Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE

v3.7.0.1
FAIR VALUE
6 Months Ended
Jun. 30, 2017
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]
2. FAIR VALUE
 
In accordance with the Fair Value Measurements and Disclosures Topic of the FASB ASC 820, the Company groups its financial assets and financial liabilities generally 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: Input prices quoted in an active market for identical financial assets or liabilities.
·
Level 2: Inputs other than prices quoted in Level 1, such as prices quoted for similar financial assets and liabilities in active markets, prices for identical 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: Input prices quoted that are significant to the fair value of the financial assets or liabilities which are not observable or supported by an active market.
 
To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
 
The Company issued warrants to purchase an aggregate of 82,500 common shares in a February 2013 public offering (the “February 2013 Public Offering Warrants”). On February 20, 2014, 27,500 of the February 2013 Public Offering Warrants expired. On May 20, 2016, 16,250 warrants were exercised. The remaining 38,750 warrants are classified within the Level 3 hierarchy.
 
In August 2014, as part of an underwritten public offering, the Company issued 494,315 warrants to purchase common stock (the “August 2014 Warrants”). The August 2014 Warrants are listed on the Nasdaq Capital Market under the symbol “CLRBW,” however, there are certain periods where trading volume is low; therefore, they are classified as Level 2 within the hierarchy.
 
The following tables set forth the Company’s financial instruments carried at fair value using the lowest level of input applicable to each financial instrument as of June 30, 2017 and December 31, 2016:
 
 
 
June 30, 2017
 
 
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
February 2013 Public Offering Warrants
 
$
 
$
 
$
18,600
 
$
18,600
 
August 2014 Warrants
 
 
 
 
101,000
 
 
 
 
101,000
 
Total
 
$
 
$
101,000
 
$
18,600
 
$
119,600
 
 
 
 
December 31, 2016
 
 
 
Level 1
 
Level 2
 
Level 3
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
February 2013 Public Offering Warrants
 
$
 
$
 
$
27,125
 
$
27,125
 
August 2014 Warrants
 
 
 
 
100,000
 
 
 
 
100,000
 
Total
 
$
 
$
100,000
 
$
27,125
 
$
127,125
 
 
In order to estimate the value of the February 2013 Public Offering Warrants considered to be derivative instruments, the Company uses a modified option-pricing model together with assumptions that consider, among other variables, the fair value of the underlying stock, risk-free interest rates, volatility, the contractual term of the warrants, future financing requirements and dividend rates. The future financing estimates are based on the Company’s estimates of anticipated cash requirements over the term of the warrants as well as the frequency of required financings based on its assessment of its historical financing trends and anticipated future events. Due to the nature of these inputs and the valuation technique utilized, these warrants are classified within the Level 3 hierarchy.
 
The following table summarizes the modified option-pricing assumptions used:
 
 
 
Six Months 
Ended
 
Twelve Months 
Ended
 
 
 
June 30, 
2017
 
December 31, 
2016
 
Volatility
 
 
76
%
 
92.72-134
%
Risk-free interest rate
 
 
1.21
%
 
0.53-1.15
%
Expected life (years)
 
 
0.64
 
 
1.14-1.89
 
Dividend
 
 
0
%
 
0
%
 
During fiscal year 2016, the Company had warrants outstanding for part of the year that were considered financial instruments. Those warrants were either extinguished or amended such that they were no longer considered financial instruments as of December 31, 2016, and were, therefore, not financial instruments during the three or six months ended June 30, 2017. The following table summarizes the modified option-pricing assumptions used for the period they were considered financial instruments:
 
 
 
Twelve Months 
Ended 
December 31, 
2016
 
Volatility
 
 
89.73
%
Risk-free interest rate
 
 
1.65
%
Expected life (years)
 
 
4.50
 
Dividend
 
 
0
%
 
The following table summarizes the changes in the fair market value of the Company’s warrants which are classified within the Level 3 fair value hierarchy:
 
 
 
Six Months 
Ended
 
Twelve Months
Ended
 
 
 
June 30, 
2017
 
December 31, 
2016
 
Beginning balance – Fair value
 
$
27,125
 
$
2,067,000
 
Reclassification to equity for warrants that are no longer derivative liabilities
 
 
 
 
(1,392,429)
 
Gain on derivatives resulting from change in fair value or extinguishment
 
 
(8,525)
 
 
(647,446)
 
Ending balance – Fair value
 
$
18,600
 
$
27,125
 
 
In order to estimate the fair value of the August 2014 Warrants, the Company calculated the weighted average closing price for the trailing 10 day period with trades that ended on the balance sheet date.