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 three months ended March 31, 2018 or 2017.

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 March 31, 2018:



	Fair Value Measurements at
	March 31, 2018
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Unobservable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	1,590,607	$	1,590,607	$	—	$	—
Mutual funds	54,203,448		—		54,203,448		—
US corporate debt securities	21,056,441		—		21,056,441		—
Investment in affiliated entities	13,774,903		13,774,903		—		—
Total Assets	$	90,625,399	$	15,365,510	$	75,259,889	$	—
Liabilities:
Common stock warrants	$	488,636	$	—	$	—	488,636
Total Liabilities	$	488,636	$	—	$	—	$	488,636

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, 2017:



	Fair Value Measurements at
	December 31, 2017
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Unobservable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	$	9,843,482	$	9,843,482	$	—	$	—
Mutual funds	68,565,889		—		68,565,889		—
US corporate debt securities	35,072,955		—		35,072,955		—
Investment in affiliated entities	11,394,480		11,394,480		—		—
Total Assets	$	124,876,806	$	21,237,962	$	103,638,844	$	—
Liabilities:
Common stock warrants	$	360,795	$	—	$	—	$	360,795
Total Liabilities	$	360,795	$	—	$	—	$	360,795

Level 1 assets at March 31, 2018 consisted of 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 1,644,155 common shares of GeneOne based on the closing price of the shares on the Korean Stock Exchange on the applicable balance sheet date. The Company accounts for its investment in 395,758 common shares of PLS as an equity investment with a fair value based on the closing price of the shares on the Korea New Exchange (KONEX) Market on the applicable balance sheet date. 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. After the adoption of ASU No. 2016-01 on January 1, 2018, unrealized gains and losses on the Company's equity securities are reported in the condensed consolidated statement of operations as a gain (loss) on investment in affiliated entities, as discussed in Note 5.

Level 2 assets at March 31, 2018 consisted of 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 the service's 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.

There were no Level 3 assets held as of March 31, 2018.

Level 3 liabilities at March 31, 2018 consisted 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 March 31, 2018 and 2017, none of these warrants were exercised.

As of March 31, 2018, the Company had a $489,000 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 March 31, 2018 are presented below:



Risk-free interest rate	1.93%
Expected volatility	65%
Expected life in years	0.45
Dividend yield	—

Changes in these assumptions as well as fluctuations 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 (decrease) in fair value of $128,000 and $(116,000) for the three months ended March 31, 2018 and 2017, respectively. The change in fair value of common stock warrants is reflected in the Company's condensed consolidated statements of operations.

The following table presents the changes in fair value of the Company’s Level 3 financial liabilities for the three months ended March 31, 2018:



Balance at December 31, 2017	$	360,795
Increase attributable to change in fair value of common stock warrants	127,841
Balance at March 31, 2018	$	488,636