Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.19.3
Fair Value Measurements
9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements

10.

Fair Value Measurements

The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached as of September 30, 2019 and December 31, 2018 for financial instruments measured at fair value on a recurring basis (in thousands):

 

 

 

 

 

 

 

Fair Value Hierarchy Classification

 

 

 

Balance

 

 

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs (Level 3)

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

213

 

 

$

213

 

 

 

 

 

 

 

Restricted cash

 

 

328

 

 

 

328

 

 

 

 

 

 

 

Money market funds

 

 

11,226

 

 

 

11,226

 

 

 

 

 

 

 

Total assets

 

$

11,767

 

 

$

11,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

986

 

 

 

 

 

 

 

 

$

986

 

Total liabilities

 

$

986

 

 

 

 

 

 

 

 

$

986

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

122

 

 

$

122

 

 

 

 

 

 

 

Restricted cash

 

 

273

 

 

 

273

 

 

 

 

 

 

 

Money market funds

 

 

11,497

 

 

 

11,497

 

 

 

 

 

 

 

Total assets

 

$

11,892

 

 

$

11,892

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

3,629

 

 

 

 

 

 

 

 

$

3,629

 

Derivative liability

 

 

4,536

 

 

 

 

 

 

 

 

 

4,536

 

Total liabilities

 

$

8,165

 

 

 

 

 

 

 

 

$

8,165

 

 

The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.

Level 3 financial liabilities consist of the warrant liability for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company uses the Black-Scholes option valuation model to value the Level 3 warrant liability at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility.  The Company uses the binomial lattice valuation model to value the Level 3 derivative liability at inception and on subsequent valuation dates.  This model incorporates transaction details such as the Company’s stock price, contractual terms, dividend yield, risk-free rate, historical volatility, credit rating, market credit spread, and estimated yield.  

A reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):

 

 

 

Warrant Liabilities

 

Balance – January 1, 2019

 

 

$

986

 

Loss adjustment to fair value

 

 

 

2,643

 

Balance – September 30, 2019

 

 

$

3,629

 

 

 

 

 

 

 

 

 

 

Derivative Liability

 

Balance – January 1, 2019

 

 

$

 

Bifurcated embedded conversion option associated with Notes

 

 

 

6,960

 

Gain adjustment to fair value

 

 

 

(768

)

Adjustment for April 2019 conversion of Notes

 

 

 

(1,656

)

Balance – September 30, 2019

 

 

$

4,536