XML 54 R15.htm IDEA: XBRL DOCUMENT v2.4.0.8
Assets and Liabilities Measured at Fair Value
 12 Months Ended
Dec. 31, 2013
Assets and Liabilities Measured at Fair Value [Abstract]  
Assets and Liabilities Measured at Fair Value
(9)Assets and Liabilities Measured at Fair Value
 
Derivative Financial Instruments
As disclosed in Note 10, the Company allocated proceeds to the warrants issued in connection with a private placement and recent public offering that were classified as liabilities and accounted for as a derivative instrument in accordance with ASC 815.  The valuation of the warrants is determined using an option pricing model. This model uses inputs such as the underlying price of the shares issued when the warrant is exercised, volatility, risk free interest rate and expected life of the instrument.   The Company has determined that the warrant derivative liability should be classified within Level 3 of the fair-value hierarchy by evaluating each input for the option pricing model against the fair-value hierarchy criteria and using the lowest level of input as the basis for the fair-value classification as called for in ASC 820. There are six inputs: closing price of Delcath stock on the day of evaluation; the exercise price of the warrants; the remaining term of the warrants; the volatility of Delcath’s stock over that term; annual rate of dividends; and the riskless rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily observable in the warrant agreements. The annual rate of dividends is based on the Company’s historical practice of not granting dividends. The closing price of Delcath stock would fall under Level 1 of the fair-value hierarchy as it is a quoted price in an active market (ASC 820-10). The riskless rate of return is a Level 2 input as defined in ASC 820-10, while the historical volatility is a Level 3 input as defined in ASC 820. Since the lowest level input is a Level 3, Delcath determined the warrant derivative liability is most appropriately classified within Level 3 of the fair value hierarchy.
 
Money Market Funds
The Company has determined that the inputs associated with the fair value determination are based on quoted prices (unadjusted) and as a result the investments are classified within Level 1 of the fair value hierarchy.
 
The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012, aggregated by the level in the fair value hierarchy within which those measurements fall.
 
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
 
 
Level 1
 
Level 2
  
Level 3
 
Balance at
December 31,
 
 (in thousands)
 
2013
 
2012
 
2013
 
2012
  
2013
  
2012
 
2013
 
2012
 
Assets
 
 
 
 
  
  
 
 
 
Money market funds
 
$
1,956
  
$
1,967
   
—
   
—
   
—
   
—
  
$
1,956
  
$
1,967
 
Liabilities
                                
Derivative instrument liabilities
  
—
   
—
   
—
   
—
  
$
2,310
  
$
3,427
  
$
2,310
  
$
3,427
 
 
  
Fair Value Measurements Using Significant Unobservable
Inputs (Level 3)
 
(in thousands)
 
Derivative
 
Balance at December 31, 2010
 
$
18,005
 
Total change in the fair value of the liability included in earnings
  
(15,566
)
Balance at December 31, 2011
 
$
2,439
 
Total change in the fair value of the liability included in earnings
  
(2,159
)
Fair value of warrants issued
  
4,055
 
Fair value of warrants exercised or expired
  
(908
)
Balance at December 31, 2012
 
$
3,427
 
Total change in the fair value of the liability included in earnings
  
(2,756
)
Fair value of warrants issued and exercised
  
1,639
 
Balance at December 31, 2013
 
$
2,310