Note 14 - Fair Value Measurements

12 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

14.

 Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in

one

of the following

three

levels of the fair value hierarchy, of which the

first

two

are considered observable and the last is considered unobservable:

● Level 1 —Quoted prices in active markets for identical assets or liabilities.

● Level 2 —Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

● Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The asset

’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The following table presents the Company

’s assets and liabilities that are measured at fair value on a recurring basis:

	December 31, 2017
	(Level 1)		(Level 2)		(Level 3)
Assets
Cash and cash equivalents	$	8,896,468	$	—	$	—
Liabilities
Common stock warrant liability	$	—	$	—	$	—

	December 31, 2016
	(Level 1)		(Level 2)		(Level 3)
Assets
Cash and cash equivalents	$	1,552,852	$	—	$	—
Liabilities
Common stock warrant liability	$	—	$	—	$	—

The reconciliation of the contingent consideration liability measured at fair value on a recurring basis using significant unobservable inputs (Level

3

) is as follows:

	Common Stock Warrant Liability
Balance at December 31, 2016	$	—
Issued in connection with the Series A convertible preferred stock		35,225,846
Change in fair value		(22,072,322	)
Reclassification of Series A warrants to additional paid in capital		(13,153,524	)
Balance at December 31, 2017	$	—

The common stock warrants issued in connection with the Series A convertible preferred stock were previously classified as liabilities, and were marked-to-market each reporting period with the change in fair value recorded as either income or expense in the accompanying statements of operations until the warrants are exercised, expire or other facts and circumstances lead the liability to be reclassified to stockholders’ equity. On

November 1, 2017

the Company held a Special Stockholders meeting, requesting stockholders, both common and Series A, to approve a proposed amendment to the Company’s Certificate of Incorporation to permit the Company to pay dividends on the Company’s Series A Convertible Preferred Stock in either cash or shares of the Company’s Common, which was approved by the stockholders. As a result of this amendment, the Company is able to assert there will be sufficient authorized shares available to settle the Series A warrants. Upon this assertion, the Series A warrants were reclassified from liabilities to stockholders’ equity.

The fair value of the warrant liability is estimated using the Black-Scholes model and assumptions used to value the warrant liability as of

November 1, 2017,

which was the date of the reclassification, were as follows:

Stock price	$	1.44
Exercise price	$	2.22
Expected term (in years)		4.38
Risk-free interest rate		1.9	%
Expected volatility		104.1	%
Dividend yield		—