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Fair Value Measurement
 9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurement

Note 3. Fair Value Measurement

Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, we are required to apply a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value. The three levels of the fair value hierarchy are:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Directly or indirectly observable inputs other than in Level 1, that include quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 — Unobservable inputs which are supported by little or no market activity that reflects the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets measured at fair value are classified below based on the three fair value hierarchy tiers described above.

Our liability for warrants issued in our 2011 financing and 2016 financing is classified as Level 2 as the liability is valued using a Black-Scholes model. Some of the significant inputs used to calculate the fair value of warrant liability include our stock price on the valuation date, expected volatility of our common stock as traded on NASDAQ, and risk-free interest rates that are derived from the yield on U.S. Treasury debt securities, all of which are observable from active markets. Our note payable is classified as level 2 based on pricing sources and observable inputs.

The following table presents financial liabilities measured at fair value as of September 30, 2016:

 

    

Fair Value Measurement

at Report Date Using

                
     Quoted Prices
in Active Markets
for
Identical Assets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Unobservable
Inputs
(Level 3)		      As of
September 30,
2016		  

Financial liabilities:

            

Note payable

      —         $ 2,000,000       $ —         $ 2,000,000   

Warrant liabilities

      —           651,902         —           651,902   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total financial liabilities

    $ —        $ 2,651,902       $ —         $ 2,651,902   
  

 

 

     

 

 

     

 

 

     

 

 

  

The following table presents financial assets and liabilities measured at fair value as of December 31, 2015:

 

    

Fair Value Measurement

at Report Date Using

                
     Quoted Prices
in Active Markets
for
Identical Assets
(Level 1)		      Significant
Other
Observable
Inputs
(Level 2)		      Unobservable
Inputs
(Level 3)		      As of
December 31,
2015		  

Financial assets

            

Cash equivalents:

            

Money market funds

    $ 2,544,475       $ —         $ —         $ 2,544,475   

U.S. Treasury debt obligations

      11,158,400         —           —           11,158,400   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total financial assets

    $ 13,702,875       $ —         $ —         $ 13,702,875   
  

 

 

     

 

 

     

 

 

     

 

 

  

Financial liabilities:

            

Loan payable net of discounts

    $ —         $ —         $ 10,334,029       $ 10,334,029   

Warrant liabilities

      —           —           770,964         770,964   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total financial liabilities

    $ —         $ —         $ 11,104,993       $ 11,104,993