Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE OF FINANCIAL INSTRUMENTS

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FAIR VALUE OF FINANCIAL INSTRUMENTS
6 Months Ended
Jun. 30, 2017
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Pursuant to the accounting guidance for fair value measurement and its subsequent updates, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The accounting guidance establishes a hierarchy for inputs used in measuring fair value that minimizes the use of unobservable inputs by requiring the use of observable market data when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on active market data. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

 

The fair value hierarchy is broken down into the three input levels summarized below:

 

Level 1 —Valuations are based on quoted prices in active markets for identical assets or liabilities and readily accessible by us at the reporting date. Examples of assets and liabilities utilizing Level 1 inputs are certain money market funds, U.S. Treasuries and trading securities with quoted prices on active markets.

 

Level 2 —Valuations based on inputs other than the quoted prices in active markets that are observable either directly or indirectly in active markets. Examples of assets and liabilities utilizing Level 2 inputs are U.S. government agency bonds, corporate bonds, commercial paper, certificates of deposit and over-the- counter derivatives.

 

Level 3 —Valuations based on unobservable inputs in which there are little or no market data, which require the Company to develop its own assumptions. 

 

The following tables present the Company’s fair value hierarchy for all its financial assets, in thousands, by major security type measured at fair value on a recurring basis as of June 30, 2017:

 

    June, 30 2017  
    Estimated Fair Value     Level 1     Level 2     Level 3  
Assets:                                
    $     $     $     $  
Liabilities:                                
Common Stock Warrant Liability   $ 864,371                     $ 864,371  

 

There were no financial assets outstanding that were required to be measured at fair value at December 31, 2016.

 

Warrants containing provisions that could require the Company to settle the warrants in cash in an event outside the Company’s control or that have price protection rights are accounted for as liabilities, with changes in the fair values included in net loss for the respective periods. Because some of the inputs to the valuation model are either not observable or are not derived principally from or corroborated by observable market data by correlation or other means, the warrant liability is classified as Level 3 in the fair value hierarchy.

 

The following table summarizes the changes in the Company’s Level 3 warrant liability for the six months ended June 30, 2017:

 

    June 30, 2017  
Warrant liability        
Beginning balance   $  
Issuances of warrants     1,612,417  
Warrant exercises     (900,493 )
Change in fair value     152,447  
Ending balance     864,371  

 

There were no transfers between Level 1, Level 2 or Level 3 for the three and six months ended June 30, 2017 and year ended December 31, 2016.