Note 2 - Investments and Fair Value Measurement

9 Months Ended

Sep. 30, 2022

Investments and Fair Value Measurement Disclosure [Text Block]

2. Investments and Fair Value Measurement

Investments

The Company classifies its marketable securities as available-for-sale and records its investments at fair value. Available-for-sale securities are carried at estimated fair value based on quoted market prices or observable market inputs of almost identical assets, with the unrealized holding gains and losses included in accumulated other comprehensive income (loss). Marketable securities which have maturities beyond one year as of the end of the reporting period are classified as non-current.

The table below summarizes the Company’s cash, cash equivalents, restricted cash and short-term investments (in thousands):

	As of September 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash, cash equivalents and restricted cash:
Cash	$	4,533	$	—	$	—	$	4,533
Money market funds		113		—		—		113
U.S. government agency securities		7,193		—		—		7,193
Commercial paper		5,893		—		—		5,893
Total cash, cash equivalents and restricted cash		17,732		—		—		17,732

Short-term investments:
Commercial paper		3,194		—		—		3,194
Total short-term investments		3,194		—		—		3,194
Total cash, cash equivalents, restricted cash and short-term investments	$	20,926	$	—	$	—	$	20,926

	As of December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Cash, cash equivalents and restricted cash:
Cash	$	1,443	$	—	$	—	$	1,443
Money market funds		2,822		—		—		2,822
Commercial paper		8,398		—		—		8,398
Total cash, cash equivalents and restricted cash		12,663		—		—		12,663

Short-term investments:
Commercial paper		29,504		—		—		29,504
Corporate debt securities		9,463		—		—		9,463
Total short-term investments		38,967		—		—		38,967
Total cash, cash equivalents, restricted cash and short-term investments	$	51,630	$	—	$	—	$	51,630

There were no other-than-temporary impairments for these securities at September 30, 2022 or December 31, 2021. No gross realized gains or losses were recognized on the available-for-sale securities and, accordingly, there were no amounts reclassified out of accumulated other comprehensive income (loss) to earnings during the three and nine months ended September 30, 2022 and 2021.

As of September 30, 2022, and December 31, 2021, the contractual maturity of all investments held was less than one year.

Fair Value Measurement

The Company’s financial instruments consist of Level I and II assets and Level III liabilities. Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. For Level II instruments, the Company estimates fair value by utilizing third party pricing services in developing fair value measurements where fair value is based on valuation methodologies such as models using observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers and other reference data. Such Level II instruments typically include U.S. treasury, U.S. government agency securities and commercial paper. As of September 30, 2022, and December 31, 2021, the Company held a contingent put option liability associated with the Loan Agreement with Oxford, determined to be a Level III instrument. The Company’s estimate of fair value of the contingent put option liability was determined by using a risk-neutral valuation model, wherein the fair value of the underlying debt facility is estimated both with and without the presence of the default provisions, holding all other assumptions constant. The resulting difference between the two estimated fair values is the estimated fair value of the default provisions, or the contingent put option. Changes to the estimated fair value of this liability is recorded in interest income and other income, net in the condensed consolidated statements of operations. The fair value of the underlying debt facility is estimated by calculating the expected cash flows in consideration of an estimated probability of default and expected recovery rate in default and discounting such cash flows back to the reporting date using a risk-free rate.

The following table sets forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy (in thousands):

	As of September 30, 2022
	Fair Value		Level I		Level II		Level III
Assets
Money market funds	$	113	$	113	$	—	$	—
U.S. government agency securities		7,193		—		7,193		—
Commercial paper		9,087		—		9,087		—
Total assets measured at fair value	$	16,393	$	113	$	16,280	$	—

Liabilities
Contingent put option liability	$	27	$	—	$	—	$	27
Total liabilities measured at fair value	$	27	$	—	$	—	$	27

	As of December 31, 2021
	Fair Value		Level I		Level II		Level III
Assets
Money market funds	$	2,822	$	2,822	$	—	$	—
Commercial paper		37,902		—		37,902		—
Corporate debt securities		9,463		—		9,463		—
Total assets measured at fair value	$	50,187	$	2,822	$	47,365	$	—

Liabilities
Contingent put option liability	$	81	$	—	$	—	$	81
Total liabilities measured at fair value	$	81	$	—	$	—	$	81

The following tables set forth a summary of the changes in the fair value of the Company’s Level III financial liabilities for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended September 30, 2022			Nine Months Ended September 30, 2022
Fair value—beginning of period	$	49		$	81
Change in fair value of contingent put option associated with the Loan Agreement		(22	)		(54	)
Fair value—end of period	$	27		$	27

	Three Months Ended September 30, 2021			Nine Months Ended September 30, 2021
Fair value—beginning of period	$	128		$	246
Change in fair value of contingent put option associated with the Loan Agreement		(19	)		(137	)
Fair value—end of period	$	109		$	109

There were no transfers between Level I, Level II or Level III of the fair value hierarchy during the three and nine months ended September 30, 2022 and 2021.