Note 3 - Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE

3.

FAIR VALUE MEASUREMENTS

The Company follows ASC

820,

Fair Value Measurements and Disclosures

, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. 

The Company’s cash equivalents are classified within Level

1

or Level

2

of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of investments that are generally classified within Level

1

of the fair value hierarchy include money market securities and certificates of deposit. The types of investments that are generally classified within Level

2

of the fair value hierarchy include corporate securities and U.S. government securities.

As of

March 31, 2020,

the Company’s warrants consist of warrants to purchase the Company’s common stock issued in

October 2015,

June 2019

and

August 2019,

out of which the warrants issued in

October 2015

and

August 2019

are classified as liabilities. The

June 2019

warrants are considered to be indexed to the Company’s stock and are therefore classified as equity.

35,107

July 2011

Warrants (as defined below) and

7,419

March 2015

Warrants (as defined below) expired unexercised during the

three

months ended

March 31, 2020.

As

July 2011

Warrants were classified as liabilities prior to expiration, the expiration of the warrants resulted in a decrease of

$15

thousand in warrant liability. The Company's warrant liability is classified within Level

3

of the fair value hierarchy because the value is calculated using significant judgment based on the Company’s own assumptions in the valuation of this liability. The Company determined the fair value of the warrant liability using the Black-Scholes valuation method or the Lattice valuation model where deemed appropriate. See Note

11,

“Warrant Liability” for further discussion of the calculation of the fair value of the warrant liability.

As a result of the call option and the put feature within the Convertible Note, the Company recorded a derivative liability on its condensed consolidated balance sheet with a corresponding debt discount which is netted against the face value of the Convertible Note. The fair value of embedded derivative liability is classified within Level

3

of the fair value hierarchy because the value is calculated using significant judgment based on the Company’s own assumptions in the valuation of this liability. The Company determined the fair value of the embedded derivative liability using the Monte Carlo simulation model. See Note

10,

“Convertible Note” for further discussion of the calculation of the fair value of the embedded derivative liability.

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of

March 31, 2020:

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	March 31,		Active Markets		Other		Unobservable
(in thousands)	2020		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Restricted cash held as a certificate of deposit	$	324	$	324	$	—	$	—
Deposit held as a certificate of deposit		151		151		—		—
Total assets	$	475	$	475	$	—	$	—
Liabilities
Warrant liability	$	3,952	$	—	$	—	$	3,952
Embedded derivative liability		1		—		—		1
Total liabilities	$	3,953	$	—	$	—	$	3,953

The following table presents the Company's assets and liabilities measured at fair value on a recurring basis as of

December 31, 2019:

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	December 31,		Active Markets		Other		Unobservable
(in thousands)	2019		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Restricted cash held as a certificate of deposit	$	324	$	324	$	—	$	—
Deposit held as a certificate of deposit		151		151		—		—
Total assets	$	475	$	475	$	—	$	—
Liabilities
Warrant liability	$	4,089	$	—	$	—	$	4,089
Embedded derivative liability		3		—		—		3
Total liabilities	$	4,092	$	—	$	—	$	4,092

The following is a reconciliation of the beginning and ending balances for the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level

3

) during the

three

months ended

March 31, 2020:

(in thousands)	Level 3
	liabilities
Fair value of warrant liability and embedded derivative liability at December 31, 2019	$	4,092
Decrease in fair value of warrant liability at March 31, 2020		(122	)
Decrease in fair value of embedded derivative liability at March 31, 2020		(2	)
Decrease in fair value related to warrants expired		(15	)
Fair value of warrant liability and embedded derivative liability at March 31, 2020	$	3,953