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Fair Value Measurements
 12 Months Ended
Dec. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 13 - Fair Value Measurements

 

The Company holds investments in equity securities and limited partnership interests, which are accounted for at fair value and classified within financial assets at fair value on the condensed consolidated balance sheet, with changes in fair value recognized as investment gain / loss in the condensed consolidated statements of operations. The Company also held an investment in Nexway common stock that was publicly traded on the Frankfurt Exchange. Additionally, the Company’s convertible notes, derivatives and warrants were classified as liabilities and measured at fair value on the issuance date, with changes in fair value recognized as other income (expense) in the condensed consolidated statements of operations.

 

The following table classifies the Company’s assets and liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2020 and December 31, 2019 (in thousands):

 

 

    Fair valued measured at December 31, 2020  
    Quoted prices
in active markets
(Level 1)		     Significant other
observable
inputs (Level 2)		     Significant
unobservable inputs (Level 3)		     Total  
Financial liabilities at fair value:                                
Warrant liabilities   $ -     $ -     $ 22,686     $ 22,686  
Total financial liabilities at fair value   $ -     $ -     $ 22,686     $ 22,686  

 

    Fair valued measured at December 31, 2019  
    Quoted prices
in active
markets (Level 1)		     Significant other
observable
inputs (Level 2)		     Significant
unobservable inputs (Level 3)		     Total  
Financial assets at fair value                                
Financial assets at fair value   $ -     $ -     $ 1,965     $ 1,965  
Total Financial Assets at Fair Value   $ -     $ -     $ 1,965     $ 1,965  
                                 
Financial liabilities at fair value:                                
Derivative liability - convertible notes   $ -     $ -     $ 1,203     $ 1,203  
Profits interest sold     -       -       1,971       1,971  
Embedded put option     -       -       376       376  
Warrant liability - Subsidiary     -       -       24       24  
Total financial liabilities at fair value   $ -     $ -     $ 3,574     $ 3,574  

 

Derivative Financial Instruments

 

The following table presents changes in Level 3 liabilities measured at fair value (in thousands) for the year ended December 31, 2020 and 2019. Unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.

 

    Derivative - Convertible Notes     Profits Interests Sold     Embedded Put Option     Warrant liabilities  
Fair value at December 31, 2018   $ 1,018     $ -     $ -     $ 4,528  
Change in fair value     (678 )     198       (137 )     (4,504 )
Additions     863       1,773       589       -  
Redemption     -       -       (76 )     -  
Fair value at December 31, 2019     1,203       1,971       376       24  
Change in fair value     (206 )     (1,971 )     (220 )     83,338  
Additions     3,583       -       172       50,743  
Redemption     (4,580 )     -       (328 )     (97,884 )
Reclassification of warrant liabilities     -       -       -       (13,535 )
Fair value at December 31, 2020   $ -     $ -     $ -     $ 22,686  

 

Warrant Liabilities

 

FB Loan Warrant

 

In connection with its Note Purchase Agreement (see Note 12), the Company issued the FB Loan Warrant and the warrant liability was recorded at the date of grant at fair value. Subsequent changes in fair value during the year ended December 31, 2020 was recorded as a change in fair value of warrants in other income (expense) in the consolidated statement of operations. As of December 31, 2020, the FB Loan Warrant was fully exercised.

 

Purchase Agreements with Investors

 

Between May 11, 2020 and June 8, 2020, the Company entered into Purchase Agreements with certain investors (the “Investors”), pursuant to which the Company sold an aggregate of 3,735,922 shares (the “Purchased Shares”) of the Company’s common stock and issued 3,735,922 warrants to the Investors. These warrants were initially reported as warrant liabilities due to the Company’s sequencing policy disclosed in Note 3. On September 25, 2020, the Company repaid all of its variable convertible notes. As a result of this repayment, the Company was no longer subject to a sequencing policy and therefore reclassified $13.5 million of warrant liabilities to additional paid in capital as of that date.

 

Between August 20, 2020 and September 29, 2020, the Company entered into Purchase Agreements, with certain investors (the “Investors”), pursuant to which the Company sold an aggregate of 1,843,726 shares (the “Purchased Shares”) of the Company’s common stock and issued 1,843,726 warrants to the Investors. The aggregate warrant liabilities were recorded at the date of grant at fair value of $5.5 million. Subsequent changes in fair value for the year ended December 31, 2020 were recorded as change in fair value of warrant liabilities in the consolidated statement of operations. The Company used a Black-Scholes model to estimate the fair value of the warrant liability at December 31, 2020 using the following inputs:

 

    December 31, 2020  
Fair value of underlying common shares   $ 28.00  
Exercise price   $ 9.25  
Expected dividend yield     — %
Expected volatility     73.9% - 75.1 %
Weighted average expected volatility     74.35 %
Risk free interest rate     0.1% - 0.11 %
Weighted average risk free interest rate     10.57 %
Expected term (years)     1.14 - 1.24  
Weighted average expected term (years)     1.19  

 

ARETE Wealth Management

 

On May 25, 2020, the Company issued to ARETE Wealth Management a warrant to purchase 275,000 shares of the Company’s common stock for investment services. The warrant liability was recorded at the date of grant at fair value. Subsequent changes in fair value for the year ended December 31, 2020 were recorded as change in fair value of warrant liabilities in the consolidated statement of operations. As of December 31, 2020, these warrants were fully exercised.

 

Auctus Warrant

 

On April 1, 2020, the Company issued 142,118 common stock warrants in connection with a $1.1 million convertible note. The warrant was recorded as a warrant liability utilizing the Black-Scholes pricing model. The warrant liability was recorded at the date of grant at fair value. Subsequent changes in fair value for the year ended December 31, 2020 were recorded as change in fair value of warrant liability in the consolidated statement of operations. On September 29, 2020, the Company entered into an amendment related to the common stock warrants and issued an additional 217,357 warrants. As of December 31, 2020, these warrants were fully exercised.

  

Subsidiary Warrant Liability

 

The Company assumed liability for a warrant issued by PEC that expires on January 28, 2023. The fair value of the warrant liability, totaled $25,000 on December 31, 2020 and $24,000 on December 31, 2019, resulting in a change in fair value of $1,000 that is reported as a component of other income/(expense) in the consolidated statement of operations for the year ended December 31, 2020.