Quarterly report pursuant to Section 13 or 15(d)

Investments at Fair Value

v3.3.0.814
Investments at Fair Value
9 Months Ended
Sep. 30, 2015
Fair Value Disclosures [Abstract]  
Investments at Fair Value
11. Investments at Fair Value
 
From time to time, the Company invests in marketable securities, which are classified as trading securities and are stated at fair value as determined by quoted market prices. As of both September 30, 2015 and December 31, 2014, the Company held approximately $40.0 million and $20.0 million in marketable securities, which consisted of a U.S. treasury bill and mutual funds.
 
The fair value of the Company’s investment of $250,000 in a third-party company developing a laser device to treat migraine headaches, as of September 30, 2015 and December 31, 2014 was $0.2 million. During the nine months ended September 30, 2015, the Company evaluated operating results and other qualitative and quantitative factors pertaining to this investment to arrive at this determination.
 
As of September 30, 2015, the Company valued its investment in CB Pharma, a publicly traded company, utilizing the following assumptions: volatility of 25.4%, no dividend rate, yielding an underlying value of $8.99 per ordinary share for the insider shares, and $9.49 per ordinary share for the private placement shares. The rights and warrants were valued utilizing a binomial-lattice model which assumes a volatility of 25.4%, a risk free rate of return of 1.37% and a strike price of $11.50 per share arriving at a value of $0.95 for each right and $0.84 for a warrant. A 31.69% probability of a successful business combination was applied to the values above arriving at an estimated value of $2.84 for the insider shares, $3.00 for the private placement shares, $0.27 for each warrant and $0.30 for each right. Based upon the valuation, the Company recorded a decrease in fair-value of investment of $1.4 million. At September 30, 2015 the fair value of the Company’s investment in CB Pharma was, $3.8 million. Additionally, as of August 31, 2015, CB Pharma had net assets of approximately $42.6 million. Operations since inception have been insignificant. The Company has a working capital commitment of up to $0.5 million to fund CB Pharma operations, of which $0.1 million has been paid, with an additional $50,000 paid in October 2015. As of September 30, 2015, the fair value of this commitment was insignificant.
 
Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.
 
The following tables classify into the fair value hierarchy financial instruments measured at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of September 30, 2015 (unaudited) and December 31, 2014:
 
 
 
Fair Value Measurement as of September 30, 2015
 
($ in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury bills
 
$
39,951
 
$
-
 
$
-
 
$
39,951
 
Total marketable securities
 
 
39,951
 
 
-
 
 
-
 
 
39,951
 
Long-term investments, at fair value
 
 
-
 
 
-
 
 
4,095
 
 
4,095
 
Total
 
$
39,951
 
$
-
 
$
4,095
 
$
44,046
 
 
 
 
Fair Value Measurement as of December 31, 2014
 
($ in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Marketable securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury bills
 
$
19,998
 
$
-
 
$
-
 
$
19,998
 
Mutual funds
 
 
4
 
 
-
 
 
 
 
 
4
 
Total marketable securities
 
 
20,002
 
 
-
 
 
-
 
 
20,002
 
Long-term investments, at fair value
 
 
-
 
 
-
 
 
4,160
 
 
4,160
 
Total
 
$
20,002
 
$
-
 
$
4,160
 
$
24,162
 
 
The fair value of marketable securities are determined using quoted market prices from daily exchange-traded markets based on the closing price as of the balance sheet date.
 
The table below provides a roll-forward of the changes in fair value of Level 3 financial instruments, as of September 30, 2015:
 
 
 
Fair Value of Investment
 
 
 
Short-term
 
Long-term
 
Total
 
($ in thousands)
 
Other
 
Other
 
CB Pharma
 
 
 
Balance at December 31, 2014
 
$
-
 
$
250
 
$
3,910
 
$
4,160
 
Change in fair value of investment
 
 
-
 
 
-
 
 
(65)
 
 
(65)
 
Balance at September 30, 2015
 
$
-
 
$
250
 
$
3,845
 
$
4,095
 
 
For the three and nine months ended September 30, 2015, no transfers occurred between Level 1, Level 2 and Level 3 instruments.