Marketable Securities and Fair Value Measurements

The guidance regarding fair value measurements establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets that are accessible at the measurement date; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company did not have any transfer of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value hierarchy during the six months ended June 30, 2016 or 2015.

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, and are determined using the following inputs as of June 30, 2016:



	Fair Value Measurements at
	June 30, 2016
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Unobservable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	22,940,492	$	22,940,492	$	—	$	—
Mutual funds	78,498,696		—		78,498,696		—
US corporate debt securities	27,584,293		—		27,584,293		—
Investments in affiliated entities	27,026,216		27,026,216		—		—
Total Assets	$	156,049,697	$	49,966,708	$	106,082,989	$	—
Liabilities:
Common stock warrants	$	1,815,343	$	—	$	—	1,815,343
Total Liabilities	$	1,815,343	$	—	$	—	$	1,815,343

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, and are determined using the following inputs as of December 31, 2015:



	Fair Value Measurements at
	December 31, 2015
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Unobservable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	54,474,609	$	54,474,609	$	—	$	—
Mutual funds	78,385,992		—		78,385,992		—
US corporate debt securities	26,869,403		—		26,869,403		—
Municipal bonds	101,882		—		101,882		—
Investment in affiliated entities	19,987,192		19,987,192		—		—
Common stock warrants	5,970		—		—		5,970
Total Assets	$	179,825,048	$	74,461,801	$	105,357,277	$	5,970
Liabilities:
Common stock warrants	$	1,301,138	$	—	$	—	$	1,301,138
Total Liabilities	$	1,301,138	$	—	$	—	$	1,301,138

Level 1 assets include money market funds held by the Company that are valued at quoted market prices, as well as the Company’s investments in GeneOne and PLS. The Company accounts for its investment in GeneOne at fair value on a recurring basis by which the fair value is based on the market value of 1,644,155 common shares on June 30, 2016 and December 31, 2015, listed on the Korean Stock Exchange. The Company accounts for its investment in PLS as an available-for sale security by which the fair value is based on the market value of 395,758 common shares on June 30, 2016, listed on the Korea New Exchange (KONEX) Market. The Company elected the fair value option in conjunction with the investment in GeneOne at the inception of the investment therefore changes in the fair value of the investment are reflected as other income (expense) in the condensed consolidated statements of operations. The Company did not elect the fair value option for the investment in PLS at the inception of the investment, but rather recorded the investment under the equity method until its ownership interest dropped below 20% in June 2015 and accordingly began recording the investment under the cost method using the carryover basis from the equity method of zero. Once shares of PLS began trading on the KONEX, the Company classified the investment as available-for-sale and began recording the investment at fair value with changes in fair value reflected in other comprehensive income (loss).

Level 2 assets at June 30, 2016 include US corporate debt securities and mutual funds held by the Company that are initially valued at the transaction price and subsequently valued, at the end of each reporting period, typically utilizing market observable data. The Company obtains the fair value of its Level 2 assets from a professional pricing service, which may use quoted market prices for identical or comparable instruments, or inputs other than quoted prices that are observable either directly or indirectly. The professional pricing service gathers quoted market prices and observable inputs from a variety of industry data providers. The valuation techniques used to measure the fair value of the Company's Level 2 financial instruments were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models such as discounted cash flow techniques. The Company validates the quoted market prices provided by the primary pricing service by comparing their assessment of the fair values of the Company's investment portfolio balance against the fair values of the Company's investment portfolio balance obtained from an independent source.

Level 3 assets held as of June 30, 2016 include two warrants received by the Company to purchase shares of common stock of OncoSec Medical Incorporated (“OncoSec”), in connection with the first and second amendments to the Asset Purchase Agreement between the Company and OncoSec signed in September 2011 and March 2012, respectively. The first warrant to purchase 50,000 shares of common stock of OncoSec has a contractual life of five years with an exercise price of $24.00 per share. The second warrant to purchase 150,000 shares of common stock of OncoSec has a contractual life of five years with an exercise price of $20.00 per share.

The Company reassesses the fair value of the OncoSec warrants at each reporting date utilizing a Black-Scholes pricing model. Inputs used in the pricing model include estimates of OncoSec stock price volatility, expected warrant life and risk-free interest rate. The Company develops its estimates based on publicly available historical data and knowledge of OncoSec. The Company reassesses the fair value of the warrants at each reporting date. The assumptions used to estimate the fair values of the OncoSec common stock warrants at June 30, 2016 are presented below:



Risk-free interest rate	0.39-0.45%
Expected volatility	88%
Expected life in years	0.25-0.75
Dividend yield	—

As a result of these calculations, the Company recorded a decrease in fair value of the two warrants of $(3,000) and $(6,000) for the three and six months ended June 30, 2016, respectively and $(73,000) and $(364,000) for the three and six months ended June 30, 2015, respectively. The change in fair value is reflected in the Company's condensed consolidated statements of operations as a component of change in fair value of common stock warrants.

The following table presents a summary of changes in fair value of the Company’s total Level 3 financial assets for the six months ended June 30, 2016:



Balance at January 1, 2016	$	5,970
Decrease in fair value included in change in fair value of common stock warrants	(5,970		)
Balance at June 30, 2016	$	—

Level 3 liabilities held as of June 30, 2016 consist of common stock warrant liabilities associated with warrants to purchase the Company's common stock issued in March 2013. If unexercised, the warrants will expire in September 2018. During the three months ended June 30, 2016 and 2015, none of these warrants were exercised.

As of June 30, 2016 the Company has a $1.8 million common stock warrant liability. The Company reassesses the fair value of the common stock warrants at each reporting date utilizing a Black-Scholes pricing model. Inputs used in the pricing model include estimates of stock price volatility, expected warrant life and risk-free interest rate. The Company develops its estimates based on historical data. The assumptions used to estimate the fair value of common stock warrants at June 30, 2016 are presented below:



Risk-free interest rate	0.58%
Expected volatility	63%
Expected life in years	2.2
Dividend yield	—

Changes in these assumptions as well as in the Company's stock price on the valuation date can have a significant impact on the fair value of the common stock warrant liability. As a result of these calculations, the Company recorded an increase in fair value of $108,000 and $514,000 for the three and six months ended June 30, 2016, respectively, and a decrease in fair value of $23,000 and $313,000 for the three and six months ended June 30, 2015, respectively. The change in fair value is reflected in the Company's condensed consolidated statements of operations as a component of change in fair value of common stock warrants.

The following table presents the changes in fair value of the Company’s total Level 3 financial liabilities for the six months ended June 30, 2016:



Balance at January 1, 2016	$	1,301,138
Increase in fair value included in change in fair value of common stock warrants	514,204
Balance at June 30, 2016	$	1,815,342