Debt and Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2018

Aggregate Fair Value and Carrying Value of Warrant Liability and Short and Long-term Debt

At September 30, 2018 and December 31, 2017, the carrying value and the aggregate fair value of the Company’s warrant liability and short- and long-term debt were as follows (in thousands):

	As of September 30, 2018				As of December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Warrant liability	$	9,918	$	9,918	$	—	$	—
Short-term debt, related party		—		—		1,000		1,000
Long-term debt, related party		1,200		1,200		1,200		1,200
Long-term debt		1,755		1,755		1,558		1,558
Total	$	12,873	$	12,873	$	3,758	$	3,758

Schedule of Roll Forward of Warrant Liability Classified as Level 3 and Measured at Fair Value on a Recurring Basis

A roll forward of our warrant liability classified as Level 3 and measured at fair value on a recurring basis follows (in thousands):

Balance at December 31, 2017 (audited)	$	—
Warrants issued		6,792
Change in fair value of warrant liability		3,126
Balance at September 30, 2018 (unaudited)	$	9,918

Fair Value of Warrants Determined by Using Option Pricing Model

The warrants are not traded in an active securities market and, as such, the estimated fair value as of September 30, 2018 was determined by using an option pricing model (Black-Scholes) with the following assumptions:

	March 5, 2018			May 3, 2018
	Warrants			Warrants
Expected term		4.92			5.08
Common stock market price	$	2.52		$	2.52
Risk-free interest rate		2.89	%		2.89	%
Expected volatility		70.6	%		74.0	%
Resulting fair value (per warrant)	$	1.58		$	1.66

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details