(4) Fair Value Measurements

Fair value of financial assets and liabilities is defined as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy has been established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

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 for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or model-derived valuations for which all significant inputs are observable, either directly or indirectly.

Level 3—Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

The Company’s assets that are measured at fair value on a recurring basis are classified within Level 1 or Level 2 of the fair value hierarchy. The Company does not hold any recurring assets that are measured at fair value using Level 3 inputs.

The Company did not hold any short-term investments classified as available for sale or held to maturity as of September 30, 2017 and December 31, 2016.

The fair value of the Company’s common stock warrant liability is calculated using a Black-Scholes valuation model and is classified as Level 2 in the fair value hierarchy. The fair values are presented below along with the valuation assumptions:


		Series A Warrants
	September 30, 2017			December 31, 2016
Risk-free interest rates		1.31	%		1.20	%
Expected life		15	months		24	months
Expected dividends		—	%		—	%
Expected volatility		194.28	%		122.03	%
Fair value	$	2,159		$	36,000

The following were the fair value assumptions used by the Company in calculating values of Note Warrants as of December 31, 2016:


	December 31, 2016
	November 2015 Note Warrants			January 2016 Note Warrants			May 2016 Note Warrants
Risk-free interest rates		1.47	%		1.93	%		1.93	%
Expected life		46	months		48	months		52	months
Expected dividends		—	%		—	%		—	%
Expected volatility		102.29	%		108.57	%		106.37	%
Fair value	$	449		$	1,633		$	1,037

The following table summarizes fair value measurements of the Series A Warrants and Note Warrants by level at December 31, 2016 and September 30, 2017:


	Level 1		Level 2		Level 3		Total
Common stock warrants at December 31, 2016	$	—	$	39,119	$	—	$	39,119
Common stock warrants at September 30, 2017	$	—	$	2,159	$	—	$	2,159

During the three and nine months ended September 30, 2016, the Company had amounts outstanding from 7% senior amortizing convertible notes (the Notes) related to Note issuances on November 9, 2015 (the First Closing) and January 11, 2016 (the Second Closing) and May 2, 2016 (the Third Closing), when the Company issued Notes with principal amounts of $1.5 million, $11.0 million and $6.25 million, respectively. As of December 31, 2015, the fair value of the outstanding Notes from the First Closing was determined to be $1.3 million. The fair value of the Notes issued with the Second Closing was determined to be $9.9 million on the January 11, 2016 issue date and $2.4 million on September 30, 2016. The fair value of the Notes issued with the Third Closing was determined to be $6.0 million on the May 2, 2016 issue date and $3.2 million on September 30, 2016. The fair values were calculated using a Binomial Lattice model and the following assumptions:


	November 2015 Notes					January 2016 Notes
	September 30, 2016		December 31, 2015			September 30, 2016			January 11, 2016
Risk-free interest rates		N/A		1.11	%		0.65	%		1.01	%
Expected life		N/A		1.86	years		1.11	years		1.83	years
Expected dividends		N/A		—	%		—	%		—	%
Expected volatility		N/A		57.5	%		70.0	%		60.0	%
Fair value per share of common stock		N/A	$	0.03		$	0.002		$	0.02


	May 2016 Notes
	September 30, 2016			May 2, 2016
Risk-free interest rates		0.65	%		0.69	%
Expected life		1.11	years		1.52	years
Expected dividends		—	%		—	%
Expected volatility		70.0	%		65.0	%
Fair value per share of common stock	$	0.002		$	0.01