17. FAIR VALUE OF FINANCIAL INSTRUMENTS

As of December 31, 2016 and December 31, 2015, the carrying amounts of receivables, accounts payable, accrued expenses and the amount due Prudential approximated their estimated fair values because of the short term nature of these financial instruments.

Fair value measurements-Level 2

Our notes payable are carried at cost and approximate fair value since the interest rates being charged approximate market rates. The fair value of our term loans at December 31, 2016 and 2015 is approximately $7.3 and $6.0 million, respectively. The Company’s outstanding borrowings under the line of credit with Opus had a carrying value of $2 million as of both December 31, 2016 and 2015. The fair value of the outstanding borrowings under the term loans and line of credit with Opus approximated the carrying value at December 31, 2016 and 2015, respectively, as these borrowings bear interest based on prevailing variable market rates currently available. As a result, the Company categorizes these borrowings as Level 2 in the fair value hierarchy.

Contingent Consideration

The Company’s contingent consideration of approximately $930,000 and $1.2 million as of December 31, 2016 and 2015, respectively, are Level 3 liabilities. The fair value of the contingent consideration at December 31, 2016 and 2015 was primarily driven by the price of the Company’s common stock on the Nasdaq Capital Market, changes in revenue estimates related to the 2015 and 2016 Acquisitions, the passage of time and the associated discount rate. Due to the number of factors used to determine contingent consideration, it is not possible to determine a range of outcomes.

As stated in Note 4, the Company historically estimated the number of shares anticipated to be earned as a result of the 2014 Acquisitions. The remaining shares of one of the sellers related to the 2014 Acquisitions has been included in the contingent consideration liability as of December 31, 2016 and 2015 since a formal settlement agreement has not yet been reached. If, at the time of settlement, the Company’s stock price exceeds the price on December 31, 2016, the actual consideration could exceed the estimated contingent consideration. Contingent consideration related to the 2016 and 2015 Acquisitions was based on the Company’s estimate of revenues to be achieved during the terms of the respective agreements. Subsequent adjustments to the fair value of the contingent consideration liability will continue to be recorded in the Company’s results of operations until all contingencies are settled.

The following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value using significant unobservable inputs (Level 3):

During the years ended December 31, 2016 and 2015, the Company recorded approximately $715,000 and $1.8 million, respectively, changes to the contingent consideration liability. These amounts consisted of a reduction in the liabilities primarily due to changes in revenue estimates related to the 2016, 2015 and 2014 Acquisitions, the passage of time, the associated discount rate and reflect contingent amounts which were subsequently paid. Subsequent adjustments to the fair value of the contingent consideration liability will continue to be recorded in the Company’s results of operations until all contingencies are settled.