Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.8.0.1
Fair Value Measurements
12 Months Ended
Dec. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the Topic establishes a fair value hierarchy for valuation inputs that give the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy is as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that we have the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3: Significant unobservable inputs that reflect our own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The following table summarizes the financial liabilities measured at fair value on a recurring basis segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
 
 
 
2017
 
 
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Warrant liability
 
$
4,403

 

 

 
$
4,403

Notes payable
 
$
156

 

 

 
156

 
 
$
4,559

 

 

 
$
4,559

 
 
 
 
 
 
 
 
 

 
 
2016
 
 
Total
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Warrant liability
 
$
2,018

 

 

 
$
2,018

Notes payable
 
114

 

 

 
114

 
 
$
2,132

 

 

 
$
2,132

At December 31, 2017, the warrant liability consists of stock warrants issued as part of the 2016 Offerings and 2017 Offering that contain contingent redemption features and warrants issued as part of the 2017 debt refinancing outlined in Note 7. In accordance with derivative accounting for warrants, we calculated the fair value of warrants and the assumptions used are described in Note 15, “Fair Value of Warrants.” Realized and unrealized gains and losses related to the change in fair value of the warrant liability are included in other income (expense) on the Consolidated Statements of Operations and Other Comprehensive Loss.
At December 31, 2017 and 2016, the Company had a note payable to VenturEast from a prior acquisition. The ultimate repayment of the note will be the value of 84,278 shares of common stock at the time of payment. The value of the note payable to VenturEast was determined using the fair value of our common stock at the reporting date. During the years ended December 31, 2017 and 2016, we recognized a loss of $42,000 and gain of $152,000, respectively, due to the changes in value of the note. Realized and unrealized gains and losses related to the VenturEast note are included in other income (expense) on the Consolidated Statements of Operations and Other Comprehensive Loss.
The following table summarizes the activity of the notes payable to VenturEast and our derivative warrants, which were measured at fair value using Level 3 inputs (in thousands):
 
 
Note Payable
 
Warrant
 
 
to VenturEast
 
Liability
Fair value at January 1, 2016
 
$
266

 
$
17

Change in fair value
 
(152
)
 
(1,525
)
Fair value of warrants issued
 

 
3,526

Fair value at December 31, 2016
 
$
114

 
$
2,018

Change in fair value
 
42

 
1,964

Fair value of warrants issued
 

 
3,203

Fair value of warrants exercised
 

 
(2,782
)
Fair value at December 31, 2017
 
$
156

 
$
4,403