Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2019

5. Fair Value of Financial Instruments

The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018 and indicates the fair value hierarchy of the valuation techniques the Company used to determine such fair value. In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, requiring the Company to develop its own assumptions for the asset or liability.

The following tables present the assets and liabilities the Company has measured at fair value on a recurring basis (in thousands):

			Fair Value Measurements at
			Reporting Date Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
Description	March 31, 2019		(Level 1)		(Level 2)		(Level 3)
Assets
Money market funds (included in cash and cash equivalents)	$	4	$	4	$	—	$	—
Total assets	$	4	$	4	$	—	$	—
Liabilities
Derivative liability	$	883	$	—	$	—	$	883
Total liabilities	$	883	$	—	$	—	$	883

			Fair Value Measurements at
			Reporting Date Using
			Quoted Prices in		Significant Other		Significant
			Active Markets for		Observable		Unobservable
			Identical Assets		Inputs		Inputs
Description	December 31, 2018		(Level 1)		(Level 2)		(Level 3)
Assets
Money market funds (included in cash and cash equivalents)	$	1,097	$	1,097	$	—	$	—
Total assets	$	1,097	$	1,097	$	—	$	—
Liabilities
Derivative liability	$	51	$	—	$	—	$	51
Total liabilities	$	51	$	—	$	—	$	51

The assumptions used in the Black-Scholes option pricing model to determine the fair value of the common stock warrants as of March 31, 2019, and December 31, 2018 were as follows:

	March 31,			December 31,
	2019			2018
Exercise price (A$55.00 at the then current exchange rate)	$	0.64		$	0.64
Fair value of common stock	$	0.67		$	0.57
Expected volatility		179.0	%		134.0	%
Expected term (in years)	2.11			2.35
Risk-free interest rate		2.3	%		2.5	%
Expected dividend yield		—	%		—	%

The following table rolls forward the fair value of the Derivative Liabilities, where fair value is determined by Level 3 inputs (in thousands):

Balance at December 31, 2018	$	51
Increase in fair value of warrants upon re-measurement		1
Amortization of conversion rights		(40	)
Fair value of warrants issued with 2019 Note		871
Balance at March 31, 2019	$	883

Cash, cash equivalents, restricted cash, prepaid expenses and other current assets, accounts payable, accrued expenses and short-term debt to Crystal Amber Fund Limited, a related party, at March 31, 2019 and December 31, 2018 are carried at amounts that approximate fair value due to their short-term maturities and highly liquid nature of these instruments. The carrying value of the Company’s long-term debt to Crystal Amber Fund Limited, a related party, at March 31, 2019 and December 31, 2018 approximates fair value based on commonly applied estimation methodologies and industry studies obtained by 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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