial instrument that is subject to the acquired business’s satisfaction of certain financial and personnel objectives by March 31, 2023, under the Purchase Agreement. The fair value of the contingent consideration is based on (1) applying the Monte Carlo simulation method, with underlying forecast mathematics based on Geometric Brownian motion in a risk-neutral framework, to forecast achievement of the acquired business’ financial objectives under various possible contingent consideration events and (2) a probability based methodology using management's inputs and assumptions to forecast achievement of the acquired business’ personnel objectives which combined may result in up to $3.0 million in total payments to the acquired business. Key inputs in the valuation include forecasted revenue, revenue volatility, discount rate and discount term as it relates to the financial objectives and probability of achievement, discount term and discount rate as it relates to the personnel objectives.
The following are the financial instruments that are measured on a recurring basis. The contingent consideration liability, a Level 3 financial instrument, was $2.7 million as of December 31, 2021.
The following table summarizes activity for the contingent consideration:
Fair Value at December 31,
2021 2020
(in thousands)
Contingent consideration
Beginning balance $ —  $ — 
Acquisitions (Note 3) 2,700  — 
Payments —  — 
Gain (loss) recognized in earnings —  — 
Ending balance $ 2,700  $ — 
Net loss for the period included in earnings attributable to contingent consideration held at the end of the period $ —  $ — 
Interest rate swap
Beginning balance $ —  $ (37)
Unrealized gain (loss) recognized in other comprehensive income (loss) —  122 
Gain recognized in earnings —  (85)
Ending balance $ —  $ — 
There were no transfers between Level 1, Level 2 or Level 3 fair value hierarchy categories of financial instruments in the years ended December 31, 2021 and 2020.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis

Some of the Company’s financial instruments are recorded at amounts that approximate fair value due to their liquid or short-term nature or by election on investments in privately-held entities (Note 7). Such financial assets and financial liabilities include: cash and cash equivalents, restricted cash, net receivables, investments in privately-held entities, certain other assets, accounts payable, accrued price protection liability, accrued expenses, accrued compensation costs, and other current liabilities.

The Company’s long-term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes (Note 8).