XML 30 R11.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

12 Months Ended

Dec. 31, 2019

4.	Fair Value Measurements

The Company measures and reports its cash equivalents, restricted cash, warrant liabilities

and securities issuance obligation

at fair value. The following table sets forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy:


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Money market funds	$	146,240	$	—	$	—	$	146,240
Restricted money market funds		300		—		—		300
Total financial assets	$	146,540	$	—	$	—	$	146,540
Financial Liabilities
Warrant liabilities	$	—	$	—	$	45,935	$	45,935
Securities issuance obligation		—		—		10,485		10,485
Total financial liabilities	$	—	$	—	$	56,420	$	56,420

	December 31, 2018
	Level 1		Level 2		Level 3		Total
	(in thousands)
Financial Assets
Money market funds	$	105,224	$	—	$	—	$	105,224
Restricted money market funds		300		—		—		300

Total financial assets	$	105,524	$	—	$	—	$	105,524

Money market funds and restricted money market funds are measured at fair value on a recurring basis using quoted prices and are classified as a Level 1 input.

The Company’s warrant liabilities and securities issuance obligation contain unobservable inputs that reflected the Company’s own assumptions in which there is little, if any, market activity at the measurement date. Accordingly, the Company’s warrant liabilities and securities issuance obligation are measured at fair value on a recurring basis using unobservable inputs at each reporting period. The warrant liabilities and securities issuance obligation are classified as Level 3 inputs. These liabilities are shown as current liabilities on the balance sheet as they are deemed more probable than not by management to be settled within one year.

The fair values of the Series A and Series B warrants are estimated using the Black-Scholes option-pricing model. The expected terms represent the periods that the warrants are expected to be outstanding. The risk-free interest rates are based on the U.S. Constant Maturity treasury curve commensurate with the time to expiry. The expected dividend is zero as the Company has not paid nor does it anticipate paying any dividends on its common stock in the foreseeable future. The expected volatilities are estimated by backsolving to volatility implied in the transaction price. Discount for lack of marketability is dependent on the restriction period and the estimated volatility during the period.

The fair value of the warrant issuance obligation is estimated using the Black-Scholes option-pricing model. The expected term represents the period that the underlying warrant is expected to be outstanding from the time the issuance obligation arose. The risk-free interest rate is based on the U.S. Constant Maturity treasury curve commensurate with the time to expiry. The expected dividend is zero as the Company has not paid nor does it anticipate paying any dividends on its common stock in the foreseeable future. The expected volatility is estimated by backsolving to volatility implied in the transaction price. The fair value of the common stock issuance obligation is estimated based on the fair value of the underlying common stock. Discount for lack of marketability is dependent on the restriction period and the estimated volatility during the period.

The assumptions used in calculating the estimated fair values at the end of the reporting period represent the Company’s best estimate. However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

At November 13, 2019, the Company estimated the fair values of the financial liabilities using the following assumptions:


	Series A Warrant			Series B Warrant			Warrant Issuance Obligation			Common Stock Issuance Obligation
Expected term (in years)		5.2			2.3			5.2			N/A
Expected volatility		43	%		88	%		43	%		N/A
Risk-free interest rate		1.70	%		1.64	%		1.70	%		N/A
Expected dividend yield		—	%		—	%		—	%		N/A
Discount for lack of marketability		30	%		30	%		32	%		32	%

At December 31, 2019, the Company remeasured these liabilities to their fair values using the following assumptions:


	Series A Warrant			Series B Warrant			Warrant Issuance Obligation			Common Stock Issuance Obligation
Expected term (in years)		5.1			2.2			5.1			N/A
Expected volatility		43	%		88	%		43	%		N/A
Risk-free interest rate		1.69	%		1.59	%		1.70	%		N/A
Expected dividend yield		—	%		—	%		—	%		N/A
Discount for lack of marketability		25	%		25	%		25	%		25	%

The following table provides a summary of changes in the estimated fair values of the Company’s Level 3 financial liabilities, which are measured at fair value on a recurring basis using unobservable inputs:


	Series A Warrant Liability		Series B Warrant Liability		Warrant Issuance Obligation		Common Stock Issuance Obligation		Total
	(in thousands)
Balance, December 31, 2018	$	—	$	—	$	—	$	—	$	—
Issuance of warrants		17,133		7,876		—		—		25,009
Securities issuance obligation						1,543		4,903		6,446
Changes in fair value		15,483		5,443		1,493		2,546		24,965

Balance, December 31, 2019	$	32,616	$	13,319	$	3,036	$	7,449	$	56,420

The warrant liabilities will increase or decrease each reporting period based on fluctuations of the fair value of the underlying common stock until such time these financial liabilities are no longer considered derivative instruments, or the earlier of settlement and expiration of warrants. The change in the fair value of warrant liabilities for each presented period is recognized as a component of other income (expense), net in the consolidated statements of operations.

The securities issuance obligation will increase or decrease each reporting period based on fluctuations of the fair value of the underlying common stock until such time the securities are issued. The change in fair values of securities issuance obligation is recognized as research and development expense in the consolidated statement of operations.

There were no transfers between Levels 1, 2 or 3 during the years ended December 31, 2019 and 2018.

- 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 + Details