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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2016

Aggregate Fair Value and Carrying Value of Warrant Liability and Long-Term Debt

At September 30, 2016 and December 31, 2015, the carrying value and the aggregate fair value of the Company’s warrant liability and long-term debt were as follows (in thousands):


	As of September 30, 2016				As of December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Liabilities:
Warrant liability, net	$	1,761	$	1,761	$	—	$	—
Long-term debt, net	$	4,000	$	1,766	$	—	$	—

Schedule of Roll Forward of Warrant Liability Classified as Level 3 and Measured at Fair Value on a Recurring Basis

A roll forward of our warrant liability classified as Level 3 and measured at fair value on a recurring basis is as follows (in thousands):


Balance, December 31, 2015 (audited)	$	—
Issuances		2,096
Change in fair value of warrant liability		(335	)

Balance, September 30, 2016 (unaudited)	$	1,761

Fair Value of Warrants Determined by Using Option Pricing Model

The warrants are not traded in an active securities market, and as such the estimated fair value as of September 30, 2016 was determined by using an option pricing model (Black-Scholes) with the following assumptions:



	As of September 30, 2016
Expected term		4.9 years
Common stock market price	$	2.03
Risk-free interest rate		1.18	%
Expected volatility		70.5	%
Resulting fair value (per warrant)	$	1.05

Aggregate Fair Value and Carrying Value of Long-term Debt

At September 30, 2016, the aggregate fair value and the carrying value of the Company’s long-term debt was as follows (in thousands):


	As of September 30, 2016				As of December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt – related party	$	2,000	$	883	$	—	$	—
Long-term debt		2,000		883		—		—

Total long-term debt	$	4,000	$	1,766	$	—	$	—

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

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