Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
 12 Months Ended
Dec. 31, 2012
Fair Value Measurements [Abstract]  
Fair Value Measurements

NOTE 13 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date: 

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 December 31,  2012 and December 31, 2011, are summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$
5,497,788 

 

$

 -

 

$

 -

 

$
5,497,788 

Subtotal

 
5,497,788 

 

 

 -

 

 

 -

 

 
5,497,788 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 
7,258,768 

 

 

 -

 

 
7,258,768 

Corporate Notes/Bonds

 

 -

 

 
3,800,143 

 

 

 -

 

 
3,800,143 

Commercial Paper

 

 -

 

 
1,642,627 

 

 

 -

 

 
1,642,627 

Subtotal

 

 -

 

 
12,701,538 

 

 

 -

 

 
12,701,538 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 
900,763 

 

 

 -

 

 
900,763 

Corporate Notes/Bonds

 

 -

 

 
4,475,634 

 

 

 -

 

 
4,475,634 

Subtotal

 

 -

 

 
5,376,397 

 

 

 -

 

 
5,376,397 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 -

 

 

 

 

 

 

 

 

 

Accrued Consideration

 

 -

 

 

 -

 

 
(770,041)

 

 
(770,041)

Subtotal

 

 -

 

 

 -

 

 
(770,041)

 

 
(770,041)

 

 

 

 

 

 

 

 

 

 

 

 

Total

$
5,497,788 

 

$
18,077,935 

 

$
(770,041)

 

$
22,805,682 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$
829,881 

 

$

 -

 

$

 -

 

$
829,881 

Subtotal

 
829,881 

 

 

 -

 

 

 -

 

 
829,881 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 
18,635,601 

 

 

 -

 

 
18,635,601 

Subtotal

 

 -

 

 
18,635,601 

 

 

 -

 

 
18,635,601 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term investments:

 

 

 

 

 

 

 

 

 

 

 

Certificates of deposit

 

 -

 

 
4,883,510 

 

 

 -

 

 
4,883,510 

Subtotal

 

 -

 

 
4,883,510 

 

 

 -

 

 
4,883,510 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accrued Consideration

 

 -

 

 

 -

 

 
(1,002,623)

 

 
(1,002,623)

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 -

 

 

 -

 

 
(1,002,623)

 

 
(1,002,623)

 

 

 

 

 

 

 

 

 

 

 

 

Total

$
829,881 

 

$
23,519,111 

 

$
(1,002,623)

 

$
23,346,369 

 

The estimated fair value of remaining contingent consideration as of December 31,  2012 was $770,041, 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 gross margin targets and assumed probabilities. The change in the estimated contingent consideration during 2012 was due to $370,096 in payments, $52,013 in foreign currency losses, and $85,501 in losses included in operating income.  The gains were the result of a change in future assumptions related to the contingent consideration. 

There were no transfers between levels during 2012 and 2011.