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Fair Value Measures

12 Months Ended

Dec. 31, 2018

16.	Fair Value Measurement

The Company records cash equivalents, warrant liability, and embedded derivatives at fair value on a recurring basis. Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants based on assumptions that market participants would use in pricing an asset or liability. As a basis for classifying the fair value measurements, a three-tier fair value hierarchy, which classifies the fair value measurements based on the inputs used in measuring fair value, was established. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The Company’s cash equivalents are composed of money market funds which are classified as Level 1 in the fair value hierarchy. Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and notes payable the carrying value approximate their fair value due to the short-term nature of these items. Refer to Note 12 for disclosure of the warrant liability from January 1, 2017 to December 31, 2018. The embedded derivative was fully extinguished during the year in conjunction with the preferred stock activity disclosed in Note 10. The Company’s warrant liability and embedded derivatives classified within Level 3 of the fair value hierarchy are valued using the Monte Carlo simulation valuation model. If applicable, the Company will recognize transfers into and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurs. There were no transfers into and out of any of the levels of the fair value hierarchy during 2018 or 2017.

Assets recorded at fair value on a nonrecurring basis, such as property and equipment, intangible assets, and goodwill are recognized at fair value when they are impaired. During 2018 and 2017, the Company recognized goodwill impairments measured at fair value on a nonrecurring basis (Note 3). During 2018, the Company recognized intangible impairments measured at fair value on a nonrecurring basis (Note 6).

The Company’s assets and liabilities measured at fair value on a recurring and nonrecurrent basis at December 31, 2018 consisted of the following:

	Fair Value Measurement at December 31, 2018
	Total		Level 1		Level 2		Level 3
Recurring fair value measurements
Cash equivalents — money market fund	$	29,375,509	$	29,375,509	$	—	$	—
Warrant liability		65,000		—		—		65,000

The Company’s assets and liabilities measured at fair value on a recurring and nonrecurrent basis at December 31, 2017 consisted of the following:

	Fair Value Measurement at December 31, 2017
	Total			Level 1		Level 2		Level 3
Recurring fair value measurements
Cash equivalents — money market fund	$	8,940,897		$	8,940,897	$	—	$	—
Restricted cash — money market fund		3,500,000			3,500,000		—		—
Warrant liability		(3,400,869	)				—		(3,400,869	)
Embedded derivative		(27,236	)		—		—		(27,236	)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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