Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

(2) Fair Value Measurements

For assets and liabilities measured at fair value we utilize FASB Accounting Standards Codification (ASC) Section 820 “Fair Value Measurements and Disclosures” (ASC 820), which defines fair value and establishes a framework for fair value measurements. This standard establishes a three-level hierarchy for disclosure of fair value measurements. The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels of inputs used to measure fair value are as follows:

· Level 1 – Quoted prices in active markets for identical assets or liabilities;

· Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active and other inputs that are observable (e.g., interest rates, yield curves, volatilities and default rates, among others) or that 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 certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The following table presents information about assets and liabilities recorded at fair value on a recurring basis on the Condensed Balance Sheet at June 30, 2016:

			Quoted Prices in
			Active Markets for		Significant		Significant
	Total Carrying		Identical		Other Observable		Unobservable
	Value on the		Assets		Inputs		Inputs
	Balance Sheet		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Assets:
Cash and cash equivalents	$	9,630	$	9,630	$	-	$	-
Total assets at fair value	$	9,630	$	9,630	$	-	$	-
Liabilities:
Warrant liabilities	$	1,949	$	-	$	-	$	1,949
Total liabilities at fair value	$	1,949	$	-	$	-	$	1,949

The following table presents information about assets recorded at fair value on a recurring basis on the Condensed Balance Sheet at December 31, 2015:

			Quoted Prices in
			Active Markets for		Significant
	Total Carrying		Identical		Other Observable
	Value on the		Assets		Inputs
	Balance Sheet		(Level 1)		(Level 2)
			(in thousands)
Assets:
Cash and cash equivalents	$	7,015	$	7,015	$	-
Corporate notes and bonds		1,593		-		1,593
Equity Securities		68		68		-
Total assets at fair value	$	8,676	$	7,083	$	1,593

We determine fair value for our investments in marketable securities with Level 1 inputs through quoted market prices and have classified them as available-for-sale. Our Level 2 investments consist of corporate notes and bonds maturing at various times in 2016.

We review all investments for other-than-temporary impairment at least quarterly or as indicators of impairment exist. Indicators of impairment include the duration and severity of the decline in fair value as well as the intent and ability to hold the investment to allow for a recovery in the market value of the investment. In addition, we consider qualitative factors that include, but are not limited to: (i) the financial condition and business plans of the investee, including its future earnings potential, (ii) the investee’s credit rating and (iii) the current and expected market and industry conditions in which the investee operates. If a decline in the fair value of an investment is deemed by management to be other-than-temporary, we write down the cost basis of the investment to fair value, and the amount of the write down is included in net earnings. Such a determination is dependent on the facts and circumstances relating to each investment. During the first quarter of 2016, we determined that our equity security holding had incurred an other-than-temporary impairment as a result of the entity in which we held the equity being acquired by another company at a price lower than our carrying value. The stock of the entity is no longer being publicly traded. As a result of this impairment, we realized a loss of $4,000. We have determined there were no such impairments during 2015.

All unrealized holding gains or losses related to our investments in marketable securities are reflected in accumulated other comprehensive loss in stockholders’ equity. The change in accumulated other comprehensive loss was a net unrealized gain of $5,000 and $2,000 for the six months ended June 30, 2016 and 2015, respectively.

As of June 30, 2016, the Company also had a Level 3 liability associated with the warrants issued in connection with the Company’s May 2016 registered offering, described in Note 6 below. The warrants are considered a liability and are valued using the Black-Scholes option-pricing model, the inputs for which include the following: exercise price of the warrants, market price of the underlying common shares, contractual term, expected volatility of our stock, risk-free interest rate, and expected dividend yield. Changes in fair value are recorded against operations in the reporting period in which they occur; increases and decreases in fair value are recorded in other income/(expense) as a change in fair value. The change in fair value was a gain of $0.8 million for the six months ended June 30, 2016. 

The following table sets for the a reconciliation of changes in the six months ended June 30, 2016 in the fair value of the liabilities classified as Level 3 in the fair value hierarchy:

	Warrant
	Liabilities
	(in thousands)
Balance at January 1, 2016	$	-
Additions		2,714
Change in fair value		(765	)
Balance at June 30, 2016	$	1,949