Derivative Financial Instruments

12 Months Ended

Dec. 31, 2019

Derivative Financial Instruments

Derivative Financial Instruments

5. DERIVATIVE FINANCIAL INSTRUMENTS

Foreign Currency Exchange Rate Exposure

The Company has used forward foreign currency exchange contracts to secure a foreign currency exchange rate when a contract is executed involving payment in a foreign currency in order to minimize cash flow exposure to fluctuating exchange rates. Such exposure results from portions of the Company’s forecasted cash outflows being denominated in currencies other than the U.S. dollar, primarily the Swiss franc, or CHF, and the euro, or EUR. The derivative instruments the Company uses to hedge this exposure are not designated as cash flow hedges, and as a result, changes in the fair value of the derivative instruments are recorded in other income (expense), net, in the Company's statements of operations and comprehensive loss. The fair values of forward foreign currency exchange contracts are estimated using current exchange rates and interest rates and take into consideration the current creditworthiness of the counterparties.

In March 2019, the Company settled its forward foreign currency exchange contract in the aggregate notional amount of CHF 3.3 million. As of December 31, 2019, the Company has no open forward foreign currency exchange contracts. The net loss associated with the Company's derivative instruments of $60,558 and $124,194 for the years ended December 31, 2019 and 2018, respectively, is recognized in other income (expense), net, in the statement of operations and comprehensive loss. There were no expenses related to the Company’s derivative instruments during the year ended December 31, 2017.