Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2021

NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables represent the financial instruments measured at fair value on a recurring basis in the financial statements of the Company and the valuation approach applied to each class of financial instruments at September 30, 2021 and December 31, 2020 (in thousands):


	September 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	5,563	$	—	$	—	$	5,563
Corporate notes and bonds	—		561		—		561
Total cash equivalents	5,563		561		—		6,124
Equity investments:
Mutual funds	700		—		—		700
Total equity investments	700		—		—		700
Debt securities available-for-sale:
Certificates of deposit	—		1,567		—		1,567
Commercial paper	—		8,269		—		8,269
Corporate notes and bonds	—		10,763		—		10,763
Total debt securities available-for-sale	—		20,599		—		20,599
Total assets measured at fair value	$	6,263	$	21,160	$	—	$	27,423


	December 31, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash equivalents:
Money market funds	$	19,276	$	—	$	—	$	19,276
Commercial paper	—		885		—		885
Total cash equivalents	19,276		885		—		20,161
Equity investments:
Mutual funds	357		—		—		357
Total equity investments	357		—		—		357
Debt securities available-for-sale:
Certificates of deposit	—		5,825		—		5,825
U.S. Treasury securities	5,923		—		—		5,923
Commercial paper	—		10,604		—		10,604
Corporate notes and bonds	—		9,779		—		9,779
Total debt securities available-for-sale	5,923		26,208		—		32,131
Total assets measured at fair value	$	25,556	$	27,093	$	—	$	52,649

Highly liquid investments with an original maturity of three months or less at time of purchase are included in cash and cash equivalents on the condensed consolidated balance sheet.

Level 1 assets are priced using quoted prices in active markets for identical assets which include money market funds, U.S. Treasury securities and mutual funds as these specific assets are liquid.

Level 2 available-for-sale securities are priced using quoted market prices for similar instruments or nonbinding market prices that are corroborated by observable market data. The Company uses inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the ultimate fair value of these assets and liabilities. The Company uses such pricing data as the primary input to make its assessments and determinations as to the ultimate valuation of its investment portfolio and has not made, during the periods presented, any material adjustments to such inputs.

The Company has Notes, as described in Note 10, Convertible Notes. At September 30, 2021, the Notes had an outstanding principle of $125.5 million with a fair value of $85.9 million. At December 31, 2020, the Notes had an outstanding principle of $171.5 million with a fair value of $98.7 million. The fair value of the Notes is typically correlated to the Company’s stock price and as a result, significant changes to the Company’s stock price will have a significant impact on the calculated fair value. The fair value of the Notes is classified as Level 2 within the fair value hierarchy. See Note 10, Convertible Notes for further detail on the Company’s convertible notes.

The Company's long-term notes, cumulatively $0.4 million, approximate their fair value. The estimated fair value of the Company’s long-term debt represents a Level 3 measurement. See Note 9, Long-Term Debt for further detail on the Company's long-term debt.

As described in Note 18, 2021 Securities Purchase Agreement Tranche Right the estimated fair value of the Company’s Tranche Right represents a Level 3 measurement with an approximate fair value of $2.5 million.

- 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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