Note 4 - Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

(4) Fair Value Measurements

The fair value of financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The Company follows a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following

three

 levels:

Level 

1

– quoted prices in active markets for identical assets and liabilities

Level 

2

– observable inputs other than quoted prices in active markets for identical assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

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.

The following table sets forth the fair value of our financial assets measured on a recurring basis as of

December

31,

2016

and indicates the fair value hierarchy utilized to determine such fair value (in thousands).

	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	21,352	$	—	$	—	$	21,352

The following table sets forth the fair value of our financial assets and liabilities measured on a recurring basis as of

December

31,

2015

and indicates the fair value hierarchy utilized to determine such fair value(in thousands).

	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	3,557	$	—	$	—	$	3,557
Liabilities:
Convertible preferred stock warrant liability	$	—	$	—	$	275	$	275
Maturity date preferred stock warrant liability	$	—	$	—	$	10	$	10
Convertible shareholder notes derivative liability	$	—	$	—	$	1,044	$	1,044

As discussed more fully in Notes

11

and

12,

the Company issued warrants to purchase preferred stock in connection with the note agreements to various shareholders. The warrant liabilities were recorded at the fair value on the date of issuance and were remeasured each subsequent balance sheet date and as of the warrant exercise date, with fair value changes recognized as income (decrease in fair value) or expense (increase in fair value) in other income (expense) in the consolidated statements of operations.

In

May

2015,

the Company entered into note agreements with various stockholders of the Company and other lenders for a total of

$7.2

million (the

“2015

Notes”). As discussed more fully in Note

12,

the

2015

Notes include embedded derivative features that were determined to be a compound embedded derivative requiring bifurcation and separate accounting at estimated fair value. The Company estimated the fair value of the compound embedded derivative utilizing a Monte Carlo simulation model from inception through

June

30,

2016.

The inputs used to determine the estimated fair value of the compound embedded derivative instrument include the probability of an underlying event triggering the redemption event and its timing prior to the maturity date of the

2015

Notes. The fair value measurement is based upon significant inputs not observable in the market. These assumptions are inherently subjective and involve significant management judgment. Upon the completion of the Merger, the valuation of the compound embedded derivative was determined based on the settlement value of the common stock exchanged for the notes on

October

24,

2016.

The following tables set forth the fair value of our financial liabilities that the Company remeasured on a recurring basis (in thousands):

	Convertible Preferred Stock Warrant Liability			Maturity Date Preferred Stock Warrant Liability			Convertible Shareholder Note Derivative Liability
Fair value December 31, 2015	$	275		$	10		$	1,044
Change in fair value		(250	)		(10	)		1,224
Exchange of convertible preferred stock warrants		(25	)		—			—
Conversion of convertible notes		—			—			(2,268	)
Fair value December 31, 2016	$	—		$	—		$	—