Fair Value Measurements of Financial Instruments

9 Months Ended

Sep. 30, 2020

3. Fair Value Measurements of Financial Instruments

Summary of Financial Instruments

The following is a summary of financial instruments (in thousands):

	September 30,
	2020
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	2,544	$	—	$	—		$	2,544
Commercial paper		1,749		—		—			1,749
Corporate bonds		21,080		85		(1	)		21,164
Total available-for-sale securities	$	25,373	$	85	$	(1	)	$	25,457
Reported in:
Cash and cash equivalents								$	2,544
Short-term investments									18,183
Other assets									4,730
Total available-for-sale securities								$	25,457

	December 31,
	2019
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Estimated Fair Values
Available-for-sale securities:
Money market funds	$	2,027	$	—	$	—		$	2,027
Commercial paper		6,965		—		(3	)		6,962
Corporate bonds		12,943		1		(13	)		12,931
Total available-for-sale securities	$	21,935	$	1	$	(16	)	$	21,920
Reported in:
Cash and cash equivalents								$	4,275
Short-term investments									9,475
Other assets									8,170
Total available-for-sale securities								$	21,920

The contractual maturities of available-for-sale securities are presented in the following table (in thousands):

	September 30,
	2020
	Amortized Cost Basis		Estimated Fair Value
Due in one year or less	$	20,662	$	20,727
Due between one to two years		4,711		4,730
	$	25,373	$	25,457

The Company had 4 investments in unrealized loss positions as of September 30, 2020. The investments have been in unrealized loss positions for less than twelve months. The total fair value of such investments is $5.4 million with unrealized losses of $1,365 for the nine months ended September 30, 2020. There were no material gross unrealized losses from available-for-sale securities and no material realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the nine months ended September 30, 2020.

For investments in available-for-sale debt securities that have unrealized losses, the Company evaluates (i) whether it has the intention to sell any of these investments and (ii) whether 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. Based on this evaluation, the Company determined that there were no other-than-temporary impairments associated with investments as of September 30, 2020.

There were no sales of available-for-sale securities for the nine months ended September 30, 2020 and 2019.

Fair Value Measurements

Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires us to maximize the use of observable inputs and minimize the use of unobservable inputs. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:

Level 1. Quoted prices in active markets for identical assets or liabilities.

Level 2. Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3. Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Financial assets measured at fair value on a recurring basis were as follows (in thousands):

	Fair Value Measurement at Reporting Date Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of September 30, 2020
Financial assets - available-for-sales securities
Money market funds	$	2,544	$	—	$	—	$	2,544
Commercial paper		—		1,749		—		1,749
Corporate bonds		—		21,164		—		21,164
Total financial assets - available-for-sales securities	$	2,544	$	22,913	$	—	$	25,457
As of December 31, 2019
Financial assets - available-for-sales securities
Money market funds	$	2,027	$	—	$	—	$	2,027
Commercial paper		—		6,962		—		6,962
Corporate bonds		—		12,931		—		12,931
Total financial assets - available-for-sales securities	$	2,027	$	19,893	$	—	$	21,920

The Company classifies money market funds in Level 1 since the financial assets consist of securities for which quoted prices are available in an active market.

In addition, the Company classifies corporate bonds and commercial paper in Level 2 since the financial assets use observable inputs including quoted prices in active markets for similar assets or liabilities. The Company uses a pricing service to assist in determining the fair values of all of its cash equivalents, short-term investments and long-term investments. The pricing service uses inputs from multiple industry standard data providers or other third party sources and applies various acceptable methodologies.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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