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FAIR VALUE

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

4. FAIR VALUE

In accordance with ASC 820, Fair Value Measurements and Disclosures, financial instruments were measured at fair value using a three-level hierarchy which maximizes use of observable inputs and minimizes use of unobservable inputs:

	●	Level 1: Observable inputs such as quoted prices in active markets for identical instruments.

	●	Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the market.

	●	Level 3: Significant unobservable inputs supported by little or no market activity. Financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, for which determination of fair value requires significant judgment or estimation.

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. There were no transfers within the hierarchy for any of the periods presented.

During the nine months ended September 30, 2020, the Company transferred all available-for-sale securities to cash accounts.

The following table sets forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy (in thousands):

		September 30, 2020
		Level 1				Level 2				Level 3				Total
Liabilities:
Common stock warrant liability		$	–			$	–			$	7,233			$	7,233
Total		$	–			$	–			$	7,233			$	7,233

		December 31, 2019
		Level 1				Level 2				Level 3				Total
Assets:
Money market funds		$	2,019			$	–			$	–			$	2,019
Commercial paper			–				11,064				–				11,064
Corporate debt securities			–				8,982				–				8,982
U.S. government debt securities			–				3,770				–				3,770
Total		$	2,019			$	23,816			$	–			$	25,835
Liabilities:
Contingent consideration		$	–			$	–			$	31			$	31
Total		$	–			$	–			$	31			$	31

The fair value of the common stock warrant liability is estimated using a Monte Carlo simulation model, which uses certain assumptions related to risk-free interest rates, expected volatility, and expected term. The fair value of the warrant liability was $11.7 million upon the issuance date of February 14, 2020 and $7.2 million as of September 30, 2020.

The following assumptions were used in estimating the fair value of the warrant liability as of September 30, 2020 and upon the issuance date of February 14, 2020:

		September 30, 2020				February 14, 2020
Stock price		$	1.04			$	1.69
Exercise price		$	2.80			$	2.80
Risk-free rate			0.41	%			1.51	%
Volatility			99.6	%			93.40	%
Term			6.37				6.99

The contingent consideration related to the IBEX acquisition of $31,000 outstanding at December 31, 2019, was paid during the nine months ended September 30, 2020. As of September 30, 2020, the obligation related to the contingent consideration was fully satisfied.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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