Quarterly report pursuant to Section 13 or 15(d)

2. FAIR VALUE MEASUREMENTS

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2. FAIR VALUE MEASUREMENTS
 9 Months Ended
May 31, 2017
Fair Value Measurements  
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 in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value.

 

Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the NASDAQ Stock Market. The Company had none of these instruments as of May 31, 2017 or August 31, 2016.

 

Level 2 — Valuations for assets and liabilities obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company had 51 and 36 Level 2 assets as of May 31, 2017 and August 31, 2016, respectively, which consisted of certificates of deposit and U.S. treasury notes.

 

Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. The Company had one Level 3 liability, the contingent portion of the CAA, as of May 31, 2017 and August 31, 2016, which the Company has determined that the contingent portion of the CAA does not have a determinable fair value (see Note 4).

 

The Company maintains policies and procedures to value instruments using what management believes to be the best and most relevant data available.

 

Level 2 Asset – Available for Sale Securities. The Company’s available for sale securities are the Company’s only financial asset with fair value measured on a recurring basis. At May 31, 2017, these securities include only federally insured certificates of deposit and U.S. treasury notes.

 

The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of May 31, 2017: 

 

                      Fair Value Measurement Using:          
              Cost / Other       Quoted Prices in Active Markets for Identical Assets       Significant Other Observable Inputs       Significant Unobservable Inputs       Accumulated Unrealized Gains and  
      Fair Value       Value       (Level 1)       (Level 2)       (Level 3)       (Losses)  
Certificates of deposit   $ 11,432,214     $ 11,443,068     $ —       $ 11,432,214     $ —       $ (10,854 )
U.S. Treasuries     8,800,721       8,814,820       —         8,800,721       —         (14,099 )
 Subtotal   $ 20,232,935     $ 20,257,888     $ —       $ 20,232,935     $ —       $ (24,953 )
Long-term investments     1,430,177       1,431,712       —         1,430,177               (1,535 )
 Total   $ 21,663,112     $ 21,689,600     $ —       $ 21,663,112     $ —       $ (26,488 )