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 Measurements  
Fair Value Measurements

5.    Fair Value Measurements

The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Each level of input has different levels of subjectivity and difficulty involved in determining fair value.

·

Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. Therefore, determining fair value for Level 1 investments generally does not require significant judgment, and the estimation is not difficult.

·

Level 2 – Pricing is provided by third-party sources of market information obtained through investment advisors. The Company does not adjust for or apply any additional assumptions or estimates to the pricing information received from its advisors.

·

Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 instruments involves the most management judgment and subjectivity.

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 by level within the fair value hierarchy, are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

 

 

Significant

 

 

 

 

 

Quoted prices

 

other

 

Significant

 

 

in active

 

  observable

 

  unobservable

 

 

markets

 

inputs

 

inputs

(in thousands)

    

(Level 1)

 

(Level 2)

    

(Level 3)

Liabilities:

 

 

  

 

 

  

 

 

  

Derivative liability

 

$

 -

 

$

 -

 

$

387

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

Significant

 

 

 

 

 

Quoted prices

 

other

 

Significant

 

 

in active

 

  observable

 

  unobservable

 

 

markets

 

inputs

 

inputs

(in thousands)

    

(Level 1)

    

(Level 2)

    

(Level 3)

Liabilities:

 

 

  

 

 

  

 

 

  

Derivative liability

 

$

 -

 

$

 -

 

$

387

Warrant liability

 

$

 -

 

$

 -

 

$

24

 

There were no transfers between Level 1, 2 or 3 during the three and nine months ended September 30, 2020 or September 30, 2019.

Warrant Liability

The following table includes a summary of changes in fair value of the Company’s warrant liability measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2020 and 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the nine months ended

 

    

September 30, 2020

    

September 30, 2019

    

September 30, 2020

    

September 30, 2019

Beginning balance

 

$

 -

 

$

39

 

$

24

 

$

210

Additions

 

 

 -

 

 

 -

 

 

 -

 

 

 4

Change in fair value

 

 

 -

 

 

(18)

 

 

(24)

 

 

(193)

Ending balance

 

$

 -

 

$

21

 

$

 -

 

$

21

 

The changes in fair value of the warrant liability are recorded in change in fair value of warrant liability in the condensed consolidated statements of operations.

A summary of the weighted average significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liability that is categorized within Level 3 of the fair value hierarchy as of September 30, 2020 and December 31, 2019 is as follows:

 

 

 

 

 

 

 

 

 

 

    

As of

 

 

    

September 30, 2020

    

December 31, 2019

 

Common Stock Price

 

$

1.90

 

$

12.20

 

Term (Years)

 

 

2.51

 

 

3.26

 

Volatility

 

 

66

%  

 

62

%

Risk-free rate of interest

 

 

0.15

%  

 

1.62

%

Dividend Yield

 

 

0.0

%  

 

0.0

%

 

Derivative Liability

The following table includes a summary of changes in fair value of the Company’s derivative liability measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2020 and 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the nine months ended

(in thousands)

    

September 30, 2020

 

September 30, 2019

    

September 30, 2020

 

September 30, 2019

Beginning balance

 

$

387

 

 

387

 

$

387

 

$

 -

Additions

 

 

 -

 

 

 -

 

 

 -

 

 

216

Change in fair value

 

 

 -

 

 

 -

 

 

 -

 

 

171

Ending balance

 

$

387

 

$

387

 

$

387

 

$

387

 

As of September 30, 2020, the Company measured the fair value of the derivative by estimating the fair value of the Series A Preferred Stock as if conversion occurred on September 30, 2020. The Company calculated value of the conversion feature using the Fixed Conversion Price of the Series A Preferred Stock, as adjusted to 95% of the volume weighted average price of the common stock for the previous ten trading days and the specified floor price of $30.00. There was no change in the fair value of the derivative liability for the nine months ended September 30, 2020 because the volume weighted average price of the common stock was below the specified floor price.