FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

6 Months Ended

Jun. 30, 2020

FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

NOTE 6. – 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 as of June 30, 2020 and December 31, 2019, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

	Fair Value
	June 30, 2020
	Level 1		Level 2		Level 3		Total
Assets
Short-term investment securities:
Money market funds	$	1,123	$	—	$	—	$	1,123
Corporate bonds		—		26,980		—		26,980
Total short-term investment securities	$	1,123	$	26,980	$	—	$	28,103
Investment - Aurora stock warrants	$	—	$	—	$	540	$	540
Investment - Panacea preferred stock	$	—	$	—	$	5,029	$	5,029
Convertible note receivable	$	—	$	—	$	5,732	$	5,732

	Fair Value
	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets
Short-term investment securities:
Money market funds	$	12,146	$	—	$	—	$	12,146
Corporate bonds		—		26,331		—		26,331
Total short-term investment securities	$	12,146	$	26,331	$	—	$	38,477
Investment - Aurora stock warrants	$	—	$	—	$	673	$	673
Investment - Panacea preferred stock	$	—	$	—	$	4,865	$	4,865
Convertible note receivable	$	—	$	—	$	5,589	$	5,589

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 the 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.

Corporate bonds are valued using pricing models maximizing the use of observable inputs for similar securities.

The investment in the Aurora stock (ACB) warrants is measured at fair value using the Black-Scholes pricing model and is classified within Level 3 of the valuation hierarchy. The unobservable input is an estimated volatility factor of 141% and 83% at June 30, 2020 and December 31, 2019, respectively. Therefore, changes in market volatility will impact the fair value measurement of our ACB investment.

A 20% increase or decrease in the volatility factor used at June 30, 2020 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $175. A 20% increase or decrease in the volatility factor used at December 31, 2019 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $260.

The Panacea convertible note receivable and the preferred stock investment are considered available-for-sale debt securities with a private company that is not traded in active markets. Since observable price quotations were not available, fair value was estimated based on cost less an appropriate discount upon acquisition. The discount of each instrument is accreted into interest income over the respective term and will adjust the amortized cost basis of the investments.

The following table sets forth a summary of the changes in fair value of the Company’s Level 3 investments for the quarter ended June 30, 2020:

Fair Value at December 31, 2019	$	11,128
Unrealized loss as a result of change in fair value		(133)
Accretion of interest on Panacea Investment		306
Fair Value at June 30, 2020	$	11,301

The following tables set forth a summary of the Company’s available-for-sale debt securities from amortized cost basis to fair value as of June 30, 2020 and December 31, 2019:

	Available for Sale Debt Securities
	June 30, 2020
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
Corporate bonds	$	26,928	$	140	$	(88)	$	26,980
Convertible note receivable		5,732		—		—		5,732
Investment - Panacea preferred stock		5,029		—		—		5,029
	$	37,689	$	140	$	(88)	$	37,741

	Available for Sale Debt Securities
	December 31, 2019
	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
Corporate bonds	$	26,324	$	64	$	(57)	$	26,331
Convertible note receivable		5,589		—		—		5,589
Investment - Panacea preferred stock		4,865		—		—		4,865
	$	36,778	$	64	$	(57)	$	36,785

The following table sets forth a summary of the Company’s available-for-sale securities from amortized cost basis and fair value by contractual maturity as of June 30, 2020 and December 31, 2019:

	Available for Sale Debt Securities
	June 30, 2020				December 31, 2019
	Amortized				Amortized
	Cost Basis		Fair Value		Cost Basis		Fair Value
Due in one year or less	$	18,796	$	18,796	$	16,823	$	16,851
Due after one year through five years		18,893		18,945		9,501		9,480
Due in five years		—		—		10,454		10,454
	$	37,689	$	37,741	$	36,778	$	36,785