NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note One — Basis of Presentation
The accompanying interim consolidated financial statements include Mattersight Corporation and its subsidiaries (collectively, Mattersight or the company). The accompanying interim consolidated financial statements have been prepared without audit. Certain notes and other information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. In the opinion of management, the accompanying consolidated financial statements include all normal recurring adjustments considered necessary to present fairly the financial position of the company at June 30, 2017 and December 31, 2016 and the results of operations and cash flows for the periods indicated. Quarterly results are not necessarily indicative of results for any subsequent period.
On April 1, 2017, the company adopted Accounting Standards Update (
ASU) No
2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses the presentation and classification of cash flows related to (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies), (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions, and (viii) separately identifiable cash flows and application of the predominance principle. Upon adoption, the company updated the statement of cash flow for all periods presented.
On January 1, 2017, the company adopted ASU No. 2016-18, Statement of Cash Flows: Restricted Cash, which requires that a statement of cash flows explain the change in the total of cash, cash equivalents and restricted cash. The company has updated its presentation of restricted cash in the statements of cash flow for all periods presented.
On January 1, 2017, the company adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718). This update is intended to simplify the accounting for share-based payment transactions, including the income tax impacts, classification of awards as either equity or liabilities, and presentation on the statement of cash flows. Under ASU 2016-19, the company has elected to account for forfeitures as they occur rather than on an estimated basis. The standard was adopted using a modified retrospective approach which had an immaterial impact on the accumulated deficit balance on January 1, 2017.
On January 1, 2017, the company adopted ASU No. 2015-17, Income Taxes (Topic 740). This update simplifies the presentation of deferred income taxes and requires that deferred income tax liabilities and assets be classified as noncurrent in a classified balance sheet. Upon adoption, all deferred tax assets and liabilities were classified as long term.
On January 1, 2017, to better align expenses, the company changed the caption on the Consolidated Statements of Operations from Research and development to Product development. The company believes the revised presentation provides a clearer understanding of the business expenses in this caption. There was no change to the expense classification and the current period is comparable to the prior period.
The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in Mattersight’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (SEC) on March 16, 2017.
Note Two — Recent Accounting Pronouncements
In May 2017, the Financial Accounting Standards Board (FASB) issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ASU is effective for reporting periods beginning after December 15, 2017 and interim periods within those annual periods. The company is currently evaluating the impact of this update on its consolidated financial statements.
In January 2017, FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other, simplifying the test for goodwill impairment. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under this update, goodwill impairment will be measured as the amount by which a reporting unit’s carrying value exceeds its fair value.
An entity still has the option to perform the qualitative assessment for a reporting unit to
5
determine if the quantitative impairment test is needed. This ASU is effective for reporting periods beginning after December
15, 2019 and interim periods within those annual periods. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The company is evaluating its option to adopt the standard at its Decemb
er 31, 2017 testing date
.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments. This update broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The update is effective for annual periods beginning after December 15, 2019. The company is currently evaluating the impact of this update on its consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update is intended to improve financial reporting of leasing transactions. The ASU will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. This update is effective for periods beginning after December 15, 2018. The company is currently evaluating the impact of this update on its consolidated financial statements.
In May 2014, FASB issued ASU 2014-09: Revenue from Contracts with Customers (Topic 606). This update sets forth a new five-step revenue recognition model that replaces the prior revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance that have historically existed. The underlying principle of the new standard is that an organization will recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. ASU 2014-09 provides alternative methods of initial adoption and is effective for annual periods beginning after December 15, 2017 and interim periods within those annual periods. Based on its preliminary assessment, the company generally does not expect a significant change in revenue recognition when ASU 2014-09 is adopted.
The company will be putting additional processes and controls in place to enable compliance with ASU 2014-09’s disclosure requirements
. The company has elected to adopt the modified retrospective transition method.
Note Three
—
Current Prepaid Expenses
Current prepaid expenses primarily consist of deferred deployment costs and prepaid commissions related to Behavioral Analytics contracts. These costs are recognized over the subscription periods of the respective contracts generally one to three years after the go-live date or, in cases where the company contracts with a client for a short-term pilot of a Behavioral Analytics offering prior to committing to a longer subscription period, if any, the subscription or pilot periods generally range from three to twelve months after the go-live date. Costs included in current prepaid expenses will be recognized within the next twelve months.
Current prepaid expenses consisted of the following:
(In millions)
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Deferred deployment costs
|
|
$
|
1.9
|
|
|
$
|
1.7
|
|
Prepaid commissions
|
|
|
1.1
|
|
|
|
1.2
|
|
Prepaid technology maintenance costs
|
|
|
1.2
|
|
|
|
1.4
|
|
Other
|
|
|
1.0
|
|
|
|
0.1
|
|
Total
|
|
$
|
5.2
|
|
|
$
|
4.4
|
|
6
Note Four
—
Other Long-Term Assets
Other long-term assets includes the long-term portion of deferred deployment costs, prepaid commissions related to Behavioral Analytics, and restricted cash. Restricted cash represents cash used to collateralize certain letters of credit issued to support the company’s equipment leasing activities. These costs are recognized over the terms of the respective contracts, generally one to three years. Costs included in long-term assets will be recognized over the remaining term of the contracts beyond the first twelve months. Other long-term assets consisted of the following:
(In millions)
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Restricted cash
|
|
$
|
3.4
|
|
|
$
|
4.2
|
|
Deferred deployment costs
|
|
|
0.9
|
|
|
|
0.6
|
|
Prepaid technology and maintenance support
|
|
|
0.6
|
|
|
|
0.6
|
|
Prepaid commissions
|
|
|
0.6
|
|
|
|
0.5
|
|
Other
|
|
|
0.3
|
|
|
|
0.1
|
|
Total
|
|
$
|
5.8
|
|
|
$
|
6.0
|
|
Note Five — Other Current Liabilities
Other current liabilities consisted of the following:
(In millions)
|
|
June
30,
2017
|
|
|
December 31,
2016
|
|
Accrued vendor payable
|
|
$
|
1.3
|
|
|
$
|
1.9
|
|
Warrant liability
|
|
|
0.4
|
|
|
|
0.8
|
|
Deferred rent liability
|
|
|
0.4
|
|
|
|
0.4
|
|
Other
|
|
|
0.3
|
|
|
|
0.3
|
|
Total
|
|
$
|
2.4
|
|
|
$
|
3.4
|
|
On August 1, 2016, the company issued a warrant to Hercules Capital, Inc. (Hercules) that gives Hercules the right to purchase shares of the company’s common stock at $3.50 per share. The warrant is exercisable for 357,142 shares of common stock and expires on August 1, 2023. The warrant is accounted for as a liability and carried at fair market value using the Black-Scholes model. Changes in the warrant’s fair market value are recognized in non-operating income (expense) in the consolidated statements of operations.
Note Six — Leases
Capital Leases
Assets under capital leases consist primarily of computer hardware and related equipment. The gross amount of assets recorded under capital leases was $8.1 million and $6.5 million at June 30, 2017 and December 31, 2016, respectively. Depreciation expense related to assets under capital leases is included in depreciation and amortization expense on the consolidated statements of operations.
As of June 30, 2017, the future minimum lease payments due under capital leases are expected to be as follows:
(In millions)
|
|
|
|
|
Year
|
|
Amount
|
|
Remainder of 2017
|
|
$
|
1.6
|
|
2018
|
|
|
2.4
|
|
2019
|
|
|
1.2
|
|
2020
|
|
|
0.1
|
|
Total minimum lease payments
|
|
$
|
5.3
|
|
Less: amount representing interest
|
|
|
(1.0
|
)
|
Present value of minimum lease payments
|
|
$
|
4.3
|
|
7
Note Seven — Debt
On June 29, 2017, the company entered into a loan agreement with The PrivateBank and Trust Company. The loan agreement provides for a revolving line of credit to the company with a maximum credit limit of $20.0 million, which matures on
June 29, 2020 (the credit facility).
The credit facility
is secured by a security interest in the company’s assets.
The company, subject to certain limits and restrictions, may from time to time request the issuance of letters of credit under the loan agreement.
The principal amount outstanding under the credit facility will accrue interest at a floating annual rate equal to 1 month, 2 month or 3 month LIBOR (as selected by the company) plus 4.50%, payable monthly. In addition, the company will pay a non-use fee on the credit facility of 25 basis points (0.25%) per annum of the average unused portion of the credit facility. The amount the company may borrow under the credit facility is limited to five times the company’s monthly recurring revenue (as determined in accordance with the terms and conditions set forth in the loan agreement), multiplied by a dynamic churn factor that is based upon the ratio of recurring revenue retained in the prior twelve month period relative to the total amount of recurring revenue at the beginning of the period.
The loan agreement imposes various restrictions on the company, including usual and customary limitations on the ability of the company to incur debt and to grant liens upon its assets, prohibits certain consolidations, mergers, and sales and transfers of assets by the company and requires the company to comply with total revenue and EBITDA (as adjusted in accordance with the loan agreement) targets. The loan agreement includes usual and customary events of default (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default, payment of all amounts payable under the loan agreement may be accelerated and/or the lender’s commitments may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the loan agreement will automatically become immediately due and payable, and the lender’s commitments will automatically terminate.
On June 29, 2017, the company drew $13.5 million on the revolving line of credit. The proceeds were used to repay the principal balance of $22.5 million under the company’s prior credit facility with Hercules. Upon repayment, the company terminated its loan agreement with Hercules.
The loss on the early extinguishment of Hercules debt totaled $1.8 million. It consisted of a prepayment charge of
$0.7 million
, acceleration of unaccreted debt discount of
$0.6 million
, and acceleration of unamortized deferred debt costs of $0.5 million.
$13.5 million remains outstanding on the revolving line of credit at June 30, 2017. As of June 30, 2017, the company has the ability to draw an additional $2.9 million from the line of credit. On July 14, 2017, the company repaid $5.0 million of principal on the line of credit.
Debt consisted of the following:
(In millions)
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
The Private Bank loan due June 29, 2020, effective
rate of 5.72% at June 30, 2017
|
|
$
|
13.5
|
|
|
$
|
—
|
|
Hercules loan effective rate of 14.50% at
December 31, 2016
|
|
—
|
|
|
|
22.5
|
|
Furniture loan due May 2021, effective rate of 9.10%
|
|
|
0.1
|
|
|
|
0.1
|
|
Furniture loan due May 2021, effective rate of 9.55%
|
|
|
0.1
|
|
|
|
0.1
|
|
Furniture loan due July 2019, effective rate of 13.98%
|
|
|
0.1
|
|
|
|
0.1
|
|
Total debt
(1)
|
|
$
|
13.8
|
|
|
$
|
22.8
|
|
(1)
|
Total debt of $13.8 million at June 30, 2017, includes the current portion of the furniture loans of $0.1 million. As of December 31, 2016, short-term debt was $0.7 million, consisting of $0.6 million related to the current portion of the secured loan with Hercules and $0.1 million related to the current portion of the furniture loans.
|
8
Note Eight — Other L
ong-Term Liabilities
Other long-term liabilities consisted of the following:
(In millions)
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
7% Series B convertible preferred stock dividends payable
|
|
$
|
2.9
|
|
|
$
|
2.6
|
|
Deferred rent liability
|
|
|
2.1
|
|
|
|
2.2
|
|
Intellectual property purchase liability
|
|
|
0.5
|
|
|
|
0.8
|
|
Deferred income tax liability
|
|
|
0.2
|
|
|
|
0.3
|
|
Total
|
|
$
|
5.7
|
|
|
$
|
5.9
|
|
Note Nine — Litigation and Other Contingencies
The company is a party to various agreements, including all client contracts, under which it may be obligated to indemnify the other party with respect to certain matters, including, but not limited to, indemnification against third-party claims of infringement of intellectual property rights with respect to services, software, and other deliverables provided by the company. These obligations may be subject to various limitations on the remedies available to the other party, including, without limitation, limits on the amounts recoverable and the time during which claims may be made, and may be supported by indemnities given to the company by applicable third parties. Payment by the company under these indemnification clauses is generally subject to the other party making a claim that is subject to challenge by the company. Historically, the company has not been obligated to pay any claim for indemnification under its agreements, and management is not aware of future indemnification payments that it would be obligated to make.
Under its by-laws, subject to certain exceptions, the company has agreed to indemnify its corporate officers and directors for certain events or occurrences while the officer or director is, or was, serving at its request in such capacity or in certain related capacities. The company has separate indemnification agreements with each of its corporate officers and directors that requires it, subject to certain exceptions, to indemnify them to the fullest extent authorized or permitted by its by-laws and the Delaware General Corporation Law. The maximum potential amount of future payments the company could be required to make under these indemnification agreements is unlimited; however, the company has a director and officer liability insurance policy that limits its exposure and enables it to recover a portion of any amounts paid under these indemnification agreements. As a result of its insurance policy coverage, the company believes the estimated fair value of these indemnification agreements is minimal. The company had no liabilities recorded for these agreements as of June 30, 2017.
The company’s products may be subject to sales tax in certain jurisdictions. If a taxing authority were to successfully assert that the company has not properly collected sales or other transaction taxes, or if sales or other transaction tax laws or the interpretation thereof were to change, and the company was unable to enforce the terms of its contracts with customers that give it the right to reimbursement for assessed sales taxes, the company could incur tax liabilities in amounts that could be material. The company has considered the changing nature of tax laws, the terms of its customer contracts and its recent audit experience in assessing its exposure to possible and probable sales tax liabilities. Based on its assessment, the company has recorded a sales tax liability of less than $0.1 million at June 30, 2017.
Note Ten — Capital Stock
On February 23, 2017, the company, entered into a definitive purchase agreement for the sale of 5,328,187 shares of its common stock to certain investors and certain officers and directors in a private placement. Under the terms of the agreement, the company raised approximately $16.0 million in gross proceeds by selling 5,228,187 shares to certain investors at a price of $3.00 per share and by selling 100,000 shares to certain officers and directors (including certain of their affiliates) at a price of $3.45 per share. The shares represented approximately 20% of the issued and outstanding shares of common stock immediately prior to the issuance.
On March 1, 2017, the company received aggregate gross proceeds, net of fees, of $14.9 million. Proceeds are being used for general corporate, working capital, and debt repayment purposes. Craig-Hallum Capital Group LLC, which acted as the sole placement agent for the offering,
received a commission of
$1.1 million
, and was reimbursed for its out-of-pocket expenses
. The company’s registration statement on Form S-3 (File No. 333-217290) was filed with the SEC on April 13, 2017 and declared effective by the SEC on April 26, 2017.
The company’s ability to utilize its net operating losses (NOLs) could become subject to significant limitations under Section 382 of the Internal Revenue Code if the company were to undergo an ownership change. An ownership change would occur if the stockholders who own or have owned, directly or indirectly, 5% or more of the company’s common stock or are otherwise treated as 5% stockholders under Section 382 and the regulations promulgated thereunder, increase their aggregate percentage ownership of the company’s stock by more than 50 percentage points over the lowest percentage of the stock owned by these stockholders at any time during the testing period, which is generally the three-year period preceding the potential ownership change. In the event of an
9
ownership change, Section 382 imposes an annual limitation on the amount of taxable
income a corporation may offset with NOL carryforwards. Any unused annual limitation may be carried over to later years until the applicable expiration date for the respective NOL carryforwards. The
c
ompany has undergone a Section 382 analysis
as of Decemb
er 31, 2016
and does not believe there is currently a limitation on the use of NOLs under Section 382; however, due to ongoing ownership changes, the
c
ompany may be subject to significant limitations in the future. If a change in ownership is deemed to hav
e occurred during the past three years, then it may be possible that the
c
ompany’s NOL carryforward could be subject to limitation under Section 382 for tax return purposes. However, since its NOL carryforward is fully reserved with a valuation allowance,
there would be no impact for financial statement purposes from a Section 382 limitation.
Note Eleven — Stock-Based Compensation
Restricted Stock
Restricted stock awards are shares of common stock granted to an individual that vest over a period of time. During the vesting period, the holder of restricted stock receives all of the benefits of ownership (right to dividends, voting rights, etc.), other than the right to sell or otherwise transfer any interest in the stock. Restricted stock awards granted during the quarter ended June 30, 2017 were as follows:
Description
|
|
Grant Date
|
|
Shares
|
|
|
Vesting Schedule
|
Grants to employees
|
|
4/3/2017
|
|
|
334,246
|
|
|
100% on April 15, 2017
|
Grants to employees
|
|
5/10/2017
|
|
|
22,490
|
|
|
25% on May 31, 2017, 6.25% quarterly thereafter
|
Grants to employees
|
|
5/10/2017
|
|
|
20,735
|
|
|
50% on May 31, 2019, 6.25% quarterly thereafter
|
Grants to employees
|
|
5/10/2017
|
|
|
3,160
|
|
|
37.5% on May 31, 2017, 6.25% quarterly thereafter
|
Grants to non-employee
directors
|
|
5/19/2017
|
|
|
60,000
|
|
|
25% on May 31, 2017, 25% quarterly thereafter
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
440,631
|
|
|
|
Restricted stock award activity was as follows for the six months ended June 30, 2017:
|
|
Shares
|
|
|
Weighted
Average
Price
|
|
Unvested balance at December 31, 2016
|
|
|
1,183,753
|
|
|
$
|
4.87
|
|
Granted
|
|
|
1,205,804
|
|
|
$
|
3.45
|
|
Vested
|
|
|
(895,884
|
)
|
|
$
|
4.27
|
|
Forfeited
|
|
|
(176,955
|
)
|
|
$
|
5.05
|
|
Unvested balance at June 30, 2017
|
|
|
1,316,718
|
|
|
$
|
3.94
|
|
Note Twelve — Loss Per Share
The following table presents the loss per share calculation for the periods presented:
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
(In millions)
|
|
June
30,
2017
|
|
|
June 30,
2016
|
|
|
June
30,
2017
|
|
|
June 30,
2016
|
|
Net loss
|
|
$
|
(6.8
|
)
|
|
$
|
(6.2
|
)
|
|
$
|
(11.7
|
)
|
|
$
|
(12.0
|
)
|
Dividends related to 7% Series B convertible
preferred stock
(1)
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
|
(0.3
|
)
|
|
|
(0.3
|
)
|
Net loss available to common stockholders
|
|
$
|
(6.9
|
)
|
|
$
|
(6.3
|
)
|
|
$
|
(12.0
|
)
|
|
$
|
(12.3
|
)
|
Per share of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic/diluted net loss available to common
stockholders
|
|
$
|
(0.22
|
)
|
|
$
|
(0.25
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.49
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding (basic
and diluted)
|
|
|
31,336
|
|
|
|
25,161
|
|
|
|
29,379
|
|
|
|
25,112
|
|
Anti-dilutive common stock equivalents
(2)
|
|
|
1,120
|
|
|
|
1,467
|
|
|
|
1,660
|
|
|
|
1,650
|
|
10
(1)
|
Dividends on 7% Series B convertible preferred stock (Series B stock) are cumulative and have been accrued from July 1, 2012 to June 30, 2017. Total accrued dividends were $2.9 million as of June 30, 2017. Dividends will continue to accrue until they are declared by the company’s board of directors. The company has not declared any Series B stock dividends in 2017 or 2016.
|
(2)
|
In periods in which there was a loss, the effect of common stock equivalents, which is primarily related to the Series B stock, was not included in the diluted loss per share
calculation as it was antidilutive.
|
Note Thirteen
—
Fair Value Measurements
The company uses a three-level classification hierarchy of fair value measurements to report certain assets and liabilities at fair value. The first tier, Level 1, uses quoted market prices in active markets for identical assets or liabilities. Level 2 uses observable market data, such as quoted market prices for similar assets and liabilities in active markets, or inputs other than quoted prices that are directly observable. Level 3 uses entity-specific inputs or unobservable inputs that are derived and cannot be corroborated by market data. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following table presents financial instruments measured at fair value measured on a recurring basis:
|
|
June 30, 2017
|
|
(In millions)
|
|
Carrying value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Cash and cash equivalents - money market fund
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Warrant liability
|
|
|
0.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Carrying value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Cash and cash equivalents - money market fund
|
|
$
|
12.1
|
|
|
$
|
12.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Warrant liability
|
|
|
0.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.8
|
|
The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and short-term debt approximated their fair values as of June 30, 2017 due to the short-term nature of these instruments.
The company determined the fair value of the liability for the warrant issued to Hercules, considered a Level 3 liability, using the Black-Scholes model. At June 30, 2017, management used a risk free rate of 2.03%, expected volatility of 53%, and an expected term of 6.09 years. Significant increases or decreases in any of these inputs in isolation would result in a significantly different fair value (See Note 5 – Other Current Liabilities).
The fair value of long-term debt was estimated to be $13.7 million at June 30, 2017.
There were no transfers of assets or liabilities between Level 1, Level 2, and Level 3 during the second quarter of 2017. There were no assets or liabilities valued at fair value on a nonrecurring basis during the first six months of 2017.
11