Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.5.0.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2016
Fair Value Measurements [Abstract]  
Fair Value Measurements

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 as of September 30, 2016 and December 31, 2015, are summarized below:





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

September 30, 2016

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Level 1

 

Level 2

 

Level 3

 

Total Fair Value



 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$

98,000 

 

$

 -

 

$

 -

 

$

98,000 

Certificates of deposit

 

 

 

 

 -

 

 

 

 

 

 -

Subtotal

 

98,000 

 

 

 -

 

 

 -

 

 

98,000 



 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 

4,292,000 

 

 

 -

 

 

4,292,000 

Corporate Notes/Bonds

 

 -

 

 

4,524,000 

 

 

 -

 

 

4,524,000 

Subtotal

 

 -

 

 

8,816,000 

 

 

 -

 

 

8,816,000 



 

 

 

 

 

 

 

 

 

 

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 

728,000 

 

 

 -

 

 

728,000 

Corporate Notes/Bonds

 

 -

 

 

 -

 

 

 -

 

 

 -

Subtotal

 

 -

 

 

728,000 

 

 

 -

 

 

728,000 



 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Contingent Consideration

 

 -

 

 

 -

 

 

(7,000)

 

 

(7,000)

Subtotal

 

 -

 

 

 -

 

 

(7,000)

 

 

(7,000)



 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

Total

$

98,000 

 

$

9,544,000 

 

$

(7,000)

 

$

9,635,000 







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



 

December 31, 2015

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Level 1

 

Level 2

 

Level 3

 

Total Fair Value



 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$

1,944,000 

 

$

 -

 

$

 -

 

$

1,944,000 

Subtotal

 

1,944,000 

 

 

 -

 

 

 -

 

 

1,944,000 



 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 

1,202,000 

 

 

 -

 

 

1,202,000 

Corporate Notes/Bonds

 

 -

 

 

4,027,000 

 

 

 -

 

 

4,027,000 

Subtotal

 

 -

 

 

5,229,000 

 

 

 -

 

 

5,229,000 



 

 

 

 

 

 

 

 

 

 

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 

4,286,000 

 

 

 -

 

 

4,286,000 

Corporate Notes/Bonds

 

 -

 

 

2,007,000 

 

 

 -

 

 

2,007,000 

Subtotal

 

 -

 

 

6,293,000 

 

 

 -

 

 

6,293,000 



 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Contingent Consideration

 

 -

 

 

 -

 

 

(142,000)

 

 

(142,000)

Subtotal

 

 -

 

 

 -

 

 

(142,000)

 

 

(142,000)



 

 

 

 

 

 

 

 

 

 

 

Total

$

1,944,000 

 

$

11,522,000 

 

$

(142,000)

 

$

13,324,000 



The estimated fair value of contingent consideration as of September 30, 2016 was $7,000, 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 change in the estimated contingent consideration during the nine months ended September 30, 2016 resulted in a gain of $135,000 included in operating income. The gains were the result of a change in future assumptions related to the contingent consideration..



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 September 30, 2016.