Fair Value Measurement
|3 Months Ended
Mar. 31, 2017
|Fair Value Disclosures [Abstract]
|Fair Value Disclosures [Text Block]
Note 9 - Fair Value Measurement
Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. At March 31, 2017 and December 31, 2016, the warrant balance of approximately $311,000 and $314,000, respectively, was classified as Level 3 instruments.
The following table sets forth the changes in the estimated fair value for our Level 3 classified derivative contingently issuable warrant liability:
If the Company has an initial public offering and raises sufficient equity capital so that it has cash equal to five times the amount of the portion of the proceeds of the NSC Note transferred to it, then NSC will receive a warrant to purchase the Company’s stock equal to 25% of the outstanding note divided by the lowest price the Company sells its equity in its first third party financing. The warrants issued will have a term of 10 years and an exercise price equal to the par value of the Company’s common stock. In accordance with ASC 815, the Company classifies the fair value of the warrant that may have been granted in connection with the NSC Note transferred to the Company as a derivative liability as there was a potential that the Company would not have a sufficient number of authorized common shares available to settle this instrument. The Company valued this warrant using a Black-Scholes model and used estimates for an expected dividend yield, a risk-free interest rate, and expected volatility together with management’s estimate of the probability of issuance of the warrant. At each reporting period, as long as the warrant was potentially issuable and there was a potential for an insufficient number of authorized shares available to settle the warrant, the warrant was revalued and any difference from the previous valuation date would be recognized as a change in fair value in the Company’s statement of operations.
The fair value of the NSC Contingently Issuable Warrants was determined by applying management’s estimate of the probability of issuance of the NSC Contingently Issuable Warrants together with the Black-Scholes option pricing model with the following key assumptions:
The following table sets forth the changes in the estimated fair value for our Level 3 classified convertible notes payable:
The fair value of Westpark warrant liability was measured at fair value using a Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy is as follows: