Investments and Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2019

Investments And Fair Value Of Financial Instruments [Abstract]

Investments and Fair Value of Financial Instruments

4. Investments and Fair Value of Financial Instruments

Available-for-Sale Investments

The Company classified short-term investments as “available-for-sale.” These short-term investments are free of trading restrictions. The investments are carried at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive loss, which is reflected as a separate component of stockholder’s equity in the Consolidated Balance Sheets. Gains and losses are recognized when realized in the Consolidated Statements of Operations and Comprehensive Loss.

The following tables summarize the amortized cost and fair value of the available-for-sale investment securities portfolio at March 31, 2019 and December 31, 2018, and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income:

(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
March 31, 2019
Cash equivalents:
Money market funds	$	6,283	$	—	$	—	$	6,283
Corporate securities		599		—		—		599
Commercial paper		3,044		—		—		3,044
Short-term investments:
Corporate securities		1,248		—		—		1,248
Treasury Bills		997		—		—		997
Commercial paper		5,110		—		—		5,110
Total Assets at Fair Value	$	17,281	$	—	$	—	$	17,281

(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
December 31, 2018
Cash equivalents:
Money market funds	$	9,902	$	—	$	—	$	9,902
Commercial paper		1,345		—		—		1,345
Short-term investments:
Corporate Securities		656		—		—		656
Treasury Bills		1,195		—		—		1,195
Commercial paper		6,776		—		—		6,776
U.S. government securities		1,198		—		—		1,198
Total Assets at Fair Value	$	21,072	$	—	$	—	$	21,072

The Company did not have any investment categories that were in a continuous unrealized loss position for more than three months as of March 31, 2019. Unrealized gains and losses amounts would be included in accumulated other comprehensive income or loss; however, none were reported during the periods presented.

As of March 31, 2019, for fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments, and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company anticipates that it will recover the entire amortized cost basis of such fixed income securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three months ended March 31, 2019.

Fair Value Measurement

Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis. Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities, are as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

• Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 inputs are unobservable inputs for the asset or liability.

The following table sets forth the fair value of the Company’s financial assets as of March 31, 2019 and December 31, 2018:  

	Fair Value Measurements at March 31, 2019
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets at Fair Value
Cash equivalents:
Money market funds	$	6,283	$	—	$	—	$	6,283
Corporate securities		—		599		—		599
Commercial paper		—		3,044		—		3,044
Short-term investments:
Corporate securities		—		1,248		—		1,248
Treasury Bills		997		—		—		997
Commercial paper		—		5,110		—		5,110
Total Assets at Fair Value	$	7,280	$	10,001	$	—	$	17,281

	Fair Value Measurements at December 31, 2018
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets at Fair Value
Cash equivalents:
Money market funds	$	9,902	$	—	$	—	$	9,902
Commercial paper		—		1,345		—		1,345
Short-term investments:
Corporate Securities		—		656		—		656
Treasury Bills		1,195		—		—		1,195
Commercial paper		—		6,776		—		6,776
U.S. government securities		1,198		—		—		1,198
Total Assets at Fair Value	$	12,295	$	8,777	$	—	$	21,072

The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2019 or 2018. The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, short-term investments and accounts payable and accrued liabilities. For accounts receivable, accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of March 31, 2019 and December 31, 2018 were considered representative of their fair values due to their short term to maturity or repayment. Cash equivalents are carried at cost, which approximates their fair value.

The Company’s Level 3 liabilities, which were measured and recorded on a recurring basis, consist of liabilities related to the March 2018 Purchase Agreement and the June 2018 Offering described in Note 8. The following table sets forth the establishment of these liabilities, as well as a summary of the changes in the fair value (in thousands):

	(Level 3)
(Dollars in thousands)	Common Stock Warrant Liability - Purchase Agreement		Common Stock Warrant Liability - June Offering		Total
Balance as of December 31, 2018	$	2,354	$	2,729	$	5,083
Change in fair value		3,970		4,525		8,495
Balance as of March 31, 2019	$	6,324	$	7,254	$	13,578

In determining the fair value, the Company uses various valuation approaches within the fair value measurement framework. The valuation methodologies used for the Company’s instruments measured at fair value and their classification in the valuation hierarchy are summarized below:

• Money market funds, treasury bills, and U.S. government securities – Investments in money market funds, treasury bills, and U.S. government securities are classified within Level 1.  At March 31, 2019 and December 31, 2018 these investments were included on the consolidated balance sheets in cash and cash equivalents and short-term investments.

• Commercial paper, corporate securities – Investments in commercial paper and corporate securities are classified within Level 2. At March 31, 2019 these investments were included on the consolidated balance sheets in cash and cash equivalents and short-term investments. At December 31, 2018, commercial paper was included on the consolidated balance sheets in short-term investments.

• Purchase Agreement common stock warrant liability – The Company has outstanding warrants to purchase 1,282,832 shares of common stock that it issued to certain accredited investors and its placement agent on March 22, 2018 (as described in Note 8). The common stock warrants were classified as a liability within Level 3 based on the instrument’s adjustment features and a contingent cash payment feature. The estimated fair value of the common stock warrant liability was remeasured at March 31, 2019 utilizing a Black Scholes Merton Model with the changes recorded on the Company’s condensed consolidated statements of operations and comprehensive loss.

• June 2018 Offering common stock warrant liability – The Company has outstanding warrants to purchase 1,461,962 shares of common stock that it issued to certain accredited investors on June 14, 2018 (as described in Note 8). The common stock warrants are classified as a liability within Level 3 due to a contingent cash payment feature.  The estimated fair value of the common stock warrant liability was remeasured at March 31, 2019 utilizing a Black Scholes Merton Model with the changes recorded on the Company’s condensed consolidated statements of operations and comprehensive loss.