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 10. Fair Value Measurements

 

During the first quarter of 2021, the Company elected to account for the $3.0 million investment in the 2020 Convertible Notes issued to the Major Investor using the fair value method. Further, the Major Investor Warrant was deemed to be a liability classified instrument due its variable settlement features. Both of these instruments were classified as Level 3 measurements within the fair value hierarchy.

 

The fair value of the Company’s 2020 Convertible Note issued to the Major Investor is measured as the sum of the instrument’s parts, being the underlying debt instrument and the conversion feature. The conversion feature was valued using the probability weighted conversion price discount. The instrument provides the holder the right to convert the instrument into shares of Series B Preferred Stock at a 20% discount. Given the timing of the issuance of the instrument near the Merger date, management determined that there was a 99.5% probability of the holders converting the instrument to Company shares at a 20% discount.

 

The Company valued the warrants issued with the 2020 Convertible Notes using a Black-Scholes-Merton model using the value of the underlying stock and exercise price of $2.01, along with a risk-free interest rate of 0.59% and volatility of 86%. The Company estimated the term of the warrant to be 5 years.

 

The Company’s 2020 Convertible Notes contain a share settled redemption feature (“Embedded Derivative”) that requires conversion at the lesser of specified discounts from qualified financing price per share or the fair value of the common stock at the time of conversion. The discount changes based on the passage of time between issuance of the convertible note and the conversion event. This feature is considered a derivative that requires bifurcation because it provides a specified premium to the holder of the note upon conversion. The Company measures the share-settlement obligation derivative at fair value based on significant inputs that are not observable in the market. This results in the liability classified as a Level 3 measurement within the fair value hierarchy.

 

Upon the Merger, all of the Level 3 instruments were exchanged for Vyant Bio equity classified instruments. Prior to their exchange, all of these instruments were marked to their fair markets with corresponding changes recorded in the statement of operations in the first quarter of 2021.

 

The following tables present changes in fair value of level 3 valued instruments as of and for the three months ended March 31, 2021:

 

    2020 Convertible Note     Warrant     Embedded Derivative  
Balance – January 1   $ -     $ -     $ 1,690  
Additions     3,746       635       325  
Measurement adjustments     4       (214 )     250  
Settlement     (3,750 )     (421 )     (2,265 )
Balance – March 31   $ -     $ -     $ -  

 

There were no level 3 fair value instruments outstanding as of and for the three months ended March 31, 2020.