Fair Value Measurements

3 Months Ended

Mar. 31, 2018

4. FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist of cash and cash equivalents, short-term investments, restricted cash and accounts payable. The carrying amount of cash, restricted cash and accounts payable are each considered a reasonable estimate of fair value due to the short-term maturity.

Assets measured at fair value on a recurring basis were as follows:

Description	At March 31, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds	$	28,831,110	$	28,831,110	$	—	$	—
Asset-backed securities		2,697,840		—		2,697,840		—
Commercial paper		13,423,213		—		13,423,213		—
Short-term investments:
Asset-backed securities		5,392,684		—		5,392,684		—
Commercial paper		18,854,033		—		18,854,033		—
Corporate debt securities		21,380,024		—		21,380,024		—
U.S. treasury securities		24,892,320		—		24,892,320		—
Total financial assets	$	115,471,224	$	28,831,110	$	86,640,114	$	—

Description	At December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents:
Money market funds	$	44,181,756	$	44,181,756	$	—	$	—
Short-term investments:
Asset-backed securities		7,421,703		—		7,421,703		—
Commercial paper		34,882,298		—		34,882,298		—
Corporate debt securities		26,856,283		—		26,856,283		—
U.S. treasury securities		8,923,320		—		8,923,320		—
Total financial assets	$	122,265,360	$	44,181,756	$	78,083,604	$	—

Short-term securities are valued using models or other valuation methodologies that use Level 2 inputs. These models are primarily industry-standard models that consider various assumptions, including time value, yield curve, volatility factors, default rates, current market and contractual prices for the underlying financial instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

The convertible preferred stock tranche liability was stated at fair value and was measured using a Level 3 input because the fair value measurement is based, in part, on significant inputs not observed in the market.

The reconciliations of changes in the fair value of financial instruments based on Level 3 inputs for the period ended March 31, 2017 consisted of:


Fair value as of January 1, 2017	$	4,247,000
Change in fair value of convertible preferred stock tranche liability		876,000
Reduction in tranche liability due to preferred stock issuance		(5,123,000	)
Fair value as of March 31, 2017	$	—

There were no transfers between fair value measure levels during the three months ended March 31, 2018 and 2017.

- 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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