Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.4.0.3
Fair Value Measurements
3 Months Ended
Mar. 31, 2016
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS

8. FAIR VALUE MEASUREMENTS

 

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2016 by level within the fair value hierarchy, are as follows (in thousands): 

 

    Fair value measured at March 31, 2016  
    Fair value
at 
March 31,
    Quoted 
prices 
in active
markets
    Significant
other
observable 
inputs
    Significant 
unobservable inputs
 
    2016     (Level 1)     (Level 2)     (Level 3)  
Assets:                                
Related party convertible notes receivable   $ 500     $ -     $ -     $ 500  
Total fair value   $ 500     $ -     $ -     $ 500  
                                 
Liabilities:                                
Embedded conversion feature   $ 2,092     $ -     $ -     $ 2,092  
Warrant liability     2,073       -       -       2,073  
Share-settled debt     476       -       -       476  
Total fair value   $ 4,641     $ -     $ -     $ 4,641  

  

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2016.

 

The following table presents additional information about Level 3 liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

 

Changes in Level 3 liabilities measured at fair value for the three months ended March 31, 2016 were as follows (dollars in thousands):

 

          Embedded              
    Warrant
Liability
    Conversion
Feature
    Share-settled Debt     Total  
January 1, 2016     3,025       2,073       521       5,619  
Issuance of warrants     1,456       -       -       1,456  
Issuance of convertible notes     -       105       -       105  
Conversion of 12% senior convertible debentures to common stock     -       -       -       -  
Conversion of share-settled debt to common stock     -       (35 )     (25 )     (60 )
Change in fair value     (2,408 )     (51 )     (20 )     (2,479 )
March 31, 2016   $ 2,073     $ 2,092     $ 476     $ 4,641  

 

The Company’s warrant liabilities, derivative liabilities and share-settled debt are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of weighted average (in aggregate) about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy for the years ended December 31, 2015 is as follows:

    As of March 31, 2016  
          Embedded        
    Warrant
Liability
    Conversion Feature     Share-settled Debt  
Contractual life (years)     4.63       0.50       0.10  
Annualized volatility     72 %     72 %     72 %
Conversion price   $ 0.29     $ 0.06     $ 0.30  
Expected dividends     0 %     0 %     0 %
Risk-free investment rate     1.1 %     0.4 %     0.4 %

 

* The Company uses comparable companies within the same industry to derive at the 72% annualized volatility.