6. Warrant Liability

March 2020 Warrant Amendment

On March 3, 2020, we amended certain outstanding warrants to purchase an aggregate of 385,078 shares of common stock, including the January 2020 Warrants and warrants we issued in connection with a financing in August 2019 (the “August 2019 Warrants”), to modify certain provisions that had required them to be previously classified as liabilities and to enable them to now be classified as equity under the relevant accounting standards. As a result, we reclassified the fair value of the warrants on the date of the amendment from warrant liabilities to additional paid-in capital in the balance sheet and recognized a non-cash loss on changes in the fair value of warrants in the statement of operations and comprehensive loss.

The following table provides a roll forward of the fair value of our warrant liabilities, the fair value of which was determined by Level 3 inputs for the year ended December 31, 2020 (in thousands):

 

The warrant liability associated with the January 2020 Warrants was classified within Level 3 of the fair value hierarchy. The following table presents the weighted-average key assumptions used to calculate the fair value of the January 2020 Warrants:

 

The warrant liability associated with the August 2019 Warrants was classified within Level 3 of the fair value hierarchy. The following table presents the weighted-average key assumptions used to calculate the fair value of the August 2019 Warrants:

 

August 2019 Warrant Liability

In August 2019, we completed a registered direct offering (the “August 2019 Offering”) and issued warrants to purchase 95,078 shares of our common stock with an exercise price of $32.10 per share (the “Placement Warrants”) in a concurrent private placement (see Note 6). The Placement Warrants agreement contained a provision where the warrant holder had the option to receive cash, equal to the Black Scholes fair value of the remaining unexercised portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). As a result of this provision, in accordance with ASC 480, “Distinguishing Liabilities from Equity,” the Placement Warrants were required to be classified as liabilities at the time of issuance. The fair value of the Placement Warrants was determined using the Black-Scholes Option Pricing model to calculate the call option and a Binomial Option Pricing model to calculate the put option with changes in the fair value recorded in our statements of operations and comprehensive loss. As of December 31, 2019, total fair value of the Placement Warrants was approximately $0.3 million, which is included within warrant liabilities in our balance sheet.

 

The warrant liability associated with the Placement Warrants is classified within level 3 of the fair value hierarchy. The below table represents the weighted-average key assumptions used to calculate the fair value of the Placement Warrants: