Note 7 - Fair Value Measurements

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 7– FAIR VALUE MEASUREMENTS

The following table presents information about warrant derivative liabilities, and indicates the fair value hierarchy of the valuation techniques we utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. We consider a security that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.  

On March 5, 2020, the Company entered into an amendment to a warrant agreement with its senior lender which, among other provisions, repriced 362,500 warrants held by the senior lender to $6.75 (the “Warrant”) (see Note 2 – “Long-Term Debt”, above). As a result, the Company reclassified the carrying value of the Warrant prior to the modification from additional paid-in capital in the amount of $865 thousand to a warrant liability, as the Warrant met the definition of a derivative. In addition, the Company recorded debt issuance costs in the amount of $1.1 million, which was the increase in fair value of the warrant at the time of the modification. The fair value of the warrant liability is remeasured each reporting period using an option pricing model, and the change in fair value is recorded as an adjustment to the warrant liability with the unrealized gains or losses reflect in interest expense. The Company recognized an unrealized gain of $259 thousand related to the remeasurement of the warrant derivative liability at fair value during the nine month ended September 30, 2020.

	Derivatives at Fair Value as of September 30, 2020
(in thousands)	Level 1		Level 2		Level 3		Total
Warrant derivative liabilities	$	-	$	-	$	1,727	$	1,727
Total warrant derivative liabilities	$	-	$	-	$	1,727	$	1,727

The following table presents a reconciliation of Level 3 activity for the nine month period ended September 30, 2020:

	Level 3 Liabilities
(in thousands)	Warrant Derivative Liabilities
Balance at December 31, 2019	$	-
Reclassification of warrant liability		1,986
Unrealized loss on warrants		561
Balance at March 31, 2020		2,547
Unrealized gain on warrants		(510	)
Balance at June 30, 2020		2,037
Unrealized gain on warrants		(310	)
Balance at September 30, 2020	$	1,727