Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

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Fair Value Measurements
 3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 4 –Fair Value Measurements


Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following at March 31, 2021 and December 31, 2020:


    March 31, 2021
    Level 1   Level 2   Level 3   Fair Value
                 
Liabilities                                
Contingent royalty obligation   $    -     $    -     $ 1,697     $ 1,697  

    December 31, 2020
    Level 1   Level 2   Level 3   Fair Value
                 
Liabilities                                
Contingent royalty obligation   $ -     $ -     $ 1,617     $ 1,617  

Financial instruments with carrying values approximating fair value include cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, and certain other current liabilities, due to their short-term nature.


Changes in the fair value of recurring fair value measurements using significant unobservable inputs (Level 3), which solely consisted of a contingent royalty obligation, during the three months ended March 31, 2021 was as follows:


    Fair Value Measurements of Contingent Royalty Obligation (Level 3)
Balance at December 31, 2020   $ 1,617  
Change in estimated fair value of contingent royalty obligation     80  
Balance at March 31, 2021   $ 1,697  

The contingent royalty obligation is re-measured at each balance sheet date using several assumptions, including the following: 1) estimated sales growth, 2) length of product cycle, 3) patent life, 4) discount rate (21% as of March 31, 2021 and December 31, 2020), and 5) rate of royalty payment (3% as of March 31, 2021 and December 31, 2020).


In accordance with ASC-820-10-50-2(g), the Company performed sensitivity analyses of the liability, which was classified as a Level 3 financial instrument. The contingent royalty obligation estimate may be significantly impacted by changes in assumptions used in these analyses. For example, the Company recalculated the fair value of the liability by applying a +/- 2% change to the input variable in the discounted cash flow model; the discount rate. A 2% decrease in the discount rate would increase the liability by approximately $264 and a 2% increase in the discount rate would decrease the liability by approximately $62.