Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.21.2
Fair Value Measurements
 9 Months Ended
Sep. 30, 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 September 30, 2021 and December 31, 2020:

 

    September 30, 2021  
    Level 1     Level 2     Level 3     Fair Value  
Liabilities                        
Contingent royalty obligation   $
-
     $
-
     $ 1,769     $ 1,769  

 

    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 nine months ended September 30, 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     152  
Balance at September 30, 2021   $ 1,769  

 

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 September 30, 2021 and December 31, 2020), and 5) rate of royalty payment (3% as of September 30, 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 $158 and a 2% increase in the discount rate would decrease the liability by approximately $142.