Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2020

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, 2020 and December 31, 2019 (in thousands):


	September 30, 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 and cash equivalents:
Money market funds	$	5,013	$	—	$	—	$	5,013
Commercial paper	—		1,875		—		1,875
Total cash and cash equivalents	5,013		1,875		—		6,888
Equity investments:
Mutual funds	248		—		—		248
Total equity investments	248		—		—		248
Debt securities available-for-sale:
Certificates of deposit	—		6,857		—		6,857
U.S. Treasury securities	13,484		—		—		13,484
Commercial paper	—		9,345		—		9,345
Corporate notes and bonds	—		20,529		—		20,529
Debt securities available-for-sale	13,484		36,731		—		50,215
Total assets measured at fair value	$	18,745	$	38,606	$	—	$	57,351


	December 31, 2019
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	43,745	$	—	$	—	$	43,745
Commercial paper	—		1,993		—		1,993
Corporate notes and bonds	—		1,006		—		1,006
Total cash and cash equivalents	43,745		2,999		—		46,744
Debt securities available-for-sale:
Certificates of deposit	—		5,663		—		5,663
U.S. Treasury securities	12,579		—		—		12,579
U.S. Agency securities	—		3,998		—		3,998
Commercial paper	—		2,491		—		2,491
Corporate notes and bonds	—		22,706		—		22,706
Debt securities available-for-sale	12,579		34,858		—		47,437
Total assets measured at fair value	$	56,324	$	37,857	$	—	$	94,181

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.

In 2018, the Company issued the Notes, for total proceeds of $171.5 million, as described in Note 11, Convertible Notes. At September 30, 2020 and December 31, 2019, the fair value of the Notes were $110.7 million and $133.8 million, respectively. The fair value of the Notes is highly 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 are classified as Level 2 within the fair value hierarchy. See Note 11, Convertible Notes for further detail on the Company’s convertible notes.

The Company's PPP Note along with its other long-term notes, cumulatively $5.5 million, approximate their fair value. The estimated fair value of the Company’s long-term debt represents a Level 3 measurement. See Note 10, Long-Term Debt for further detail on the Company's long-term debt.

- 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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