SUNation Energy, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

Fair Value Measurements

6 Months Ended

Jun. 30, 2021

NOTE 14 – FAIR VALUE MEASUREMENTS

The accounting guidance establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.

Level 2 – Observable inputs such as quoted prices for similar instruments and quoted prices in markets that are not active, and inputs that are directly observable or can be corroborated by observable market data. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities.

Level 3 – Significant inputs to pricing that have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as the complex and subjective models and forecasts used to determine the fair value of financial instruments.

Financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, are summarized below:



	June 30, 2021

	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money Market Funds	$	11,564,000	$	—	$	—	$	11,564,000
Subtotal		11,564,000		—		—		11,564,000

Short-term investments:
Corporate Notes/Bonds		—		1,705,000		—		1,705,000
Subtotal		—		1,705,000		—		1,705,000

Long-term investments:
Corporate Notes/Bonds		—		4,523,000		—		4,523,000
Convertible debt		—		—		374,000		374,000
Subtotal		—		4,523,000		374,000		4,897,000

Total	$	11,564,000	$	6,228,000	$	374,000	$	18,166,000



	December 31, 2020

	Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money Market Funds	$	9,424,000	$	—	$	—	$	9,424,000
Subtotal		9,424,000		—		—		9,424,000

Short-term investments:
Commercial Paper		—		700,000		—		700,000
Corporate Notes/Bonds		—		2,059,000		—		2,059,000
Subtotal		—		2,759,000		—		2,759,000

Long-term investments:
Corporate Notes/Bonds		—		5,605,000		—		5,605,000
Convertible debt		—		—		605,000		605,000
Subtotal		—		5,605,000		605,000		6,210,000

Current Liabilities:
Contingent Consideration		—		—		(550,000)		(550,000)
Subtotal		—		—		(550,000)		(550,000)

Total	$	9,424,000	$	8,364,000	$	55,000	$	17,843,000

The estimated fair value of contingent consideration as of December 31, 2020 was $550,000, as noted above. The estimated fair value is considered a level 3 measurement because the probability weighted discounted cash flow methodology used to estimate fair value includes the use of significant unobservable inputs, primarily the contractual contingent consideration revenue targets and assumed probabilities. The Company paid the full amount of the contingent consideration during the first quarter of 2021 and there was no liability at June 30, 2021.

We record transfers between levels of the fair value hierarchy, if necessary, at the end of the reporting period. There were no transfers between levels during the three months ended June 30, 2021.

- 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.

+ References + Details