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Financial Instruments

12 Months Ended

Dec. 31, 2020

3.	Financial Instruments

The Company’s short-term investments consist of U.S. Treasury securities, U.S. Government agency securities and corporate debt securities with remaining maturities beyond three months at the date of purchase. The Company has classified and accounted for its short-term investments as available-for-sale securities as the Company may sell these securities at any time even prior to maturity and such investments represent cash available for current operations. As a result, short-term investments may include securities with maturities beyond twelve months that are classified within current assets in the Balance Sheets. The Company’s short-term investments classified as available-for-sale are carried at fair market value with unrealized losses or income recognized in other comprehensive income (loss).

Assets and liabilities recorded at fair value on a recurring basis in the Balance Sheets and assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

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Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

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Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

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Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company’s cash equivalent Money Market Funds are classified as Level 1 because they are valued using quoted market prices. The fair value of the Company’s U.S. Treasury securities, U.S. government agency securities and corporate debt securities are classified as Level 2 because they are valued using observable inputs to quoted market prices, benchmark yields, reported trades, broker/dealer quotes or alternative pricing sources with reasonable levels of price transparency and include U.S. government agency securities, U.S. Treasury securities and corporate debt securities. These Level 2 instruments require more management judgment and subjectivity compared to Level 1 instruments which include determining which instruments are most similar to the instrument being priced, determining whether the market is active and determining which model-derived valuations are to be used when calculating fair value. The Company performs its analysis with the assistance of investment advisors.

The following tables show the Company’s cash equivalents Money Market Funds and short-term investments by significant investment category (in thousands):

	As of December 31, 2020
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Market Value
Level 1:
Money Market Funds	$	27,686	$	—	$	—		$	27,686
Level 2:
U.S. Treasury securities included in cash and cash equivalents and short-term investments		63,101		4		(1	)		63,104
U.S. government agency securities included in short-term investments		54,183		10		—			54,193
Corporate debt securities included in cash and cash equivalents and short-term investments		118,759		1		(46	)		118,714
Total financial assets	$	263,729	$	15	$	(47	)	$	263,697

	As of December 31, 2019
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Market Value
Level 1:
Money Market Funds	$	16,366	$	—	$	—		$	16,366
Level 2:
U.S. Treasury securities included in short-term investments		2,998		—		—			2,998
U.S. government agency securities included in short-term investments		34,204		1		(2	)		34,203
Total financial assets	$	53,568	$	1	$	(2	)	$	53,567

The Company may sell certain of its short-term securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.

The following summarizes the remaining contractual maturities of the Company’s short-term investments as of December 31, 2020:

	Adjusted Cost		Market Value
Mature in 1 year or less	$	220,980	$	220,946
Mature in 1 to 2 years		5,064		5,066
Total	$	226,044	$	226,012

There were no liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019. There have been no transfers between fair value measurement levels during the years ended December 31, 2020 and 2019. In addition, there were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2020 and 2019.

As of December 31, 2020, the Company had not recorded any impairment related to other-than-temporary declines in the fair value of short-term investments. Short-term investments are considered impaired when a decline in fair value is judged to be other-than-temporary. The Company consults with its investment managers and considers available quantitative and qualitative evidence in evaluating potential impairment of its short-term investments on a quarterly basis. If the cost of an individual investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost and its intent and ability to hold the investment.

The Company records interest income and accretion income earned on Money Market Funds and U.S. Treasury, U.S. government agency and corporate debt securities to interest income in its statement of operations and comprehensive loss.

- 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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