Quarterly report pursuant to Section 13 or 15(d)

Fair Value

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

Note 13 – Fair Value


The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.


ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:


Level 1 - Quoted prices available in active markets for identical assets or liabilities trading in active markets.


Level 2 - Observable inputs other than quoted prices included in Level 1, such as quotable prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


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. This includes certain pricing models, discounted cash flow methodologies and similar valuation techniques that use significant unobservable inputs.


Financial instruments, including accounts receivable, accounts payable, accrued liabilities, short term advances and deferred revenues are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company’s other financial instruments include notes payable, the carrying value of which approximates fair value, as the notes bear terms and conditions comparable to market for obligations with similar terms and maturities, as well as warrant liabilities that are accounted for at fair value on a recurring basis as of September 30, 2016, by level within the fair value hierarchy (in thousands):


    Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)       Significant Other Observable Inputs (Level 2)

      Significant Unobservable Inputs
(Level 3)
Embedded Conversion Feature   $ 0     $ 0     $ 11     $ 11  


The following table presents the fair value reconciliation of Level 3 liabilities measured at fair value during the nine months ended September 30, 2016 (in thousands):


    Embedded Conversion Feature
Balance at January 1, 2016   $ 0  
Included in Debt Discount     52  
Change in fair value of derivative     (41 )
Balance at September 30, 2016   $ 11