Fair Value Measurements

12 Months Ended

Dec. 31, 2020

The Company has certain financial assets recorded at fair value which have been classified as Level 1 and Level 2 within the fair value hierarchy as described in the accounting standards for fair value measurements. In addition, during November 2019 the Company issued Series A Warrants and Series B Warrants in its concurrent securities offerings that were considered free standing financial instruments, that were legally detachable and separately exercisable from the common and preferred stock issued in the two offerings (see Note 9). The Company determined that all of the Series A Warrants and Series B Warrants should be classified as a warrant liability in accordance with ASC 480, Distinguishing Liabilities from Equity, and recognized at their inception date fair value due to the insufficiency of common shares available to permit their exercise. The warrant liability met Level 3 classification criteria for classification within the fair value hierarchy. Fair value is the price that would be received from the sale of an asset or the price paid to transfer a liability in an orderly transaction between independent market participants at the measurement date. Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets for identical instruments. Fair values determined by Level 2 inputs utilize data points other than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the reporting entity to develop its own assumptions. The fair value hierarchy level is determined by the lowest level of significant input.

The Company’s financial assets classified as Level 2 at December 31, 2020 and December 31, 2019 were initially valued at the transaction price and subsequently valued utilizing third-party pricing services. Because the Company’s investment portfolio may include securities that do not always trade on a daily basis, the pricing services use many observable market inputs to determine value including reportable trades, benchmark yields and benchmarking of like securities. The Company validates the prices provided by the third-party pricing services by reviewing their pricing methods and obtaining market values from other pricing sources. After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by these pricing services as of December 31, 2020 and December 31, 2019.

The $14,977 fair values of the Series A and Series B Warrant liability at December 31, 2019 was determined using the Black-Scholes valuation model. The expected volatility and the risk free discount rate used in the Black-Scholes model were determined based on the Company's historical market price published by the Nasdaq Capital Market and from published U.S. Treasury yield curves, respectively, for a period matched to the contractual term of each warrant series.


At December 31, 2019	Series A Warrants	Series B Warrants
Fair market of common stock (per share)	$6.86	$6.86
Expected term (years)	2.3	7.3
Risk free rate	1.62%	1.83%
Volatility	127%	115%

On January 15, 2020, the Company filed an amendment to its Certificate of Incorporation with the State of Delaware to effect a 1-for-40 reverse stock split. As a result of the reverse stock split, the Company's number of authorized but unissued shares of Common Stock increased significantly and the Series A Warrants and Series B Warrants issued under the offerings completed in November 2019 became eligible for exercise. Prior to reclassification as equity on January 15, 2020, the Company adjusted the warrant liability to its then $15,934 fair value using the assumptions below, recording a loss on the adjustment to fair value of $957.


At January 15, 2020	Series A Warrants	Series B Warrants
Fair market of common stock (per share)	$3.77	$3.77
Expected term (years)	2.3	7.3
Risk free rate	1.62%	1.83%
Volatility	127%	115%

The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020 and December 31, 2019 and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value.


	Fair value measurements at December 31, 2020
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Balance as of
Description	(Level 1)		(Level 2)		(Level 3)		December 31, 2020
Assets
Cash equivalents:
Money market funds	$	2,873	$	—	$	—	$	2,873

Short-term investments:
U.S. government and agency securities	—		6,279		—		6,279
Total assets	$	2,873	$	6,279	$	—	$	9,152


	Fair value measurements at December 31, 2019
	Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs		Balance as of
Description	(Level 1)		(Level 2)		(Level 3)		December 31, 2019
Assets
Cash equivalents:
Money market funds	$	2,622	$	—	$	—	$	2,622
U.S. government and agency securities	—		1,750		—		1,750
Short-term investments:
U.S. government agency securities	—		5,700		—		5,700
Total assets	$	2,622	$	7,450	$	—	$	10,072

Liabilities
Warrant liability	$	—	$	—	$	14,977	$	14,977
Total liabilities	$	—	$	—	$	14,977	$	14,977

There were no transfers of financial assets or liabilities between category levels for the years ended December 31, 2020 and December 31, 2019.

The following tables show a reconciliation of the beginning and ending balances for the Level 3 warrant liability for each of the years ending December 31, 2020 and December 31, 2019. The Company's warrant liability was initially recorded in connection with the Company's concurrent public and private securities offerings completed during the year ended December 31, 2019. See Note 9 for more detailed information.


	Year ended December 31,
	2020		2019
Warrant liability, beginning of year	$	14,977	$	—
Warrants issued and classified as Level 3	—		24,518
Recognized gain (loss) from mark-to-market adjustment at December 31, 2019 balance sheet date	—		(9,541)
Recognized gain (loss) from mark-to-market adjustment prior to reclassification of warrant liability to equity	957		—
Reclassification from warrant liability to equity	(15,934)		—
Warrant liability, end of year	$	—	$	14,977

- Definition

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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