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9. Fair Value Measurements

9 Months Ended

Sep. 30, 2016

Fair Value Measurements

9. Fair Value Measurements

We have financial instruments as of September 30, 2016 and December 31, 2015 for which the fair value is summarized below (in thousands):

		September 30, 2016								December 31, 2015
		Carrying Value				Estimated Fair Value				Carrying Value				Estimated Fair Value
Assets:
Trade receivables, net		$	349			$	349			$	445			$	445
Equipment financing receivables			331				331				450				450
Certificate of deposit			252				252				251				251
Liabilities:
Acquisition related contingent consideration			-				-				99				99
Notes payable including discount from warrant grant			1,071				1,178				1,022				1,146

Assets and liabilities for which fair value is recognized in the balance sheet on a recurring basis are summarized below as of September 30, 2016 and December 31, 2015 (in thousands):

						Fair value measurement at reporting date
Description		September 30, 2016				Level 1				Level 2				Level 3

Assets:
Certificate of deposit		$	252			$	-			$	252			$	-

Description		December 31, 2015				Level 1				Level 2				Level 3

Assets:
Certificate of deposit		$	251			$	-			$	251			$	-
Liabilities:
Acquisition related contingent consideration			99				-				-				99

The carrying amount of certificates of deposit approximates fair value, as determined by certificates of deposit with similar terms and conditions.

The recurring Level 3 measurement of our contingent consideration liability includes the following significant unobservable inputs at December 31, 2015 (in thousands):

Contingent consideration liability		Fair Value at December 31, 2015				Valuation technique				Unobservable inputs				Range
Revenue - based payments		$	99		Discounted cash flow	Discount Rate			12.5	%

						Probability of milestone payment			100	%
						Projected year of payments			2016

Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s own assumptions in measuring fair value. Future changes in fair value of the contingent financial milestone consideration, as a result of changes in significant inputs such as the discount rate and estimated probabilities of financial milestone achievements, could have a material effect on the statement of operations and balance sheet in the period of the change.

The progression of the Company’s Level 3 instruments fair valued on a recurring basis for the nine months ended September 30, 2016 and the year ended December 31, 2015 are shown in the table below (in thousands):

		Acquisition Related Contingent Consideration
Balance at January 1, 2015		$	211
Change in fair value			(11	)
Cash payments			(61	)
Issuance of common stock from contingent consideration			(40	)
Balance at December 31, 2015		$	99
Cash payments			(59	)
Issuance of common stock from contingent consideration			(40	)
Balance at September 30, 2016		$	-

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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