Fair Value Measurements

12 Months Ended

Dec. 31, 2015

3. Fair Value Measurements

ASC 820 "Fair Value Measurements," defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:


	•	Level 1—Quoted prices in active markets for identical assets or liabilities;
	•	Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, 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; and
	•	Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The following table presents information about the Company's warrant liability that was measured at fair value on a recurring basis as of December 31, 2014 and indicates the fair value hierarchy of the valuation:

	Level 1		Level 2		Level 3		Total
Fiscal Year 2014:
Warrant Liability	$	—	$	—	$	601,889	$	601,889

The warrant liability was converted into an equity instrument when it became convertible into common stock at the IPO. The change in the estimated fair value of the warrant liability is summarized below:

	Beginning Value of Warrant Liability		Issuance of Common Stock Warrants		Change in Fair Value of Level 3 Liability			Conversion into Additional Paid-in Capital			Ending Fair Value of Level 3 Liability
For the year ended December 31, 2015	$	601,889	$	47,479	$	501,617		$	(1,150,985	)	$	—


For the year ended December 31, 2014	$	—	$	653,312	$	(51,423	)	$	—		$	601,889

The change in the fair value of the level 3 warrant liability is reflected in the statement of operations and comprehensive loss for the year ended December 31, 2015.

There were no assets or liabilities measured at fair value on a recurring basis at December 31, 2015.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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