Derivatives

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

The Company accounts for its derivative instruments in accordance with ASC 815-10, “Derivatives and Hedging”. ASC 815-10 establishes accounting and reporting standards requiring that derivative instruments, including derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at its fair value. ASC 815-10 also requires that changes in the fair value of derivative instruments be recognized currently in results of operations unless specific hedge accounting criteria are met.

The Company has not entered into hedging activities to date. The Company's derivative liability at December 31, 2019 was the embedded convertible option of its 2023 Series B Notes issued on October 31, 2019, which has been recorded as a liability at fair value and was revalued at each reporting date, with changes in the fair value of the instruments included in the consolidated statements of operations as non-operating income (expense). The Company does not have a derivative liability at December 31, 2018.

The terms and assumptions used in connection with the valuation of the convertible option of the 2023 Series B Notes are as follows:


	Initial Measurement			Measurement
Measurement date	10/31/2019			12/31/2019
Issuance date	10/31/2019			10/31/2019
Maturity date	5/1/2023			5/1/2023
Term (years)	3.5			3.33
Principal	$	34,405		$	34,405
Coupon	7.00% cash/ 8.0% PIK			7.00% cash/ 8.0% PIK
Seniority	Senior unsecured			Senior unsecured
Conversion price	$	0.72		$	0.72

Stock price	$	0.63		$	0.43
Risk free rate	1.5		%	1.6		%

Volatility	47.3		%	47.3		%

The following table presents the Company’s liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of December 31, 2019.


	Quoted Prices in Active markets for Identical Assets and Liabilities	Significant Other Observable Inputs	Significant Unobservable Inputs		Balance as of December 31, 2019
Descriptions	(Level 1)	(Level 2)	(Level 3)
Derivative liability related to Series B Convertible Notes	—	—	$	6,776	$	6,776

The following table sets forth a summary of changes in the fair value of the Company’s Level 3 liabilities for the year ended December 31, 2019. Any unrealized gains or losses on the derivative liabilities are recorded as non-operating income or expense in the Company’s statement of operations.


	Initial Measurement		Subsequent Measurement		Balance as of
Descriptions	10/31/2019		(Gain) or loss recognized in earnings from Change in Fair Value		12/31/2019
Fair value of convertible feature of Series B Convertible Notes	$	13,545	$	(6,769)	$	6,776