Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.20.2
Fair Value Measurements
 9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

5. Fair Value Measurements

 

Financial Instruments Measured and Recorded at Fair Value on a Recurring Basis

 

The Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have registration rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with accounting guidance. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

 

  Level 1 - quoted market prices for identical assets or liabilities in active markets.
     
  Level 2 - observable prices that are based on inputs not quoted on active markets but corroborated by market data.
     
  Level 3 - unobservable inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

The Company classifies assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant to their fair value measurement. No financial assets were measured on a recurring basis as of September 30, 2020 and December 31, 2019. The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2020 and December 31, 2019 (in thousands):

 

    Fair Value Measurements as of September  30, 2020  
Description   Level 1     Level 2     Level 3     Total  
Derivative liability                                
Common stock warrants   $ -     $ -     $ 1,600     $ 1,600  

 

    Fair Value Measurements as of December  31, 2019  
Description   Level 1     Level 2     Level 3     Total  
Derivative liability                                
Common stock warrants   $ -     $ -     $ 220     $ 220  

 

The Company did not have any transfers of assets and liabilities between any levels of the fair value measurement hierarchy during the nine months ended September 30, 2020 and 2019 (in thousands).

 

    Common Stock
Warrants		  
Balance  as of December 31, 2018   $ (1,566 )
Change in fair value     754  
Exercise of warrants     44  
Other, net     (1 )
Balance as of September 30, 2019   $ (769 )
         
Balance  as of December 31, 2019   $ (220 )
Issuance of derivatives     (6,328 )
Change in fair value     1,750  
Exercise of warrants     3,197  
Other, net     1  
Balance as of September 30, 2020   $ (1,600 )

 

Common Stock Warrants

 

The Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have registration rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with accounting guidance. As of September 30, 2020, and December 31, 2019, the derivative liability was calculated using the Monte Carlo Simulation valuation.

 

The assumptions used in estimating the common stock warrant liability as of September 30, 2020 and December 31, 2019 were as follows:

 

    September 30, 2020     December 31, 2019  
Weighted-average risk-free interest rate     0.16%-0.28 %     1.62 %
Weighted-average expected life (in years)     2.61-4.36       3.4  
Expected dividend yield     - %     - %
Weighted-average expected volatility      139.17%-160.7 %     64 %

 

Other Financial Instruments

 

The Company’s recorded values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded value of debt approximates the fair value as the interest rate approximates market interest rates.