Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.1.9
Fair Value Measurements
 3 Months Ended
Mar. 31, 2015
Available-for-Sale and Fair Value Measurements [Abstract]  
Available-for-Sale and Fair Value Measurements
5.
Fair Value Measurements

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies Accounting Standards Codification Topic 820, Fair Value Measurement and Disclosures, (“ASC 820”), which establishes a framework for measuring fair value and a fair value hierarchy that prioritizes the inputs used in valuation techniques. The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
 
Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs, either directly or indirectly, other than quoted prices in active markets for similar assets or liabilities, that are not active or other inputs that are not 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; therefore, requiring an entity to develop its own valuation techniques and assumptions.

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 of March 31, 2015 and December 31, 2014 as follows (in thousands):

   
Fair Value Measurements at March 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)
 
$
60,073
    
   
   
$
60,073
  
Foreign exchange options
    
-
      
-
      
-
      
-
  
Total
  
$
60,073
    
$
-
    
$
-
    
$
60,073
  
                                 
Liabilities:
                                
Contingent warrant liabilities
  
$
-
    
$
-
    
$
31,868
    
$
31,868
  
 
   
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
    
-
      
6
      
-
      
6
  
Total
  
$
67,569
    
$
6
    
$
-
    
$
67,575
  
                                 
Liabilities:
                                
Contingent warrant liabilities
  
$
-
    
$
-
    
$
31,828
    
$
31,828
  

 
(1)
Included in cash and cash equivalents

There were no transfers between Level 1 and Level 2 during the three months ended March 31, 2015 and 2014.
 
The estimated fair value of the foreign exchange options as of March 31, 2015 was less than $100.  The estimated fair value of the foreign exchange options at March 31, 2015 and December 31, 2014 was determined using readily observable market inputs from actively quoted markets obtained from various third-party data providers. These inputs, such as spot rate, forward rate and volatility have been derived from readily observable market data, meeting the criteria for Level 2 in the fair value hierarchy.
 
The estimated fair value of the contingent warrant liabilities at March 31, 2015 and December 31, 2014 was determined using the Black-Scholes Model, which requires inputs such as the expected term of the warrants, volatility and risk-free interest rate. These inputs are subjective and generally require analysis and judgment to develop. The Company’s common stock price represents a significant input that affects sensitivity in the valuation of the warrants. The change in the fair value is recorded as a gain or loss in the revaluation of contingent warrant liability line of the consolidated statements of comprehensive loss.
 
The estimated fair value of the contingent warrant liabilities was estimated using the following range of assumptions at March 31 2015 and December 31, 2014:

   
March 31,
 2015
    
December 31,
 2014
  
   
   
 
Expected volatility
    
73.9% - 74.8
%
    
69.6% - 72.9
%
Risk-free interest rate
    
0.55
%
    
0.03% - 0.67
%
Expected term
  
1.69 - 1.94 years
    
0.09 - 2.19 years
  

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

   
Three Months Ended March 31,
  
   
2015
    
2014
  
Beginning balance
  
$
31,828
    
$
69,869
  
Reclassification of contingent warrant liability to equity upon exercise of warrants
    
-
      
(2,525
)
Net increase (decrease) in estimated fair value of contingent warrant liabilities upon revaluation
    
40
      
(20,002
)
Ending balance
  
$
31,868
    
$
47,342
  


The fair value of the Company’s outstanding debt is estimated based on market interest rates. The carrying amount and the estimated fair value of the Company’s outstanding debt at March 31, 2015 and December 31, 2014 are as follows (in thousands):

   
March 31, 2015
    
December 31, 2014
  
   
Carrying
Amount
    
Fair
Value
    
Carrying
Amount
    
Fair
Value
  
Outstanding debt
  
$
47,189
    
$
47,668
    
$
35,308
    
$
36,461