| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results may differ from those estimates. The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the revenue recognition guidance for contracts in which control is transferred to the customer over time affect the amounts of revenues, expenses, contract assets and contract liabilities. Numerous internal and external factors can affect estimates. Estimates are also used for but not limited to: allowance for credit losses, useful lives of furniture, fixtures and equipment and definite lived intangible assets, depreciation expense, fair value assumptions in evaluating goodwill for impairment, income taxes and deferred tax asset valuation and the valuation of stock-based compensation. Restricted Cash Restricted cash consists of cash and cash equivalents which the Company has committed for rent deposits and are not available for general corporate purposes. Fair Value The carrying value of the Company’s cash and cash equivalents, receivables, accounts payable, other current liabilities, and accrued interest approximated their fair values as of March 31, 2023 and December 31, 2022 due to the short-term nature of these accounts. Fair value measurements were applied with respect to our nonfinancial assets and liabilities measured on a nonrecurring basis, which would consist of measurements primarily to goodwill, intangible assets and other long-lived assets and assets acquired and liabilities assumed in a business combination. Fair value is the price that would be received upon a sale of an asset or paid upon a transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). Market participants can use market data or assumptions in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated or generally unobservable. The use of unobservable inputs is intended to allow for fair value determinations in situations where there is little, if any, market activity for the asset or liability at the measurement date. Under the fair-value hierarchy: ● Level 1 measurements include unadjusted quoted market prices for identical assets or liabilities in an active market; ● Level 2 measurements include quoted market prices for identical assets or liabilities in an active market that have been adjusted for items such as effects of restrictions for transferability and those that are not quoted but are observable through corroboration with observable market data, including quoted market prices for similar assets; and ● Level 3 measurements include those that are unobservable and of a highly subjective measure. The following tables summarize the assets and liabilities (as applicable) measured at fair value on a recurring basis at the dates indicated: Basis of Fair Value Measurements March 31, 2023 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 18 $ — $ — $ 18 Total $ 18 $ — $ — $ 18 Liabilities: Contingent consideration (1) $ — $ — $ 5,618 $ 5,618 Total $ — $ — $ 5,618 $ 5,618 Basis of Fair Value Measurements December 31, 2022 Level 1 Level 2 Level 3 Total Assets: Cash equivalents $ 18 $ — $ — $ 18 Total $ 18 $ — $ — $ 18 Liabilities: Contingent consideration (1) $ — $ — $ 5,593 $ 5,593 Total $ — $ — $ 5,593 $ 5,593 (1) The current and noncurrent contingent consideration are included in “Accrued expenses and other current liabilities” and “Other liabilities,” respectively, as of March 31, 2023 and December 31, 2022. The following table represents the change in the contingent consideration liability during the three months ended March 31, 2023: Three Months Ended March 31, 2023 Beginning Balance $ 5,593 Accretion of contingent consideration 25 Ending Balance $ 5,618 The Company’s financial instruments include outstanding borrowings of $79.2 million both as of March 31, 2023 and December 31, 2022, respectively, which are carried at amortized cost. The fair value of debt is classified within Level 3 of the fair value hierarchy. The fair value of the Company’s outstanding borrowings was approximately $79.8 million and $76.5 million as of March 31, 2023 and December 31, 2022, respectively. The fair values of debt have been estimated using a discounted cash flow analysis based on the Company’s incremental borrowing rate for similar borrowing arrangements. The incremental borrowing rate used to discount future cash flows was 6.5% and 6.3% as of March 31, 2023, and December 31, 2022, respectively. The Company also considered recent transactions of peer group companies for similar instruments with comparable terms and maturities as well as an analysis of current market conditions and interest rates. Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (FASB) issued new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable and contract assets, and available-for-sale debt securities. The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses and additional disclosures. We adopted this standard using the modified retrospective approach with an effective date of January 1, 2023. The Company recognized a cumulative-effect adjustment increasing accumulated deficit |
