Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

XML 18 R8.htm IDEA: XBRL DOCUMENT v3.4.0.3
Fair Value Measurements
 3 Months Ended
Mar. 31, 2016
Notes to Financial Statements  
Fair Value Measurements

ASC 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

 

 Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

 

The Company categorized its cash equivalents as Level 1 fair value measurements.   The Company categorized its warrants potentially settleable in cash as Level 3 fair value measurements. The warrants potentially settleable in cash are measured at fair value on a recurring basis and are being marked to fair value at each reporting date until they are completely settled or meet the requirements to be accounted for as component of stockholders’ equity. The warrants are valued using the Black-Scholes option-pricing model as discussed in Note 4 below.

 

The following table presents a summary of fair values of assets and liabilities that are re-measured at fair value at each balance sheet date as of March 31, 2016 and December 31, 2015, and their placement within the fair value hierarchy as discussed above (in thousands):

 

    March 31,     Quoted Prices in Active Markets   Significant Other Observable Inputs   Unobservable Inputs  
 Description   2016     (Level 1)     (Level 2)     (Level 3)  
 Assets:                        
 Cash and cash equivalents   $ 10,242     $ 10,242     $ -     $ -  
 Total assets   $ 10,242     $ 10,242     $ -     $ -  
                                 
 Liabilities:                                
 Warrants potentially settleable in cash   $ 2,807     $ -     $ -     $ 2,807  
 Total liabilities   $ 2,807     $ -     $ -     $ 2,807  
                                 
    December 31,     Quoted Prices in Active Markets   Significant Other Observable Inputs   Unobservable Inputs  
 Description   2015     (Level 1)     (Level 2)     (Level 3)  
 Assets:                                
 Cash and cash equivalents   $ 9,276     $ 9,276     $ -     $ -  
 Total assets   $ 9,276     $ 9,276     $ -     $ -  
                                 
 Liabilities:                                
 Warrants potentially settleable in cash   $ 4,115     $ -     $ -     $ 4,115  
 Total liabilities   $ 4,115     $ -     $ -     $ 4,115  

 

The Company has not transferred any financial instruments into or out of Level 3 classification during the three months ended March 31, 2016 or 2015. A reconciliation of the beginning and ending Level 3 liabilities for the three months ended March 31, 2016 and 2015 is as follows:

 

    Fair Value Measurements Using Significant Unobservable Inputs (Level 3)  
    2016     2015  
 Balance , January 1,   $ 4,115     $ 8,464  
 Estimated fair value of warrants exchanged for common shares     (35 )     (9,426 )
 Change in fair value of warrants     (1,273 )     14,418  
 Balance at March 31   $ 2,807     $ 13,456