Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.19.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
4. Fair Value Measurements
The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:
 
 
 
Fair Value Measurement as of March 31, 2019
 
 
 
Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)
 
 
Significant

Other

Observable

Inputs

(Level 2)
 
 
Significant

Unobservable

Inputs

(Level 3)
 
Cash equivalents
 
$
4,898,991
 
 
$
 
 
$
 
Marketable securities
 
 
16,267,629
 
 
 
 
 
 
 
Warrant liabilities
 
 
 
 
 
 
 
 
2,982,034
 
Total
 
$
21,166,620
 
 
$
 
 
$
2,982,034
 
 
 
 
 
 
 
 
 
 
Fair Value Measurement as of December 31, 2018
 
 
 
Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)
 
 
Significant

Other

Observable

Inputs

(Level 2)
 
 
Significant

Unobservable

Inputs

(Level 3)
 
Cash equivalents
 
$
6,850,772
 
 
$
 
 
$
 
Marketable securities
 
 
22,131,936
 
 
 
 
 
 
 
Warrant liabilities
 
 
 
 
 
 
 
 
20,781,663
 
Total
 
$
28,982,708
 
 
$
 
 
$
20,781,663
 
 
 
 
 
 
 
The Company issued a warrant to the representative of the underwriter of its initial public offering (the “Representative’s Warrant”). The Company determined that this warrant should be classified as a liability and considers it as a Level 3 financial instrument (see also Note 8, “Capital Structure”). The Representative’s Warrant is 
re-measured
 at each subsequent reporting period and changes in fair value are recognized in the consolidated statement of operations. The following assumptions were used in a Black- Scholes option-pricing model to determine the fair value of the warrant liability:
 
 
 
As of
March 31,
2019
 
 
As of
December 31,
2018
 
Expected volatility
 
 
181.4 %
 
 
70.9 %
Remaining contractual term (in years)
 
 
0.42
 
 
 
0.67
 
Risk-free interest rate
 
 
2.40 %
 
 
2.63 %
Expected dividend yield
 
 
%
 
 
%
 
 
 
 
The Company issued warrants to the purchasers of its 2016 Offering (the “2016 Warrants”), The Company determined that these warrants should be classified as a liability and considered as a Level 3 financial instrument (see also Note 8, “Capital Structure”). The 2016 Warrants are re-measured at each subsequent reporting period and changes in fair value are recognized in the consolidated statement of operations. The following assumptions were used in a Black-Scholes option-pricing model to determine the fair value of the warrant liability:
 
 
 
As of

March 31,

2019
 
 
As of

December 31,

2018
 
Expected volatility
 
 
96.6
%
 
 
72.6
%
Remaining contractual term (in years)
 
 
2.33
 
 
 
2.58
 
Risk-free interest rate
 
 
2.27
%
 
 
2.46
%
Expected dividend yield
 
 
%
 
 
%
 
The Company issued warrants to the purchasers of its 2017 Offering (the “2017 Warrants”). The Company determined that these warrants should be classified as a liability and considered as a Level 3 financial instrument (see also Note 8, “Capital Structure”). The 2017 Warrants are re-measured at each subsequent reporting period and changes in fair value are recognized in the consolidated statement of operations. The following assumptions were used in a Black-Scholes option-pricing model to determine the fair value of the warrant liability:
 
 
 
As of

March 31,

2019
 
 
As of

December 31,

2018
 
Expected volatility
 
 
93.9
%
 
 
87.3
%
Remaining contractual term (in years)
 
 
3.33
 
 
 
3.58
 
Risk-free interest rate
 
 
2.21
%
 
 
2.49
%
Expected dividend yield
 
 
%
 
 
%
The following tables present a reconciliation of the Company’s financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2019 and 2018:
Warrant liabilities
 
 
 
Three Months Ended

March 31,
 
 
 
2019
 
 
2018
 
Balance at beginning of period
 
$
20,781,663
 
 
$
13,549,437
 
(Decrease) increase in fair value (1)
 
 
(17,799,629
)
 
 
12,274,559
 
Balance at end of period
 
$
2,982,034
 
 
$
25,823,996
 
 
(1)
The change in fair values of the warrant liabilities is recorded in other income (expense) in the consolidated statement of operations.
The key inputs into the Black-Scholes option pricing model are the current per-share value and the expected volatility of the Company’s common stock. Significant changes in these inputs will directly increase or decrease the estimated fair value of the Company’s warrant liabilities.