Note 8 - Fair Value Measurements

6 Months Ended

Jun. 30, 2021

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 8 – FAIR VALUE MEASUREMENTS

Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. The Company considers 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 24, 2021, the Company entered into an agreement which provided it the right, at its option, to further extend the maturity date of its then outstanding Senior Secured Debt to November 2022. The fee to acquire this second extension option was the adjustment of the exercise price of 362,500 warrants held by Apollo from $6.75 to $0.01 (“Warrant Modification”).

As a result of the Warrant Modification, the Company reclassified the carrying value of the warrant prior to the modification from a warrant liability in the amount of $1.3 million to additional paid-in capital. In addition, the Company recorded debt issuance costs in the amount of $1.9 million, which was the increase in fair value of the warrant at the time of the modification, with a corresponding adjustment to additional paid-in capital. Prior to the Warrant Modification, the fair value of the warrant was remeasured each reporting period using an option pricing model, and the change in fair value was recorded as an adjustment to the recorded warrant liability with the unrealized gains or losses reflected in interest expense.

During the six months ended June 30, 2021, the Company recognized an unrealized gain of $573 thousand related to the remeasurement of the warrant derivative liability at fair value prior to the Warrant Modification.

The following table presents a reconciliation of Level 3 activity for the six month period ended June 30, 2021:

	Level 3 Liabilities
(in thousands)	Warrant Derivative Liabilities
Balance at December 31, 2020	$	1,847
Unrealized gain on warrants		(573	)
Reclassification of warrant liability to additional paid-in capital upon Warrant Modification		(1,274	)
Balance at June 30, 2021	$	-