7. Financial instruments

Securities classified as available for sale

The Company’s short-term investments and long-term investments are consisted of available-for-sale securities as follows:


September 30, 2015 Short-term investments:	Amortized cost		Gross unrealized gains		Gross unrealized losses		Fair value
U.S. treasury securities	$	6,034	$	2	$	—	$	6,036
U.S. government agency securities		2,001		1		—		2,002

	$	8,035	$	3	$	—	$	8,038


Contractual maturities:
Due within one year	$	8,035					$	8,038

The Company had no long-term investments consisting of available-for-sale securities on September 30, 2015.



December 31, 2014 Short-term investments:	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
U.S. treasury securities	$	12,199	$	—	$	(5	)	$	12,194
U.S. government agency securities		11,996		1		—			11,997

	$	24,195	$	1	$	(5	)	$	24,191


Long-term investments:
U.S. government agency securities	$	2,003	$	0	$	—		$	2,003


Contractual maturities:
Due within one year	$	24,195						$	24,191
Due after one year through two years		2,003							2,003

The aggregate estimated fair value of the Company’s investments with unrealized losses are as follows:

Period of continuous unrealized loss

12 months or less

Greater than 12 months

December 31, 2014

Fair value

Gross
unrealized
losses

Fair value

Gross
unrealized
losses

U.S. treasury securities

12,194

)

September 30, 2015

Fair value of financial instruments

The fair value of the Company’s financial instruments are determined according to a fair value hierarchy that prioritizes the inputs and assumptions used, and the valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The carrying amounts of certain of the Company’s financial instruments, including cash, cash equivalents, accounts and other amounts receivable, accounts payable, and accrued liabilities, approximate their fair values because of their nature and/or short maturities. The Company held short and long-term investments that are classified as available-for-sale securities, which were measured at fair value determined on a recurring basis according to the fair value hierarchy.

The following tables present the fair value of our financial instruments that are measured at fair value on a recurring basis:


	QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UN- OBSERVABLE INPUTS (LEVEL 3)			TOTAL
BALANCES – September 30, 2015
Short-term investments – U.S. treasury securities	$	6,036	$	—	$	—		$	6,036
Short-term investments – U.S. government agency securities		2,002		—		—			2,002
Bank loan warrant derivative liabilities		—		—		(142	)		(142	)

	$	8,038	$	—	$	(142	)	$	7,896

BALANCES – December 31, 2014
Short-term investments – U.S. treasury securities	$	12,194	$	—	$	—		$	12,194
Short-term investments – U.S. government agency securities		11,997		—		—			11,997
Long-term investments – U.S. government agency securities		2,003		—		—			2,003
Bank loan warrant derivative liabilities		—		—		(72	)		(72	)

	$	26,194	$	—	$	(72	)	$	26,122

Level 1 instruments, which include investments that are valued based on quoted market prices in active markets, consisted of U.S. treasury and U.S. government agency securities.

Level 2 instruments, which include investments for which all significant inputs are observable, consisted of bank term deposits.

Level 3 instruments consisted of the Company’s warrants which are accounted for as derivative liabilities. The Company used Level 3 inputs for the valuation methodology of the derivative liabilities. The estimated fair values were computed using a Black-Scholes option pricing model which incorporates a number of assumptions and judgments to estimate the fair value of these derivative liabilities including the fair value per share of the underlying stock, remaining contractual term of the warrants, risk-free interest rate, expected dividend yield, credit spread, and expected volatility of the underlying stock. The derivative liabilities are adjusted to reflect estimated fair value at each period end, with any decrease or increase in the estimated fair value being recorded in change in fair value of derivative liabilities:

Fair value of significant unobservable inputs (Level 3):


Three months ended September 30, 2015:	BANK LOAN WARRANT DERIVATIVE LIABILITIES
BALANCES – June 30, 2015	$	66
Change in fair value of derivative liabilities		76

BALANCES – September 30, 2015	$	142


Nine months ended September 30, 2015:	BANK LOAN WARRANT DERIVATIVE LIABILITIES
BALANCES – December 31, 2014	$	72
Change in fair value of derivative liabilities		70

BALANCES – September 30, 2015	$	142

There were no transfers between Levels 1, 2, and 3 during the three and nine months ended September 30, 2015.