Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Financial Instruments

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Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2017
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

16. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

As of June 30, 2017 and December 31, 2016, the carrying amounts of receivables, accounts payable, accrued and expenses and the amount due to 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 June 30, 2017 and December 31, 2016 was approximately $3.2 million and $7.3 million, respectively. The Company’s outstanding borrowings under the line of credit with Opus had a carrying value of $2 million as of both June 30, 2017 and December 31, 2016. The fair value of the outstanding borrowings under the term loans and line of credit with Opus approximated the carrying value at June 30, 2017 and December 31, 2016, 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 $716,000 and $930,000 as of June 30, 2017 and December 31, 2016, respectively, are Level 3 liabilities. The fair value of the contingent consideration at June 30, 2017 and December 31, 2016 was primarily driven by changes in revenue estimates related to the acquisitions during 2015 and 2016, the price of the Company’s common stock on the Nasdaq Capital Market (only for the December 31, 2016 contingent consideration amount), 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. 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):

 

    Fair Value Measurement at Reporting Date Using Significant Unobservable Inputs, Level 3  
    Six Months Ended June 30,  
    2017     2016  
Balance - January 1,   $ 929,549     $ 1,172,508  
Acquisitions     -       420,000  
Change in fair value     151,423       (411,097 )
Settlement in the form of shares issued     (331,676 )     -  
Payments     (33,114 )     (57,917 )
Balance - June 30,   $ 716,182     $ 1,123,494