FAIR VALUE OF FINANCIAL INSTRUMENTS |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2015 | ||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Text Block] |
As of September 30, 2015 and December 31, 2014, the carrying amounts of cash, receivables, and accounts payable and accrued expenses approximated their estimated fair values because of the short term nature of these financial instruments. Our notes payable and line of credit are carried at cost and approximate fair value since the interest rates being charged approximates market rates. The fair value of our long-term debt is $4.0 million. The fair value of related party transactions including the note payable to the CEO at December 31, 2014 cannot be determined based upon the related party nature of the transactions. Contingent Consideration
The Company’s preliminary contingent consideration of $2,478,352 and $2,626,323 as of September 30, 2015 and December 31, 2014, respectively, are Level 3 liabilities. The fair value of the contingent consideration at December 31, 2014 and September 30, 2015 was primarily driven by the price of the Company’s common stock on the NASDAQ Capital Market, an estimate of revenue to be recognized by the Company from the 2014 Acquisitions during the first twelve months after acquisition compared to the trailing twelve months’ revenue from customers in good standing as of March 31, 2014 shown in the Company’s prospectus dated July 22, 2014, the passage of time and the associated discount rate. In connection with the 2014 Acquisitions, discount rates were estimated by using government bond yields.
As stated in Note 3, the Company estimated the number of shares anticipated to be earned as a result of the 2014 Acquisitions. The shares anticipated to be earned have been included in the contingent consideration liability as of September 30, 2015 since formal agreements have not yet been reached. If, at the time of settlement, the Company’s stock price exceeds the price on September 30, 2015, or the number of shares actually released exceeds the number anticipated, the actual consideration could exceed the estimated contingent consideration. Contingent consideration related to the 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): Financial instruments measured at fair value on a recurring basis:
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