Note 7 - Fair Value Measurements

6 Months Ended

Jun. 30, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

7

– Fair Value Measurements

The following table presents the Company

’s financial assets and liabilities that were accounted for at fair value on a recurring basis by level within the fair value hierarchy:

	Fair Value Measurement Using
	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value Measurement
June 30 , 2017
Derivative Instrument
Warrant liability	$	-	$	-	$	306,648	$	306,648
Interest rate swap	$	-	$	72,000	$	-	$	72,000
December 31, 201 6
Derivative Instrument
Interest rate swap	$	-	$	91,000	$	-	$	91,000

The warrant liability as of

June 30, 2017

consists of a liability of approximately

$307,000

(classified within

Warrant liability

). The interest rate swap as of

June 30, 2017

consists of a liability of

$72,000

(classified within

Accounts payable and accrued liabilities

).

The Company's warrant liability was valued

as a derivative instrument at issuance and at

June 30, 2017

using the Black-Scholes option pricing model, using observable market inputs and management judgment based on the following assumptions: a risk-free interest rate of

1.51%,

expected dividend yield of

0%,

a term of

2.5

years, and a volatility of

96.39%.

The valuation policies used are approved by the Chief Financial Officer who reviews and approves the inputs used in the fair value calculations and the changes in fair value measurements from period to period for reasonableness. Fair value measurements are discussed with the Company

’s Chief Executive Officer, as deemed appropriate.

The Company

’s interest rate swap is valued using models which require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, and correlations of such inputs. Some of the model inputs used in valuing the derivative instruments trade in liquid markets, and therefore the derivative instrument is classified within Level

2

of the fair value hierarchy. For applicable financial assets carried at fair value, the credit standing of the counterparties is analyzed and factored into the fair value measurement of those assets. The fair value estimates of our derivative financial instruments do

not

reflect their actual trading value.