M.	Fair Value of Financial Instruments

The

carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash and accounts payable and accrued expenses, approximate their respective fair values due to the short-term nature of such instruments.

The fair value of the Deerfield Convertible Note

was

$6.0

million and

$6.2

million, respectively, as of

December 31, 2019

and

2018

. The fair value of the

2021

Notes was

$2.4

million and

$51.2

million, respectively, as of

December 31, 2019

and

2018

. The fair value of the December

2019

Notes was

$57.0

million as of December

31,

2019.

The Deerfield Convertible Note,

2021

Notes and December

2019

Notes fall within Level

of the fair value hierarchy as their value is based on the credit worthiness of the Company, which is an unobservable input.

The Company used a Tsiveriotis-Fernandes model to value the Deerfield Convertible Note,

2021

Notes and December

2019

Notes

as of

December 31, 2019

and

2018

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in whi

ch to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached regarding fair value measurements as of

December 31, 2019

and

2018

(in thousands):

			Quoted Prices		Significant
			in Active		Other		Significant
	Balance at		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2019		(Level 1)		(Level 2)		(Level 3)
Deerfield Warrant liability	$	77	$	-	$	-	$	77
Embedded Warrant Put Option		19		-		-		19
Fundamental change and make-whole interest provisions embedded within 2021 Notes		-		-		-		-
Deerfield Note Conversion Feature		-		-		-		-
KVK Warrant liability		24		-		24		-
Total liabilities	$	120	$	-	$	24	$	96

			Quoted Prices		Significant
			in Active		Other		Significant
	Balance at		Markets for		Observable		Unobservable
	December 31,		Identical Assets		Inputs		Inputs
	2018		(Level 1)		(Level 2)		(Level 3)
Deerfield Warrant liability	$	1,557	$	-	$	-	$	1,557
Embedded Warrant Put Option		154		-		-		154
Fundamental change and make-whole interest provisions embedded within 2021 Notes		-		-		-		-
Deerfield Note Conversion Feature		134		-		-		134
KVK Warrant liability		273		-		273		-
Total liabilities	$	2,118	$	-	$	273	$	1,845
Trading securities:
Certificates of deposit		246		246		-		-
U.S. Treasury securities		3,014		3,014		-		-
Total assets	$	3,260	$	3,260	$	-	$	-

The Company’s Deerfield Warrant liability, embedded Warrant Put Option, the fundamental change and the make-whole interest provisions embedded in the

2021

Notes and the embedded Deerfield Note Put Option, as well as the trading securities are measured at fair value on a recurring basis. As of

December 31, 2019

and

December 31, 2018,

the Deerfield Warrant liability, embedded Warrant Put Option, the fundamental change and make-whole interest provisions embedded in the

2021

Notes and the embedded Deerfield Note Put Option are reported on the balance sheets in derivative and warrant liability. As of

December 31, 2018,

the trading securities are reported on the balance sheets in marketable securities. The Company used a Monte Carlo simulation to value the Deerfield Warrant liability, embedded Warrant Put Option, the fundamental change and make-whole interest provisions embedded in the

2021

Notes and the embedded Deerfield Note Put Option as of

December 31, 2019

and

December 31, 2018.

Significant unobservable inputs used in measuring the fair value of these financial instruments included the Company’s estimated enterprise value, an estimate of the timing of a liquidity or fundamental change event and a present value discount rate. Changes in the fair value of the Deerfield Warrant liability, embedded Warrant Put Option, the fundamental change and make-whole interest provisions embedded in the

2021

Notes and the embedded Deerfield Note Put Option are reflected in the statements of operations for the years ended

December 31, 2019

and

2018

as a fair value adjustment related to derivative and warrant liability.

The Company’s KVK Warrant liability is measured at fair value on a recurring basis. As of

December 31, 2019

and

December 31, 2018,

the KVK Warrant liability is reported on the balance sheets in derivative and warrant liability. The Company estimates the fair value of the KVK Warrant using a probability-weighted Black-Scholes option-pricing model, which requires the use of subjective assumptions, including the expected term of the warrant, the expected stock price volatility, expected dividend yield and the risk-free interest rate for the expected term of the warrant. The expected term represents the period of time the warrant is expected to be outstanding. For the KVK Warrant, the Company used an expected term equal to the contractual term of the warrant. Expected volatility is based on the Company's historical volatility since the IPO. The Company assumes

dividend yield because dividends are

not

expected to be paid in the near future, which is consistent with the Company’s history of

not

paying dividends. Changes in the fair value of the KVK Warrant liability are reflected in the statements of operations for the years ended

December 31, 2019

and

2018

as a fair value adjustment related to derivative and warrant liability.

A reconciliation of the beginning and ending balances for the derivative and warrant liability measured at fair value on a recurring basis using signific

ant unobservable inputs (Level

) is as follows (in thousands):

	2019			2018
Balance as of beginning of period	$	1,845		$	7,709
Gain on extinguishment of debt		-			(2	)
Adjustment to fair value		(1,749	)		(5,862	)
Balance as of end of period	$	96		$	1,845