FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

NOTE 10. – FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS 

FASB ASC 820 - “Fair Value Measurements and Disclosures” establishes a valuation hierarchy for disclosure of the inputs to valuation 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; and

• 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’s or a financial liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table presents information about our assets and liabilities measured at fair value at December 31, 2018 and 2017, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

	Asset and Liabilities at Fair Value
	As of December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets
Short-term investment securities:
Money market funds	$	10,083,972	$	-	$	-	$	10,083,972
Corporate bonds				38,579,055		-		38,579,055
U.S. treasury securities		-		2,970,900				2,970,900
U.S. government agency bonds		-		4,115,012		-		4,115,012
Total short-term investment securities	$	10,083,972	$	45,664,967	$	-	$	55,748,939
Investments:
Stock warrants	$	-	$	-	$	3,092,358	$	3,092,358

	Asset and Liabilities at Fair Value
	As of December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets
Cash equivalents:
Certificate of deposit	$	-	$	3,000,000	$	-	$	3,000,000
Short-term investment securities:
Certificates of deposit		-		6,000,000		-		6,000,000
Money market funds		41,526,540		-		-		41,526,540
Corporate bonds				9,450,933		-		9,450,933
U.S. government agency bonds		-		1,998,040		-		1,998,040
Total cash equivalents and short-term investment securities	$	41,526,540	$	20,448,973	$	-	$	61,975,513
Liabilities
Warrant liability	$	-	$	-	$	216,490	$	216,490

Money market mutual funds are valued at their daily closing price as reported by the fund. Money market mutual funds held by the Company are open-end mutual funds that are registered with he SEC that generally transact at a stable $1.00 Net Asset Value (“NAV”) representing its estimated fair value. On a daily basis the fund’s NAV is determined by the fund based on the amortized cost of the funds underlying investments.

U.S. government agency bonds, U.S. treasury securities, and corporate bonds are valued using pricing models maximizing the use of observable inputs for similar securities.

Certificates of deposit are valued at net present value of their expected cash flows assuming no unusual market conditions or discount for the credit worthiness of the issuer. At December 31, 2017 cost approximated fair value.

The investment in stock warrants are measured at fair value using the Black-Scholes pricing model and are classified within Level 3 of the valuation hierarchy. The unobservable input is an estimated volatility factor of 92% at December 31, 2018. A 20% increase or decrease in the volatility factor used at December 31, 2018 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $505,000.

The following table sets forth a summary of the changes in fair value of the Company’s stock warrants (Level 3 asset) for the year ended December 31, 2018:

Fair value at December 31, 2017	$	-
Fair value of stock warrants acquired on August 8, 2018		2,807,958
Unrealized gain as a result of change in fair value		284,400
Fair value at December 31, 2018	$	3,092,358

The warrant liability was measured at fair value using certain estimated factors such as volatility and probability which are classified within Level 3 of the valuation hierarchy. Significant unobservable inputs that are used in the fair value measurement of the Company’s derivative warrant liabilities including the volatility factor. Significant increases or decreases in the volatility factor would have resulted in a significantly higher or lower fair value measurement. The Company’s warrants associated with the warrant liability were exercised in July 2018 and the remaining outstanding warrants at December 31, 2018 do not include anti-dilution features and therefore are not considered derivative instruments and do not have an associated warrant liability.

The following table sets forth a summary of the Company’s available-for-sale securities in its short-term investment account from amortized cost basis to fair value at December 31, 2018:

	Available-for-sale Securities - December 31, 2018
	Amortized		Gross		Gross
	Cost Basis		Unrealized Gains		Unrealized Losses			Fair Value
Corporate bonds	$	38,579,541	$	48,796	$	(49,282	)	$	38,579,055
U.S. treasury securities		2,959,063		11,837		-			2,970,900
U.S. government agency bonds		4,099,321		15,691		-			4,115,012
	$	45,637,925	$	76,324	$	(49,282	)	$	45,664,967

The following table sets forth a summary of the Company’s available-for-sale securities in its short-term investment account for amortized cost basis and fair value by contractual maturity at December 31, 2018:

	Available-for-sale Securities
	December 31, 2018
	Amortized
	Cost Basis		Fair Value
Due in one year or less	$	43,050,306	$	43,082,677
Due after one year through two years		2,587,619		2,582,290
	$	45,637,925	$	45,664,967