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FAIR VALUE | 9 Months Ended
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Sep. 30, 2020
FAIR VALUE [Abstract] |
FAIR VALUE | 9. FAIR VALUE FASB guidance on fair value measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements for our financial assets and liabilities, as well as for other assets and liabilities that are carried at fair value on a recurring basis in our condensed consolidated financial statements. FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows: Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2—Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets; and Level 3—Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability. Common Stock Warrant Liabilities. Certain of our issued and outstanding warrants to purchase shares of common stock do not qualify to be treated as equity and, accordingly, are recorded as a liability. We are required to record these instruments at fair value at each reporting date and changes are recorded as a non-cash adjustment to earnings. The gains or losses included in earnings are reported in other income (expense) in our condensed consolidated statement of operations. 2016 Warrant Liability The Company has a warrant liability related to warrants issued in January 2016 (the “2016 Warrant Liability”) and it represents the fair value of such warrants, of which, 357 warrants remain outstanding as of September 30, 2020. In March 2018, a portion of the 2016 Warrant Liability was part of a settlement agreement pursuant to a lawsuit that was filed against the Company by one of the warrant holders. As such, approximately $0.4 million of the warrant liability, representing 1,347 warrants, was canceled on the date of the settlement agreement. The 2016 Warrant Liability is considered a Level 3 financial instrument and was valued using the Monte Carlo methodology. As of September 30, 2020, assumptions and inputs used in the valuation of the 2016 Warrant Liability include: remaining life to maturity of 0.3 years; annual volatility of 407%; and a risk-free interest rate of 0.09%. As of December 31, 2019, assumptions and inputs used in the valuation of the 2016 Warrant Liability include: remaining life to maturity of one year; annual volatility of 140%; and a risk-free interest rate of 1.59%. Bridge Note Warrant Liabilities During 2018 and 2019, the Company issued warrants in connection with the issuance of Bridge Notes. All of these warrants issuances were classified as warrant liabilities (the “Bridge Note Warrant Liabilities”). See Note 4 - Convertible Notes for further discussion. The Bridge Note Warrant Liabilities are considered Level 3 financial instruments and were valued using the Black Scholes model. As of September 30, 2020, assumptions used in the valuation of the Bridge Note Warrant Liabilities include: remaining life to maturity of 1.55 to 3.62 years; annual volatility of 168% to 206%; and risk free rate of 0.11% to 0.19%. During the three and nine months ended September 30, 2020 and 2019, the change in the fair value of the warrant liabilities measured using significant unobservable inputs (Level 3) were comprised of the following:
Dollars in Thousands |  |
|  | Three Months Ended September 30, 2020
|  | 2016 Warrant |  | Bridge Note |  | Total Warrant
|  | Liability |  | Warrant Liabilities |  | Liabilities
Beginning balance at July 1 |  | $ | 39 |  | $ | 735 |  | $ | 774
Total (gains) losses: |  |  |  |  |  |  |  |  |
Revaluation recognized in earnings |  |  | 63 |  |  | 794 |  |  | 857
Balance at September 30 |  | $ | 102 |  | $ | 1,529 |  | $ | 1,631
|  | Three Months Ended September 30, 2019
|  | 2016 Warrant |  | Bridge Note |  | Total Warrant
|  | Liability |  | Warrant Liabilities |  | Liabilities
Beginning balance at July 1 |  | $ | 86 |  | $ | 2,250 |  | $ | 2,336
Total (gains) losses: |  |  |  |  |  |  |  |  |
Revaluation recognized in earnings |  |  | (7) |  |  | (556) |  |  | (563)
Balance at September 30 |  | $ | 79 |  | $ | 1,694 |  | $ | 1,773
Dollars in Thousands |  |
|  | Nine Months Ended September 30, 2020
|  | 2016 Warrant |  | Bridge Note |  | Total Warrant
|  | Liability |  | Warrant Liabilities |  | Liabilities
Beginning balance at January 1 |  | $ | 70 |  | $ | 1,268 |  | $ | 1,338
Total gains: |  |  |  |  |  |  |  |  |
Revaluation recognized in earnings |  |  | 32 |  |  | 261 |  |  | 293
Balance at September 30 |  | $ | 102 |  | $ | 1,529 |  | $ | 1,631
|  | Nine Months Ended September 30, 2019
|  | 2016 Warrant |  | Bridge Note |  | Total Warrant
|  | Liability |  | Warrant Liabilities |  | Liabilities
Beginning balance at January 1 |  | $ | 116 |  | $ | 1,016 |  | $ | 1,132
Additions: |  |  | – |  |  | 1,858 |  |  | 1,858
Total (gains) losses: |  |  |  |  |  |  |  |  |
Revaluation recognized in earnings |  |  | (37) |  |  | 56 |  |  | 19
Modification recognized in earnings |  |  | – |  |  | 1,128 |  |  | 1,128
Deductions – warrant liability settlement |  |  | – |  |  | (2,364) |  |  | (2,364)
Balance at September 30 |  | $ | 79 |  | $ | 1,694 |  | $ | 1,773
Derivative Liabilities. Certain of our issued and outstanding convertible notes contain features that are considered derivative instruments and are required to bifurcated from the debt host and accounted for separately as derivative liabilities. The estimated fair value of the derivatives will be remeasured at each reporting date and any change in estimated fair value of the derivatives will be recorded as non-cash adjustments to earnings. The gains or losses included in earnings are reported in other (expense) income in our condensed consolidated statement of operations. Bridge Notes Redemption Feature Valuations for derivatives related to Bridge Note redemption features were performed using the “with and without” approach, whereby the Bridge Notes were valued both with the embedded derivative and without. Conversion Option Valuations for derivatives related to conversion options were performed using the Monte Carlo methodology. During the three and nine months ended September 30, 2020 and during the three months ended September 30, 2019, the change in the fair value of the derivative liabilities was zero. During the nine months ended September 30, 2019, the change in the fair value of the derivative liabilities measured using significant unobservable inputs (Level 3) was comprised of the following:
(Dollars in thousands) |  | Nine Months Ended September 30, 2019
|  | Bridge Notes |  |  |  |  |  |
|  | Redemption |  | Conversion |  | Total Derivative
|  | Feature |  | Option |  | Liabilities
Beginning balance at January 1 |  | $ | 30 |  | $ | 32 |  | $ | 62
Deductions - write-off in conjunction with convertible note conversions |  |  | (438) |  |  | (39) |  |  | (477)
Total loss: |  |  |  |  |  |  |  |  |
Revaluation recognized in earnings |  |  | 408 |  |  | 7 |  |  | 415
Balance at September 30 |  | $ | — |  | $ | — |  | $ | —

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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