Greenlane Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Financial Instruments

Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2019

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts for certain of the Company's financial instruments including cash, accounts receivable, accounts payable and certain accrued expenses and other assets and liabilities approximate fair value due to the short-term nature of these instruments. The Company's financial liabilities measured at fair value on a recurring basis are as following at September 30, 2019:


	Condensed Consolidated Balance Sheet Caption	Fair Value at September 30, 2019
(in thousands)				Level 1			Level 2			Level 3			Total
Liabilities:
Interest rate swap contract	Other long-term liabilities	$	—		$	310		$	—		$	310
Contingent consideration	Other long-term liabilities	—			—			1,553			1,553
Total Liabilities		$	—		$	310		$	1,553		$	1,863

Interest Rate Swap Contracts

The fair value of the Company's interest rate swap liability is determined based on the present value of expected future cash flows. Since the Company's interest rate swap values are based on the LIBOR forward curve and credit default swap rates, which are observable at commonly quoted intervals for the full term of the swap, it is considered a Level 2 measurement.

Contingent Consideration

For the Conscious Wholesale acquisition, additional purchase price payments ranging from $0 to $3.3 million are contingent upon the achievement of certain operational and financial targets measured through December 31, 2020. At the date of acquisition, the Company estimated the preliminary fair value of the contingent consideration to be approximately $1.6 million as discussed in "Note 9—Business Acquisitions". The estimate of the fair value of contingent consideration was determined by applying a risk-neutral framework using a Monte Carlo Simulation, which includes inputs not observable in the market, and therefore represents a Level 3 measurement.

- 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.

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