NOTE

FAIR VALUE MEASUREMENTS

The Company follows ASC

820,

Fair Value Measurements and Disclosures

, with respect to assets and liabilities that are measured at fair value on a recurring basis and nonrecurring basis. Under this standard, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date.

The Company's cash equivalents and investments are classified within Level

or Level

of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of investments that are generally classified within Level

of the fair value hierarchy include money market securities and certificates of deposit. The types of investments that are generally classified within Level

of the fair value hierarchy include corporate securities and U.S. government securities.

As of

December 31, 2019,

the Company’s warrants consist of warrants to purchase the Company’s common stock issued in

July 2011,

March 2015,

October 2015,

June 2019

and

August 2019,

out of which the warrants issued in

July 2011,

October 2015

and

August 2019

are classified as liabilities.

March 2015

and

June 2019

warrants are considered to be indexed to the Company’s stock and are therefore classified in equity.

The Company's warrant liability is classified within Level

of the fair value hierarchy because the value is calculated using significant judgment based on the Company’s own assumptions in the valuation of this liability. The Company determined the fair value of the warrant liability using the Black-Scholes valuation method or the Lattice valuation model where deemed appropriate. See Note

11,

“Warrant Liability” for further discussion of the calculation of the fair value of the warrant liability.

As a result of the call option and the put feature within the Convertible Note, the Company recorded a derivative liability on its consolidated balance sheet with a corresponding debt discount which is netted against the face value of the Convertible Note. The fair value of embedded derivative liability is classified within Level

of the fair value hierarchy because the value is calculated using significant judgment based on the Company’s own assumptions in the valuation of this liability. The Company determined the fair value of the embedded derivative liability using the Monte Carlo simulation model. See Note

10,

“Convertible Note” for further discussion of the calculation of the fair value of the embedded derivative liability.

The following table presents the Company's assets and liabilities measured at fair value on a recurring basis as of

December 31, 2019:

			Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	December 31,		Active Markets		Other		Unobservable
(in thousands)	2019		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Restricted cash held as a certificate of deposit	$	324	$	324	$	—	$	—
Deposit held as a certificate of deposit		151		151		—		—
Total assets	$	475	$	475	$	—	$	—

Liabilities
Warrant liability	$	4,089	$	—	$	—	$	4,089
Embedded derivative liability		3		—		—		3
Total liabilities	$	4,092	$	—	$	—	$	4,092

The following table presents the Company's assets and liabilities measured at fair value on a recurring basis as of

December 31, 2018:

	Fair Value Measurements Using
	Balance at		Quoted Prices in		Significant		Significant
	December 31,		Active Markets		Other		Unobservable
(in thousands)	2018		for Identical		Observable		Inputs
			Items		Inputs		(Level 3)
			(Level 1)		(Level 2)
Assets
Cash equivalents	$	103	$	103	$	—	$	—
Restricted cash held as a certificate of deposit		324		324		—		—
Deposit held as a certificate of deposit		151		151		—		—
Total assets	$	578	$	578	$	—	$	—

Liabilities
Warrant liability	$	178	$	—	$	—	$	178
Total liabilities	$	178	$	—	$	—	$	178

Upon adoption of ASU

2017

11,

effective

January 1, 2019,

the Company reclassified

210,586

warrants from warrant liabilities to equity, and the Company is

longer required to record the change in fair values for these instruments, resulting in

$56

thousand of the fair value of the warrant liabilities being reclassified to stockholders’ equity.

334,109

July 2011

and

October 2015

warrants continued to be classified as a liability as of

January 1, 2019,

out of which

158,400

warrants were exercised in the

second

quarter of

2019

and

102,602

warrants were exercised in the

third

quarter of

2019,

with

73,107

July 2011

and

October 2015

warrants remaining outstanding as of

December 31, 2019.

For the year ended

December 31, 2019,

the net change in fair value associated with the

July 2011

and

October 2015

warrants was a decrease of

$88

thousand, of which

$465

thousand is reported in the Company’s consolidated statement of operations as a loss from the change in fair value of warrant liabilities and approximately

$553

thousand as a reclassification of the fair value of the warrant liabilities to stockholders’ equity in connection with the exercise of the warrants. In

August 2019,

the Company issued a total of

7,066,508

warrants to purchase

7,066,508

shares of the Company’s common stock in

two

security offerings. The Company recorded

$5.3

million of warranty liabilities upon issuance of these warrants. For the year ended

December 31, 2019,

the net change in fair value associated with these warrants resulted in a gain of

$1.2

million. See Note

11,

“Warranty Liability” for further discussion of the calculation of the fair value of the warrant liability.

The following is a reconciliation of the beginning and ending balances for the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level

) during the year ended

December 31, 2019:

(in thousands)	2019
Fair value of warrant liability at January 1, 2019	$	178
Fair value of warrant liability reclassified to equity-Adoption of ASU 2017-11		(56	)
Fair value of July 2011 and October 2015 warrants transferred to equity upon exercise		(553	)
Issuance of Domestic, Foreign and Ladenburg warrants		5,269
Decrease in fair value of Domestic, Foreign and Ladenburg warrant liability during the year ended December 31, 2019		(1,214	)
Increase in fair value of July 2011 and October 2015 warrant liability during the year ended December 31, 2019		465
Derivative liability embedded in Convertible Note issued in March 2019		427
Decrease in fair value of embedded derivative liability during the year ended December 31, 2019		(424	)
Fair value of warrant liability and embedded derivative liability at December 31, 2019	$	4,092

For the year ended

December 31, 2018,

as a result of the fair value adjustment of the warrant liability, the Company recorded a non-cash gain on a change in the fair value of

$1.3

million in its consolidated statements of operations and comprehensive loss. The following is a reconciliation of the beginning and ending balances for the liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level

) during the year ended

December 31, 2018:

(in thousands)	2018
Fair value of warrant liability at January 1, 2018	$	1,489
Decrease in fair value during the year ended December 31, 2018		(1,311	)
Fair value of warrant liability at December 31, 2018	$	178