Fair Value Measurements

12 Months Ended

Dec. 31, 2018

4.	Fair Value Measurements

For a description of the fair value hierarchy and our fair value methodology, see “Note 3 – Summary of Significant Accounting Policies”. As of December 31, 2018 and 2017, the Company’s highly liquid money market funds included within cash equivalents, restricted cash and U.S. Treasury securities are valued using Level 1 inputs. The Company classifies its federal agency securities as Level 2. There were no transfers in or out of Level 1 and Level 2 during the periods presented. US Treasury securities are bonds issued by the U.S. government and are fully backed by the U.S. government. Given the frequency at which U.S. Treasury securities trade and the accessibility of observable, quoted prices for such assets in active markets, they are recognized as Level 1 assets. Federal agency securities are bonds and notes issued by government-sponsored enterprises, including Fannie Mae, Freddie Mac and the Federal Home Loan Bank. Since federal agency securities typically do not trade as U.S. Treasury securities and no exchange exists to price such investments, they are recognized as Level 2 assets.

At December 31, 2017 the fair value of the derivative liability was $0. The estimated reporting date fair value-based measurement of the derivative liability was calculated using the Black-Scholes valuation model.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017 (in thousands):

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds⁽¹⁾	$	29,090	$	—	$	—	$	29,090
Federal agency securities⁽¹⁾		—		999		—		999
Restricted cash ⁽²⁾		50		—		—		50
U.S. Treasury securities⁽³⁾		74,139		—		—		74,139
Federal agency securities⁽³⁾		—		14,775		—		14,775
Total financial assets	$	103,279	$	15,774	$	—	$	119,053

(1)	Included in cash and cash equivalents on accompanying consolidated balance sheets.

(2)	$0.05 million of restricted cash serves as collateral for the Company’s corporate credit card.

(3)	Included in short-term investments on accompanying consolidated balance sheets and are classified as available-for-sale securities.

	December 31, 2017
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds⁽¹⁾	$	14,334	$	—	$	—	$	14,334
U.S. Treasury securities⁽³⁾		16,471		—		—		16,471
Restricted cash⁽²⁾		5,333		—		—		5,333
Federal agency securities⁽³⁾		—		1,500		—		1,500
Total financial assets	$	36,138	$	1,500	$	—	$	37,638

(1)	Included in cash and cash equivalents on accompanying consolidated balance sheets.

(2)	$5.3 million of restricted cash in the Indenture (see Note 9) serves as full collateral for the redeemable convertible notes.

(3)	Included in short-term investments on accompanying consolidated balance sheets and are classified as available-for-sale securities.

- 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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