Quarterly report pursuant to Section 13 or 15(d)

Fair Value of Assets and Liabilities

Fair Value of Assets and Liabilities
6 Months Ended
Jun. 30, 2015
Fair Value Disclosures [Abstract]  
Fair Value of Assets and Liabilities


The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2—Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or 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—Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The Company uses valuation methods and assumptions that consider, among other factors, the fair value of the underlying stock, risk-free interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments. The Company had no assets or liabilities classified as Level 1 or Level 2. Certain warrants issued for professional services (Note 10) were classified as Level 3. The fair values of these instruments were determined using models based on market observable inputs and management judgment. There were no material re-measurements of fair value during the three months ended June 30, 2015 and 2014 with respect to financial assets and liabilities, other than those assets and liabilities that are measured at fair value on a recurring basis.

The Company had valued certain warrants as a derivative liability at June 30, 2014 and used the Black-Scholes option pricing model to estimate fair value at June 30, 2014 and used the contractual life according to the remaining terms of the warrants and the following assumptions:


     As of June 30,

Risk free interest rate


Expected dividend yield


Contractual term


Expected volatility


Due to a modification in the terms of these warrants, the derivative liability was reclassified at June 30, 2014 to Additional Paid in Capital. As of June 30, 2015 and December 31, 2014 there were no derivative warrant liabilities.

Assets and liabilities measured at fair value on a recurring basis are summarized below:


     June 30, 2014  
     Level 1      Level 2      Level 3      Total  



Derivative warrant liability at December 31, 2013

   $ —         $ —         $ 19,932       $ 19,932   

Change in fair value of the derivative warrant liability

     —           —           28,448         28,448   

Reclassification of derivative warrant liability

     —           —           (48,380      (48,380













Derivative warrant liability at June 30, 2014

   $ —         $ —         $ —         $ —