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Fair Value Measurements
6 Months Ended
Jun. 30, 2018
Fair Value Measurements [Abstract]  
Fair Value Measurements

4. Fair Value Measurements 



The guidance regarding fair value measurements prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following:





Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.



Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.



Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.



The Company estimates the fair values of derivative liabilities utilizing Level 3 inputs. No derivative liabilities have been transferred between the classification levels. Estimating the fair values of derivative liabilities requires the use of significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. The recurring fair value measurements of the Company’s derivative liabilities at June 30, 2018 and December 31, 2017 consisted of the following:







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Quoted Prices in

 

 

 

 

 

 

 

 

 



 

Active Markets

 

Significant Other

 

Significant

 

 

 



 

for Identical

 

Observable Inputs

 

Unobservable

 

 

 



 

Items (Level 1)

 

(Level 2)

 

Inputs (Level 3)

 

Total

June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

June 2016 offering warrant liability

 

$

 -

 

$

 -

 

$

28,000 

 

$

28,000 

November 2016 offering warrant liability

 

 

 -

 

 

 -

 

 

157,000 

 

 

157,000 

Total liabilities

 

$

 -

 

$

 -

 

$

185,000 

 

$

185,000 



 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

June 2016 offering warrant liability

 

$

 -

 

$

 -

 

$

32,000 

 

$

32,000 

November 2016 offering warrant liability

 

 

 -

 

 

 -

 

 

260,000 

 

 

260,000 

Total liabilities

 

$

 -

 

$

 -

 

$

292,000 

 

$

292,000 





The following table sets forth a summary of changes in the fair value of the Company's derivative liabilities:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

June 2016

 

November 2016

 

 



 

Offering

 

Offering

 

Total



 

Warrant

 

Warrant

 

Derivative



 

Liability

 

Liability

 

Liabilities

Balance, December 31, 2017

 

$

32,000 

 

$

260,000 

 

$

292,000 

Changes in estimated fair value

 

 

(4,000)

 

 

81,000 

 

 

77,000 

Exercised warrants

 

 

 -

 

 

(184,000)

 

 

(184,000)

Balance, June 30, 2018

 

$

28,000 

 

$

157,000 

 

$

185,000 





The Company estimates the fair value of the June 2016 offering warrant liability at each reporting date using the Black-Scholes valuation model. Inputs used in this valuation model include the Company’s stock price volatility, risk-free interest rates and expected term of the warrants.



Historically, the Company estimated the fair value of the November 2016 offering warrant liability at each reporting date using the Monte Carlo valuation model. Inputs used in the Monte Carlo valuation model included the Company’s stock price volatility, risk-free interest rates and expected term of the warrants. Effective March 31, 2018, due primarily to the significant decrease in the number of warrants outstanding, the Company simplified the method used and changed to the Black Scholes valuation model, which approximates the Monte Carlo valuation model.