| Fair Value Measurements | 6. Fair Value Measurements
The carrying amounts of cash and cash equivalents, restricted cash,
accounts payable, and accrued expenses approximated their estimated
fair values due to the short-term nature of these financial
instruments. Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants
on the measurement date. Valuation techniques used to measure fair
value are performed in a manner to maximize the use of observable
inputs and minimize the use of unobservable inputs. The accounting
standard describes a fair value hierarchy based on three levels of
inputs, of which the first two are considered observable and the
last unobservable, that may be used to measure fair value, which
are the following:
Level 1— Quoted prices in active markets that are
accessible at the market date for identical unrestricted assets or
liabilities.
Level 2— Inputs other than Level 1 that are
observable, either directly or indirectly, such as quoted prices
for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs for which all significant inputs
are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilities.
Level 3— Unobservable inputs that are supported by
little or no market activity and that are significant to the fair
value of the assets or liabilities.
During the periods presented, the Company has not changed the
manner in which it values assets and liabilities that are measured
at fair value using Level 3 inputs. The Company recognizes
transfers between levels of the fair value hierarchy as of the end
of the reporting period. There were no transfers within the
hierarchy for any of periods presented.
A summary of the assets and liabilities carried at fair value in
accordance with the hierarchy defined above is as follows:
Fair Value Measurements
Using
Quoted
Significant
Prices Other
Significant
Total in
Active
Observable
Unobservable
Carrying Markets Inputs Inputs
Value (Level 1) (Level 2) (Level 3)
(In
thousands)
March 31, 2017
Assets:
Cash equivalents $ 22,356 $ 18,910 $ 3,446 $
—
Short-term investments 70,429
— 70,429
—
Total assets $ 92,785 $ 18,910 $ 73,875 $
—
December 31, 2016
Assets:
Cash equivalents $ 23,844 $ 17,089 $ 6,755 $
—
Short-term investments 81,486
— 81,486
—
Total assets $ 105,330 $ 17,089 $ 88,241 $
—
Cash equivalents of $18.9 million as of March 31, 2017
and $17.1 million as of December 31, 2016 consisted of
overnight investments and money market funds and are classified
within Level 1 of the fair value hierarchy because they are
valued using quoted market prices in active markets. Cash
equivalents of $3.4 million as of March 31, 2017 and
$6.8 million as of December 31, 2016 consisted of highly
rated corporate bonds and are classified within Level 2 of the
fair value hierarchy because pricing inputs are other than quoted
prices in active markets, which are either directly or indirectly
observable as of the reporting date, and fair value is determined
through the use of models or other valuation methodologies.
Short-term investments of $70.4 million as of March 31,
2017 and $81.5 million as of December 31, 2016 consisted
of commercial paper and highly rated corporate bonds and are
classified within Level 2 of the fair value hierarchy because
pricing inputs are other than quoted prices in active markets,
which are either directly or indirectly observable as of the
reporting date, and fair value is determined through the use of
models or other valuation methodologies.
The short-term investments are classified as available-for-sale available-for-sale available-for-sale available-for-sale available-for-sale available-for-sale
Amortized
Unrealized
Unrealized
Cost Gains Losses Fair Value
(In
thousands)
March 31, 2017
Commercial paper $ 26,430 $ 21 $
— $ 26,451
Corporate bonds 44,001 0 (23 ) 43,978
$ 70,431 $ 21 $ (23 ) $ 70,429
December 31, 2016
Commercial paper $ 30,125 $ 61 $
— $ 30,186
Corporate bonds 51,305 6 (11 ) 51,300
$ 81,430 $ 67 $ (11 ) $ 81,486
A roll-forward of the recurring fair value measurements of the
common stock warrant liability and the derivative liability
categorized with Level 3 inputs is as follows:
Common Stock Derivative
(In
thousands)
Balance — December 31, 2015 $ 2,848 $ 133
Change in fair value 1,703 17
Reclassification (4,551 ) (150 )
Balance—March 31, 2016 $
— $
—
The common stock warrant liability was recorded at fair value
determined by using the Black-Scholes option-pricing model. This
method of valuation involves using inputs such as the fair value of
the Company’s common stock, stock price volatility, the
contractual term of the warrant, risk-free interest rates, and
dividend yields. Due to the nature of these inputs, the valuation
of the warrants was considered a Level 3 measurement. Upon the
closing of the IPO, the warrant was reclassified to
additional paid-in |
