On October 10, 2018, the Company issued to Kirin and Mitsui each 2,225,000 warrants, for a total of 4,450,000 warrants, to purchase the Company’s common stock. The warrants have an exercise price of $5.12 and an expiration date of October 11, 2028. In July 2020, each shareholder exercised 2,168,485 warrants for a total of $22.2 million in gross proceeds. As of March 31, 2022 and December 31, 2021, 113,030, of the original 4,450,000 warrants, remain outstanding. These warrants are classified as equity within the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

On June 23, 2010, the Company issued 2,532,000 warrants to a related-party stockholder, with a strike price of $6.74 and an original expiration date of June 23, 2020. In May 2019, the Board of Directors extended the term of the warrants for an additional 10 years to June 23, 2030. As of March 31, 2022 and December 31, 2021, none of the 2,532,000 warrants have been exercised and all common stock warrants remained outstanding. These warrants are classified as equity within the condensed consolidated balance sheets at March 31, 2022 and December 31, 2021.

On May 10, 2011, the Company issued 453,455 warrants to purchase common stock to a related-party stockholder, with a strike price of $6.74 per warrant. In May 2019, the Board of Directors extended the term of the warrants for an additional 10 years to June 23, 2030. The extension was determined by management to be a modification of the warrant. Due to these warrants containing certain down-round protections, which are not associated with the underlying Company’s equity that may trigger in the event of a modification of certain other outstanding warrant instruments, the Company has classified these warrants as liabilities within the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021.

The warrant liability is remeasured at fair value at each reporting date and have a fair value of $2.1 million as of each of March 31, 2022 and December 31, 2021.

To calculate the fair value of the warrants, certain assumptions were made, including the fair market value of the underlying common stock, risk-free interest rate, volatility, and remaining contractual life. Changes to the assumptions could cause significant adjustments to the valuation. Due to the fact that the Company had no publicly available stock price information prior to the IPO and limited publicly available stock price information subsequent to the IPO, the expected volatility assumption was determined by examining the historical volatilities of a group of industry peers whose share prices are publicly available. The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of the grant for treasury securities of similar maturity or expected term. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be zero.

The Black-Scholes model was used to value the liability-classified warrants. The following assumptions were used:


	March 31,			December 31,
	2022			2021
Fair market value	$	6.36		$	6.21
Exercise Price	$	6.74		$	6.74
Term		8.2			8.5
Volatility		75	%		75	%
Annual dividend		—			—
Risk-free interest rate		2.36	%		1.48	%

The fair value of financial instruments measured on a recurring basis is as follows:


	March 31, 2022
Description	Total		Level 1		Level 2		Level 3
Liabilities:
Warrant liability	$	2,124,485		—		—	$	2,124,485

	December 31, 2021
Description	Total		Level 1		Level 2		Level 3
Liabilities:
Warrant liability	$	2,058,566		—		—	$	2,058,566

The following table summarizes the change in fair value, as determined by Level 3 inputs, for all assets and liabilities using unobservable Level 3 inputs:


	Warrant Liability
Balance at December 31, 2021	$	2,058,566
Change in fair value during the three months ended March 31, 2022		65,919
Balance at March 31, 2022	$	2,124,485