Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS FAIR VALUE MEASUREMENTS
Fair Value Measurement
The carrying value of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities approximates fair value due to the short-term nature of their maturities. Borrowings under the Company’s Revolving Credit Facility accrues interest at a floating rate tied to a standard short-term borrowing index, selected at the Company’s option, plus an applicable margin. The carrying amount of this floating rate debt approximates fair value based upon the respective interest rates adjusting with market rate adjustments. The carrying amount of the Company's Senior Notes and Redeemable Preferred Shares also approximates fair value.
The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or a liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 inputs: Other than quoted prices in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
Liabilities by Hierarchy Level
The following tables set forth the Company’s liabilities that were measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2022 and December 31, 2021 (in thousands):
Fair Value Measurements Using:
March 31, 2022
Level 1 Level 2 Level 3 Total
Liabilities:
Founders advisory fees payable - related party $ 84,626  $ —  $ 153,986  $ 238,612 
LaderaTech contingent earn-out included in other liabilities, non-current —  —  19,979  19,979 
Total liabilities $ 84,626  $ —  $ 173,965  $ 258,591 
December 31, 2021
Liabilities:
Founders advisory fees payable - related party $ 114,276  $ —  $ 251,513  $ 365,789 
LaderaTech contingent earn-out included in other liabilities, non-current —  —  19,979  19,979 
Total liabilities $ 114,276  $ —  $ 271,492  $ 385,768 
At March 31, 2022 and December 31, 2021, the fair value of the contingent earn-out related to the May 2020 purchase of LaderaTech, Inc. (“LaderaTech”) is measured on a recurring basis using Level 3 fair value inputs. The earn-out is based on 20% of gross profits upon achieving a revenue threshold exceeding $5.0 million through December 31, 2026 and is valued using a Monte Carlo simulation model. Significant changes in the projected revenue, projected gross margin, or discount rate would have a material impact on the fair value of the contingent consideration.
There were no material adjustments to the Company’s estimated fair value of contingent earn-out as of March 31, 2022 as post-acquisition activity has remained in line with the Company’s initial projections for developing the technology. See Note 10, “Share-Based Compensation” for discussion of the fair value estimation on the founders advisory fees payable - related party.
Changes in Level 3 Liabilities
The reconciliations for all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows (in thousands):
For the three months ended March 31, 2022: Founders Advisory Fees Payable - Related Party LaderaTech
Contingent Earn-out
Successor
Fair value, beginning of period $ 251,513  $ 19,979 
Settlements (40,776) — 
Reclassification from liability to equity (10,495) — 
Change in fair value (46,256) — 
Fair value, end of period $ 153,986  $ 19,979 

For the three months ended March 31, 2021: LaderaTech
Contingent Earn-out
Predecessor
Fair value, beginning of period $ 19,816 
Fair value, end of period $ 19,816 
The fair value of the LaderaTech contingent earn-out during the three months ended March 31, 2021 also included a contingency payment for the acquired technology being listed on the USDA Forest Service’s Qualified Product List
(“QPL”). The QPL payment was also measured on a recurring basis using Level 3 fair value inputs and was valued using a scenario-based method with inputs based upon the probability and timing of achieving the QPL listing. The Company made the QPL payment of $3.0 million in the fourth quarter of 2021. As of March 31, 2021, the contingent earn-out had an estimated fair value of $17.0 million and the QPL was valued at $2.8 million.