XOMA Royalty Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2015

Financial assets and liabilities carried at fair value

The following tables set forth the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as follows (in thousands):

	Fair Value Measurements at December 31, 2015 Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds ⁽¹⁾	$	42,590	$	—	$	—	$	42,590
Marketable securities		496		—		—		496
Total	$	43,086	$	—	$	—	$	43,086

Liabilities:
Contingent warrant liabilities	$	—	$	—	$	10,464	$	10,464

	Fair Value Measurements at December 31, 2014 Using
	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Money market funds ⁽¹⁾	$	67,569	$	—	$	—	$	67,569
Foreign exchange options ⁽²⁾		—		6		—		6
Total	$	67,569	$	6	$	—	$	67,575

Liabilities:
Contingent warrant liabilities	$	—	$	—	$	31,828	$	31,828

(1) Included in cash and cash equivalents

(2) Included in other assets

Warrant liabilities fair value assumptions

The estimated fair value of the contingent warrant liabilities was estimated using the following range of assumptions at December 31, 2015 and 2014:

	December 31,
	2015	2014
Expected volatility	166% - 183%	70% - 73%
Risk-free interest rate	0.64% - 0.74%	0.03% - 0.67%
Expected term (in years)	0.94 - 1.19	0.09 - 2.19

Summary of changes in fair value of Level 3 financial liabilities

The following table provides a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the years ended December 31, 2015 and 2014 (in thousands):

Balance at December 31, 2013	$	69,869
Initial fair value of warrants issued in December 2014 warrant		10,258
Reclassification of contingent warrant liability to equity upon exercise of warrants		(2,526	)
Decrease in estimated fair value of contingent warrant liabilities upon revaluation		(45,773	)
Balance at December 31, 2014		31,828
Reclassification of contingent warrant liability to equity upon exercise of warrants		(3,552	)
Decrease in estimated fair value of contingent warrant liabilities upon revaluation		(17,812	)
Balance at December 31, 2015	$	10,464

Outstanding debt carrying amount and estimated fair value

The carrying amount and the estimated fair value of the Company’s outstanding interest-bearing obligations at December 31, 2015 and 2014 are as follows (in thousands):

	December 31, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Hercules term loan	$	19,653	$	21,231	$	—	$	—
Servier loan		15,331		15,185		16,290		17,068
Novartis note		13,683		13,394		13,357		12,923
General Electric Capital Corporation term loan		—		—		5,661		6,470
Total	$	48,667	$	49,810	$	35,308	$	36,461