Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.5.0.2
Fair Value Measurements
 9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements

5. Fair Value Measurements

 

Financial Instruments Measured and Recorded at Fair Value on a Recurring Basis

 

The Company measures and records certain financial instruments at fair value on a recurring basis. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

 

  Level 1  - quoted market prices for identical assets or liabilities in active markets.
       
  Level 2  - observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
       
  Level 3  - unobservable inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

The Company classifies assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant to their fair value measurement. No financial assets were measured on a recurring basis at September 30, 2016 and December 31, 2015. The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy at September 30, 2016 and December 31, 2015:

 

    Fair Value Measurements at September 30, 2016  
Description   Level 1     Level 2     Level 3     Total  
Derivative liability                                
Common stock warrants   $ -     $ -     $ 548     $ 548  
Total derivative liability   $ -     $ -     $ 548     $ 548  

 

    Fair Value Measurements at December 31, 2015  
Description   Level 1     Level 2     Level 3     Total  
Derivative liability                                
Common stock warrants   $ -     $ -     $ 598     $ 598  
Total derivative liability   $ -     $ -     $ 598     $ 598  

 

The Company did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during the nine months ended September 30, 2016 and 2015. The following table presents a reconciliation of the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2016 and 2015:

 

    Common Stock
 Warrants 		    Convertible Notes     Total
Derivative
Liability 		 
Balance at December 31, 2014   $ (11,358 )   $ (2,612 )   $ (13,970 )
Issuances of derivatives     (14,556 )     -       (14,556 )
Modifcation of terms     (382 )     -       (382 )
Decrease in liability due to debt conversions     -       179       179  
Decrease in liability due to warrants being exercised     10,326       -       10,326  
Extinguishment of derivatives     -       3,468       3,468  
Change in fair value     1,687       (1,035 )     652  
Balance at September 30, 2015   $ (14,283 )   $ -     $ (14,283 )
                         
Balance at December 31, 2015   $ (598 )   $ -     $ (598 )
Issuances of derivatives     -       -       -  
Extinguishment of derivative liabilities     -       -       -  
Change in fair value included in earnings, as other income     50       -       50  
Balance at September 30, 2016   $ (548 )   $ -     $ (548 )

  

Common Stock Warrants

 

The Company has issued certain warrants to purchase shares of common stock, which are considered mark-to-market liabilities and are re-measured to fair value at each reporting period in accordance with accounting guidance.

 

The assumptions used in estimating the common stock warrant liability at September 30, 2016 and December 31, 2015 were as follows:

 

    September 30, 2016     December 31, 2015  
Weighted-average risk free interest rate     0.99 %     1.71 %
Weighted-average expected life (in years)     3.4       3.7  
Expected dividend yield     0 %     0 %
Weighted average expected volatility     122 %     119 %

 

Other Financial Instruments

 

The Company’s recorded values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded value of notes payable approximates the fair value as the interest rate approximates market interest rates.