Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Measurements

Fair Value Measurements

16.  Fair Value Measurements

As of December 31, 2019, the Company had no financial instruments measured at fair value on a recurring basis. The following table summarizes the financial instruments measured at fair value on a recurring basis in the consolidated balance sheets (in thousands) at December 31, 2018:

			Quoted Prices		Significant		Significant
			in Active		Other		Other
			Markets for		Observable		Unobservable
			IdenticalItems		Inputs		Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Common stock warrant liability	$	105	$	—	$	—	$	105

Derivative Liabilities

The Company’s common stock warrant liability represents the only asset or liability classified financial instrument measured at fair value on a recurring basis in the consolidated balance sheets.  The fair value measurement is determined by using Level 3 inputs due to the lack of active and observable markets that can be used to price identical assets.  Level 3 inputs are unobservable inputs and should be used to determine fair value only when observable inputs are not available. Unobservable inputs should be developed based on the best information available in the circumstances, which might include internally generated data and assumptions being used to price the asset or liability.

Fair value of the common stock warrant liability is based on the Black-Scholes pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions.

The Company used the following assumptions for its liability-classified common stock warrants for the year ended December 31, 2018:

Risk-free interest rate	1.64% - 2.66%
Volatility	18.40% - 81.69%
Expected average term	0.01 - 1.53

There was no expected dividend yield for the warrants granted.

If factors change and different assumptions are used, the warrant liability and the change in estimated fair value could be materially different. Generally, as the market price of our common stock increases, the fair value of the warrants increases, and conversely, as the market price of our common stock decreases, the fair value of the warrants decrease. Also, a significant increase in the volatility of the market price of the Company’s common stock, in isolation, would result in significantly higher fair value measurements; and a significant decrease in volatility would result in significantly lower fair value measurements.

The following table shows the activity in the common stock warrant liability (in thousands):

	2019		2018
Beginning of period	$	105	$	4,391
Change in fair value of common stock warrants		(79)		(4,286)
Issuance of common stock warrants		—		—
Exercise of common stock warrants		(26)		—
End of period	$	—	$	105

Equity Instruments

The fair value measurement of the Company’s equity-classified common stock warrants further described in Note 13, Warrant Transaction Agreements, is determined by using Level 3 inputs due to the lack of active and observable markets that can be used to price identical instruments. 

The Company adopted ASU 2019-08, with retrospective adoption as of January 1, 2019. As a result, the fair value is measured based on the grant-date of warrants. Prior to that, the fair value of the warrants was measured as of the vesting date using the Monte Carlo pricing model, which is based, in part, upon unobservable inputs for which there is little or no market data, requiring the Company to develop its own assumptions.

The Company used the following assumptions for its equity-classified common stock warrants for the years ended December 31, 2019 and 2018:

	Year ended
	January 1, 2019	December 31, 2018
Risk-free interest rate	2.60%-2.63%	2.60% - 3.02%
Volatility	0.95	75.00% - 85.00%
Expected average term	8.26-8.55	8.26 - 9.30

The Monte Carlo pricing models used in the determination of the fair value of the equity-classified warrants also incorporate assumptions involving future revenues associated with Amazon and Walmart, and related timing.

The following table represents the fair value per warrant on the execution date of the transaction agreements and as of December 31, 2019 and 2018:

		Amazon Warrant Shares		Walmart Warrant Shares
Issuance date - first tranche	$	1.15	$	1.88
As of vesting date - second tranche, first installment		2.16		—
As of vesting date - second tranche, second installment		1.54		—
As of December 2019 - second tranche		1.05		1.00
As of December 2018 - second tranche		0.98		0.92