Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 10 – Fair Value Measurements

In accordance with the authoritative guidance for financial assets and liabilities measured at fair value on a recurring basis, the Company prioritizes the inputs used to measure fair value from market-based assumptions to entity specific assumptions:

• Level 1 – Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

• Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 – Inputs which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date.  The inputs are unobservable in the market and significant to the instruments valuation.

As of December 31, 2016 and 2015, the Company had no Level 1 or Level 2 assets or liabilities measured at fair value.  As of December 31, 2016 and 2015, the Company’s contingent consideration from the acquisition of NLEX in 2014 of $2.7 million and $3.5 million respectively, was the only liability measured at fair value on a recurring basis, and was classified as Level 3 within the fair value hierarchy.  The fair value of the Company’s contingent consideration was determined using a discounted cash flow analysis, which is based on significant inputs that are not observable in the market.

The following tables present the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015 (in thousands):

	Fair Value as of December 31, 2016
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	—	$	—	$	2,733	$	2,733
	Fair Value as of December 31, 2015
	Level 1		Level 2		Level 3		Total
Liabilities
Contingent consideration	$	—	$	—	$	3,457	$	3,457

          When valuing its Level 3 liabilities, the Company gives consideration to operating results, financial condition, economic and/or market events, and other pertinent information that would impact its estimate of the expected contingent consideration payment.  The valuation of the liability is primarily based on management’s estimate of the Net Profits of NLEX (as defined in the NLEX stock purchase agreement).  Given the short term nature of the contingent consideration periods, changes in the discount rate are not expected to have a material impact on the fair value of the liability.

          The following table summarizes the changes in the fair value of the contingent consideration liability during 2015 and 2016 (in thousands):

Balance at December 31, 2014	$	4,198
Payment of contingent consideration		(513	)
Fair value adjustment of contingent consideration		(228	)
Balance at December 31, 2015		3,457
Payment of contingent consideration		(816	)
Fair value adjustment of contingent consideration		92
Balance at December 31, 2016	$	2,733

          The fair value adjustment for the period ended December 31, 2016 includes the Company’s assumption that it will extend the earn-out period by at least one year (see Note 2 for further detail).  

          The Company had no assets measured at fair value on a non-recurring basis as of December 31, 2016.  The Company’s assets measured at fair value on a non-recurring basis as of December 31, 2015 consisted of its goodwill and intangible assets subject to the impairment charges recorded during the fourth quarter of 2015.  Refer to Note 7 for further detail on the fair value techniques used by the Company in assessing the fair value of the goodwill and intangible assets.