(4) Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Notes to Financial Statements

(4) Fair Value Measurements

The Company measures its cash equivalents and marketable securities at fair value. Fair value is an exit price, representing the amount that would be received on the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants. As a basis for considering such assumptions, the Company utilizes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value.

 Fair Value Hierarchy 

The methodology for measuring fair value specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company’s own assumptions of market participant valuation (unobservable inputs). As a result, observable and unobservable inputs have created the following fair value hierarchy:

· Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities. The Level 1 category includes money market funds, which at June 30, 2013 and December 31, 2012 totaled $5.5 million and $4.3 million, respectively, which are included within cash and cash equivalents in the condensed consolidated balance sheets.

· Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly. The Level 2 category includes government securities and corporate debt securities, which at June 30, 2013 and December 31, 2012 totaled $7.8 million and $10.5 million, respectively, which are included within cash and cash equivalents and marketable securities in the condensed consolidated balance sheets.

· Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The Company did not hold any cash, cash equivalents or marketable securities categorized as Level 3 as of June 30, 2013 or December 31, 2012.

Measurement of Fair Value

The Company measures its cash equivalents and marketable securities at fair value. Fair value is an exit price, representing the amount that would be received on the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants. As a basis for considering such assumptions, the Company utilizes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value.

Items Measured at Fair Value on a Recurring Basis

  The following table presents the Company’s assets that are measured at fair value on a recurring basis at June 30, 2013:

			Fair Value Measurements at Reporting Date Using
				Quoted Prices in				Significant
				Active Markets for		Significant other		Unobservable
				Identical Assets		Inputs		Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
Cash equivalents:
Money market funds	$	5,501,965	$	5,501,965	$	—	$	—
Total cash equivalents		5,501,965		5,501,965		—		—
Marketable securities:
Corporate debt and government securities		7,838,590		—		7,838,590		—
Total marketable securities		7,838,590		—		7,838,590		—
Total assets measured at fair value	$	13,340,555	$	5,501,965	$	7,838,590	$	—
The following table presents the Company’s assets that are measured at fair value on a recurring basis at December 31, 2012:
			Fair Value Measurements at Reporting Date Using
				Quoted Prices in				Significant
				Active Markets for		Significant other		Unobservable
				Identical Assets		Inputs		Inputs
		Total		(Level 1)		(Level 2)		(Level 3)
Cash equivalents:
Money market funds	$	4,285,309	$	4,285,309	$	—	$	—
Total cash equivalents		4,285,309		4,285,309		—		—
Marketable securities:
Corporate debt and government securities		10,530,942		—		10,530,942		—
Total marketable securities		10,530,942		—		10,530,942		—
Total assets measured at fair value	$	14,816,251	$	4,285,309	$	10,530,942	$	—