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Fair Value Measurements

12 Months Ended

Dec. 31, 2020

The Company's financial instruments measured at fair value in the accompanying Consolidated Balance Sheets on a recurring basis consist of the following:


	As of								As of
	December 31, 2020								December 31, 2019
(In thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds (1)	$	11,928	$	—	$	—	$	11,928	$	24,327	$	—	$	—	$	24,327
Certificates of deposit (2)	—		—		—		—		—		1,009		—		1,009
Total	$	11,928	$	—	$	—	$	11,928	$	24,327	$	1,009	$	—	$	25,336

Liabilities:
Financing derivatives: no hedging designation (3)
Interest rate reset	$	—	$	—	$	11,300	$	11,300	$	—	$	—	$	18,800	$	18,800
Make-whole change of control	—		—		—		—		—		—		1,600		1,600
Qualifying change of control	—		—		—		—		—		—		1,187		1,187
Warrants issued: (4)
Series A	—		—		2,831		2,831		—		—		7,508		7,508
Series B-2	—		—		—		—		—		—		217		217
Secured term note: (5)
Interest make-whole derivative	—		—		871		871		—		—		—		—
Total	$	—	$	—	$	15,002	$	15,002	$	—	$	—	$	29,312	$	29,312

(1) Level 1 cash equivalents are invested in money market funds that are intended to maintain a stable net asset value of $1.00 per share by investing in liquid, high quality U.S. Dollar-denominated money market instruments with maturities less than three months.

(2) The Company's certificates of deposit are recorded at their face value which approximates their fair value.

(3) The fair values of the financing derivatives are derived from techniques which utilize inputs, certain of which are significant and unobservable, that result in classification as Level 3 fair value measurements. The fair value of the make-whole change of control derivative was estimated as negligible as of December 31, 2020. The qualifying change of control derivative expired on August 5, 2020.

(4) The fair values of the warrant liabilities are derived from techniques which utilize inputs, certain of which are significant and unobservable, that result in classification as Level 3 fair value measurements. The fair value of the Series B-1 warrants was estimated as negligible as of December 31, 2019. The Series B-1 warrants expired without exercise on January 29, 2020. The Series B-2 Warrants expired without exercise on August 3, 2020.

(5) The fair values of embedded derivatives within the secured term note are derived from techniques which utilize inputs, certain of which are significant and unobservable, that result in classification as Level 3 fair value measurements. The interest make-whole derivative is classified within other current liabilities in the Consolidated Financial Statements as of December 31, 2020.

The Company did not have any transfers between fair value measurement levels during the periods presented. There were no changes to the Company's valuation methodologies during the years ended December 31, 2020 or 2019, respectively.

The following tables present the changes in the Company's recurring Level 3 fair value measurements for the financing derivatives, warrants liability and interest make-whole derivative for the years ended December 31, 2020 and 2019:


(In thousands)	Financing Derivative Liabilities		Warrants Liability		Interest Make-whole Derivative Liability
Balance as of December 31, 2018	$	26,100	$	—	$	—
Issuances	587		10,798		—
Settlement	—		(5,484)		—
Total (gain) loss included in other income (expense), net (1)	(5,100)		2,411		—
Balance as of December 31, 2019	21,587		7,725		—
Total (gain) loss included in other income (expense), net (2)	(10,287)		(4,894)		871
Balance as of December 31, 2020	$	11,300	$	2,831	$	871

(1) Represents $4.5 million gain due to change in fair value of interest rate reset derivative liability and $0.6 million gain due to change in fair value of the make-whole change of control redemption derivative liability. Represents $3.6 million loss due to change in fair value of the Series A Warrants, and gains of $0.3 million, $0.2 million and $0.7 million due to change in fair value of the Series B-1 Warrants, Series B-2 Warrants and Series C Warrants, respectively. All gains and losses were recorded in other income (expense), net in the Consolidated Statements of Operations and Comprehensive Loss.

(2) Represents $7.5 million gain due to change in fair value of interest rate reset derivative liability, $1.6 million gain due to change in fair value of the make-whole change of control redemption derivative liability, and $1.2 million gain due to change in fair value of the qualifying change of control redemption derivative liability. Represents $4.7 million gain due to change in fair value of the Series A Warrants and $0.2 million gain due to change in fair value of the Series B-2 Warrants. All gains were recorded in other income (expense), net in the Consolidated Statements of Operations and Comprehensive Loss.

The following table displays valuation techniques and the significant inputs, certain of which are unobservable, for the Company's Level 3 liabilities measured at fair value as of December 31, 2020 and 2019:


	Fair value measurements
	Significant Valuation Technique	Significant Valuation Inputs	December 31, 2020	December 31, 2019
Interest rate reset derivative liability	Discounted cash flow	Discount rate	20.0%	25.0%
		Stock price	$2.49	$4.94
		Volatility	96.9%	74.1%
		Term	1.04 years	2.04 years
		Risk-free rate	0.1%	1.6%

Make-whole change of control redemption derivative liability (1)	Option pricing model	Change of control probability	—%	5.0% - 10.0%
		Term	—	2.04 years
		Risk-free rate	—%	1.6%

Qualifying change of control redemption derivative liability (2)	Discounted cash flow	Change of control probability	—%	5.0%
		Term	—	0.60 years
		Discount rate	—%	25.0%

Warrants liability (3)	Option pricing model	Stock price	$2.49	$4.94
		Volatility	80.0%	65.0%
		Term	3.49 years	0.59 - 4.49 years
		Change of control probability	—%	5.0% - 10.0%
		Risk-free rate	0.2%	1.6% - 1.7%
		Cost of debt	—%	14.7% - 16.0%

Interest make-whole derivative liability	Discounted cash flow	Recapitalization probability	90.0%	—%
		Term	0.25 years	—
		Risk-free rate	0.10%	—%

(1) The probability of a make-whole change of control, and the resulting fair value determination, was estimated to be negligible as of December 31, 2020.

(2) The qualifying change of control redemption derivative liability expired on August 5, 2020.

(3) Warrants liability includes only Series A as of December 31, 2020. Warrants liability includes Series A and Series B-2 as of December 31, 2019.

The fair values of the Company's financing derivatives are estimated using forward projections and are discounted back at rates commensurate with the remaining term of the related derivative. The primary sensitivity in the interest rate reset derivative liability is driven by the discount rate used to determine the present value of the instrument, the Common Stock price at the measurement date and the observable volatility of the Common Stock. The primary sensitivity for the make-whole and qualifying change of control redemption derivative liabilities is driven by the probability of the change of control.

The fair values of the Company's warrants liability are estimated using forward projections of stock issuances with relative certainty and estimated cash payments at each exercise date discounted back to the valuation date at rates commensurate with the remaining term of the related warrants. The primary sensitivity in the valuation of each warrant liability is driven by the Common Stock price at the measurement date and the observable volatility of the Common Stock.

The fair value of the Company's interest make-whole derivative is estimated using forward projections of estimated cash payments at the closing date discounted back to the valuation date at rates commensurate with the estimated remaining term of the related derivative. The primary sensitivity in the interest make-whole derivative liability is driven by the probability, and closing date, of a fundamental transaction which includes, but is not limited to, a recapitalization of the Company.

- 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.

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