Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2022

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, 2022 and December 31, 2021 (in thousands):


	September 30, 2022
	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	$	5,145	$	—	$	—	$	5,145
Total cash and cash equivalents	5,145		—		—		5,145
Equity investments:
Mutual funds	808		—		—		808
Total equity investments	808		—		—		808
Debt securities available-for-sale:
Certificates of deposit	—		3,382		—		3,382
U.S. Treasury securities	5,228		—		—		5,228
Commercial paper	—		2,893		—		2,893
Corporate notes and bonds	—		4,096		—		4,096
Debt securities available-for-sale	5,228		10,371		—		15,599
Total assets measured at fair value	$	11,181	$	10,371	$	—	$	21,552


	December 31, 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 and cash equivalents:
Money market funds	$	5,563	$	—	$	—	$	5,563
Commercial paper	—		200		—		200
Total cash and cash equivalents	5,563		200		—		5,763
Equity investments:
Mutual funds	841		—		—		841
Total equity investments	841		—		—		841
Debt securities available-for-sale:
Certificates of deposit	—		1,351		—		1,351
U.S. Treasury securities	250		—		—		250
Commercial paper	—		8,046		—		8,046
Corporate notes and bonds	—		13,232		—		13,232
Debt securities available-for-sale	250		22,629		—		22,879
Total assets measured at fair value	$	6,654	$	22,829	$	—	$	29,483

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.

At September 30, 2022, the Notes had an outstanding principal amount of $56.6 million with a fair value of $51.7 million. At December 31, 2021, the Notes had an outstanding principal amount of $120.5 million with a fair value of $89.4 million. The fair value of the Notes represents a Level 2 measurement. 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. See Note 10, Convertible Notes for further detail on the Notes.

The Secured Note is an instrument measured at fair value on a non-recurring basis using Level 3 inputs. The estimated fair value of the Secured Note on August 15, 2022 was $16.0 million. See Note 11, Long-Term Debt Related-Party for further detail on the Secured Note.

The warrant is an instrument measured at fair value on a non-recurring basis using Level 3 inputs. The estimated fair value of the warrant on August 15, 2022 was $3.8 million. See Note 11, Long-Term Debt Related-Party for further detail on the Company’s warrant with a related-party.

- 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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