Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

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Fair Value Measurements
3 Months Ended
Mar. 31, 2015
Fair Value Measurements [Text Block]

Note 11.          Fair Value Measurements

          The Company adopted the accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

•    Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•    Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;

•    Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

            The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liability measured at fair value on a recurring basis as of March 31, 2015 and December 31, 2014:

      Fair value measurement using  
            Significant     Significant        
      Quoted prices in     other     unobservable        
      active markets     observable     inputs        
      (Level 1)     inputs (Level 2)     (Level 3)     Total  
Balance at March 31, 2015                          
Assets:                          
Cash and cash equivalents   $ 3,171,530   $   —   $   —   $ 3,171,530  
Liabilities:                          
Warrant liability   $   —   $   —   $ 3,435,326   $ 3,435,326  

      Fair value measurement using  
            Significant     Significant        
      Quoted prices in     other     unobservable        
      active markets     observable     inputs        
      (Level 1)     inputs (Level 2)     (Level 3)     Total  
Balance at December 31, 2014                          
Assets:                          
Cash and cash equivalents   $ 4,220,225   $   —   $   —   $ 4,220,225  
Liabilities:                          
Warrant liability   $   —   $   —   $ 4,633,312   $ 4,633,312  

The reconciliation of warrant liability (rounded to the nearest thousand) measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:

    Warrant Liability  
Balance at December 31, 2013 $ 1,711,000  
Issuance of additional warrants   4,416,000  
Exercise of warrants   (331,000 )
Change in fair value of warrant liability   (1,163,000 )
Balance at December 31, 2014   4,633,000  
Issuance of additional warrants   -  
Exercise of warrants   -  
Change in fair value of warrant liability   (1,198,000 )
Balance at March 31, 2015   3,435,000  

The fair value of the warrant liability is based on Level 3 inputs. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value. See Note 8 for further discussion of the warrant liability.

The Company believes that the fair values of its current assets and current liabilities approximate their reported carrying amounts. There were no transfers between Level 1, 2 and 3.