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FAIR VALUE MEASUREMENTS
 12 Months Ended
Aug. 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 no Level 1 assets or liabilities as of August 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 56 and 36 Level 2 assets as of August 31, 2017 and 2016, respectively, which consist 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 August 31, 2017 and 2016. The Company has determined that the contingent portion of the CAA does not have a determinable fair value (see Note 5).

 

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 measured at fair value on a recurring basis. The fair value of the available for sale securities is based on the values reported by the financial institutions where the funds are held. These securities include only federally insured certificates of deposit and U.S. treasuries.

 

The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 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  $12,673,700   $12,694,500   $—     $12,673,700   $—     $(20,800)
U.S. treasuries   7,381,700    7,372,000    —      7,381,700    —      9,700 
  Subtotal  $20,055,400   $20,066,500   $—     $20,055,400   $—     $(11,100)
Long-term investments   188,000    188,000    —      188,000    —      —   
  Total  $20,243,400   $20,254,500   $—     $20,243,400   $—     $(11,100)

  

The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 31, 2016: 

              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  $6,050,500   $6,054,700   $—     $6,050,500   $—     $(4,200)
U.S. treasuries   17,125,900    17,115,200    —      17,125,900    —      10,700 
  Subtotal  $23,176,400   $23,169,900   $—     $23,176,400   $—     $6,500 
Long-term investments   6,853,300    6,856,700    —      6,853,300    —      (3,400)
  Total  $30,029,700   $30,026,600   $—     $30,029,700   $—     $3,100