FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Jun. 30, 2017

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

As of June 30, 2017, the Company held no Level 1, Level 2 or Level 3 financial instruments. As of 2016, the Company held no Level 1 or Level 2 financial instruments. In accordance with the fair value hierarchy described in Note 2, the following table shows the fair value of the Company’s level 3 financial instruments that were required to be measured at fair value as of June 30, 2016:


June 30, 2016	Level 1		Level 2		Level 3		Total

Common stock warrant liability, 2.2 million warrants exercisable at $2.6058 from September 17, 2011 through September 17, 2016	$	—	$	—	$	3,739	$	3,739

As of June 30, 2016 fair value of the Company’s Level 3 financial instruments totaled $3.7 million for 2.2 million warrants. The level 3 financial instrument consisted of common stock warrants issued by the Company during March 2011, which included features requiring liability treatment of the warrants. The fair value of warrants issued March 2011 to purchase shares of the Company’s common stock was based on valuations performed by an independent third party valuation firm. The fair value was determined using proprietary valuation models considering the quality of the underlying securities of the warrants, restrictions on the warrants and security underlying the warrants, time restrictions, and precedent sale transactions completed on the secondary market or in other private transactions.

There were no transfer of assets or liabilities between level 1, level 2, or level 3 during the years ended June 30, 2017 and 2016.


	For Year Ended
	June 30,
($ in thousands)	2017		2016

Beginning balance	$	(3,739)	$	(978)
Increase due to change in fair value of warrant liabilities		(1,490)		(5,674)
Reduction due to warrant exercises		5,229		2,913
Ending balance	$	—	$	(3,739)

- 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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