General form of registration statement for all companies including face-amount certificate companies

Fair Value Measurements and Disclosures

v3.6.0.2
Fair Value Measurements and Disclosures
9 Months Ended 12 Months Ended
Sep. 30, 2016
Dec. 31, 2015
Fair Value Measurements and Disclosures [Abstract]    
Fair Value Measurements and Disclosures

Note 10—Fair Value Measurements and Disclosures

 

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company's own credit risk.

 

Inputs used in measuring fair value are prioritized into a three-level hierarchy based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels:

 

  Level 1—Quoted prices for identical instruments in active markets;

 

  Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

 

  Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

 

The following tables present information on the Company’s financial instruments (unaudited):

 

    Fair Value     Level 1     Level 2     Level 3  
Cash and cash equivalents, including restricted cash   $ 670,000     $ 670,000     $     $  
Embedded note conversion features   $ 1,023,000     $     $     $ 1,023,000  

 

The following table provides the activity of the Level 3 financial instruments from December 31, 2015 to September 30, 2016:

 

   

Warrants

Liability

   

Embedded Note

Conversion

Feature

    Total  
Value as of December 31, 2015   $ 1,297,000     $ 1,213,000     $ 2,510,000  
Adjustment to fair value     (1,223,000 )     (1,901,000 )     (3,124,000 )
Additional Warrants issued for debt amendment     1,645,000             1,645,000  
Modification of Conversion Feature—debt amendment           1,429,000       1,429,000  
Warrant amendment—August 24, 2016     (1,719,000 )           (1,719,000 )
Issuance of Convertible Unsecured Notes—September 1, 2016           282,000       282,000  
Ending balance—September 30, 2016   $     $ 1,023,000     $ 1,023,000  

Note 10—Fair Value Measurements and Disclosures

 

Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company's own credit risk.

 

Inputs used in measuring fair value are prioritized into a three-level hierarchy based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels:

 

  Level 1—Quoted prices for identical instruments in active markets;

 

  Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

 

  Level 3—Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

 

The following tables present information on the Company’s financial instruments:

 

    Fair Value     Level 1     Level 2     Level 3  
Cash and cash equivalents, including restricted cash   $ 2,805,000     $ 2,805,000     $     $  
Derivative liabilities—warrants   $ 1,297,000     $     $     $ 1,297,000  
Embedded note conversion feature   $ 1,213,000     $     $     $ 1,213,000