6. Warrant Liability

August 2019 Warrant Liability

In August 2019, we completed a registered direct offering (the “August 2019 Offering”) and issued warrants to purchase 2,852,314 shares of our common stock with an exercise price of $1.07 per share (the “Placement Warrants”) in a concurrent private placement (see Note 9). The Placement Warrants agreement contains a provision where the warrant holder has the option to receive cash, equal to the Black Scholes fair value of the remaining unexercised portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). As a result of this provision, in accordance with ASC 480, “Distinguishing Liabilities from Equity,” the Placement Warrants are required to be classified as liabilities. The fair value of the Placement Warrants is determined using the Black-Scholes Option Pricing model to calculate the call option and Binomial Option Pricing model to calculate the put option with changes in the fair value recorded in our statements of operations and comprehensive loss. As of December 31, 2019, total fair value of the Placement Warrants was approximately $0.3 million, which is included within warrant liabilities in our balance sheet.

The warrant liability associated with the Placement Warrants is classified within level 3 of the fair value hierarchy. The below table represents the weighted-average key assumptions used to calculate the fair value of the Placement Warrants: