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Fair Value Measurements | 6 Months Ended
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Dec. 31, 2020
Fair Value Measurements | Note 2. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value is as follows:
•  Level 1 — |  | Observable inputs such as quoted prices in active markets for identical assets or liabilities.
•  Level 2 — |  | Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
•  Level 3 — |  | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
We measure the following financial instruments at fair value on a recurring basis. The fair values of these financial instruments were as follows (in thousands):
|  | December 31, 2020 |  |  | June 30, 2020 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Warrant liability |  | $ | — |  |  | $ | — |  |  | $ | (20,176 | ) |  | $ | — |  |  | $ | — |  |  | $ | (40,483 | )
Total |  | $ | — |  |  | $ | — |  |  | $ | (20,176 | ) |  | $ | — |  |  | $ | — |  |  | $ | (40,483 | )
The carrying amounts of financial instruments such as cash equivalents, short-term investments and accounts payable approximate the related fair values due to the short-term maturities of these instruments. We invest our excess cash in financial instruments which are readily convertible into cash, such as money market funds and U.S. government securities. Cash equivalents, where applicable, and short-term investments are classified as Level 1 as defined by the fair value hierarchy. In May 2018, we issued warrants in connection with our private placement of shares of common stock. Pursuant to the terms of the warrants, we could be required to settle the warrants in cash in the event of an acquisition of the Company and, as a result, the warrants are required to be measured at fair value and reported as a liability in the Condensed Balance Sheet. We recorded the fair value of the warrants upon issuance using the Black-Scholes valuation model and are required to revalue the warrants at each reporting date with any changes in fair value recorded on our Condensed Statement of Operations. The valuation of the warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. Inputs used to determine estimated fair value of the warrant liabilities include the estimated fair value of the underlying stock at the valuation date, the estimated term of the warrants, risk-free interest rates, expected dividends and the expected volatility of the underlying stock. The significant unobservable inputs used in the fair value measurement of the warrant liabilities were the volatility rate and the estimated term of the warrants. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value measurement. The change in the fair value of the Level 3 warrant liability is reflected in the Condensed Statement of Operations for the three and six months ended December 31, 2020 and 2019, respectively. To calculate the fair value of the warrant liability, the following assumptions were used:
|  | December 31, |  |  | June 30, |
|  | 2020 |  |  | 2020 |
Risk-free interest rate |  |  | 0.1 | % |  |  | 0.2 | %
Expected life (years) |  |  | 2.4 |  |  |  | 2.9 |
Expected volatility |  |  | 80.5 | % |  |  | 77.4 | %
Dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Black-Scholes Fair Value |  | $ | 1.26 |  |  | $ | 2.52 |
The following table sets forth a summary of changes in the estimated fair value of our Level 3 warrant liability for the six months ended December 31, 2020 and 2019 (in thousands):
|  | Fair Value of Warrants Using Significant |
|  | Unobservable Inputs (Level 3) |
|  | 2020 |  |  | 2019 |
Balance at July 1, |  | $ | (40,483 | ) |  | $ | (17,613 | )
Change in estimated fair value of liability classified warrants |  |  | 20,307 |  |  |  | 830 |
Balance at December 31, |  | $ | (20,176 | ) |  | $ | (16,783 | )

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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