Fair Value Measurements

3 Months Ended

Mar. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value Measurements

6.  Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

As noted in Note 5, during the third quarter of 2016 the Company entered into the 2016 Financings with an institutional investor providing for the issuance and sale by the Company of 5,048,632 shares of the Company’s common stock and warrants to purchase up to 2,975,444 shares of the Company’s common stock for aggregate gross proceeds of $14.5 million.  In addition, as partial payment for services, the Company issued to the underwriters warrants to purchase up to 252,432 shares of the Company’s common stock.

The Company utilizes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value.  This hierarchy prioritizes the inputs into three broad levels as follows:  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.  Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.  A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The Company had no assets or liabilities classified as Level 1 or Level 2.  The warrant liability is classified as Level 3.

The Company has classified the warrants as a liability and has remeasured the liability to estimated fair value at March 31, 2017 and December 31, 2016, using the Black Scholes option pricing model with the following assumptions: 

	March 31, 2017		December 31, 2016
Risk-free interest rate		1.93%		1.93%
Expected volatility	101.44		94.19
Expected term	4.83 years		5.08 years
Expected dividend yield		0.0%		0.0%

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, 2017 and December 31, 2016:

	Level 1		Level 2		Level 3		Total
Warrant liability Balance at March 31, 2017	$	—	$	—	$	5,768,675	$	5,768,675
Balance at December 31, 2016	$	—	$	—	$	4,095,019	$	4,095,019

The following table presents a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2017:

	Warrant Liability
Balance at December 31, 2016	$	4,095,019
Issuance of warrants	—
Change in fair value upon re-measurement		3,072,747
Reclassification to Additional Paid-in Capital    due to warrant exercise		(1,399,091	)
Balance at March 31, 2017	$	5,768,675

There were no transfers between Level 1 and Level 2 in any of the periods reported.