Annual report pursuant to Section 13 and 15(d)

Fair Value of Financial Instruments

v3.22.1
Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2021
Fair Value of Financial Instruments  
Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurement, or ASC 820, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Cash, Cash Equivalents, Restricted Cash, and Marketable Securities

The following table presents the Company’s cash, cash equivalents, restricted cash, and marketable securities as of December 31, 2021 and 2020 (in thousands):

December 31, 2021

    

Adjusted 

Unrealized

Unrealized

Cash and Cash

Restricted

Cost

    

Gains

    

Losses

    

Fair Value

    

Equivalents

    

Cash

Cash

$

9,459

$

$

$

9,459

$

8,148

$

1,311

Level 1 (1):

 

 

  

 

  

 

  

 

 

  

Money market funds

 

58,775

 

 

 

58,775

 

58,775

 

Subtotal

 

58,775

 

 

 

58,775

 

58,775

 

Total

$

68,234

$

$

$

68,234

$

66,923

$

1,311

December 31, 2020

Adjusted 

Unrealized

Unrealized

Cash and Cash

Restricted

    

Cost

    

Gains

    

Losses

    

Fair Value

    

Equivalents

    

Cash

Cash

$

6,100

$

$

$

6,100

$

4,790

$

1,310

Level 1 (1):

 

  

 

  

 

  

 

  

 

  

 

  

Money market funds

 

104,613

 

 

 

104,613

 

104,613

 

Subtotal

 

104,613

 

 

 

104,613

 

104,613

 

Total

$

110,713

$

$

$

110,713

$

109,403

$

1,310

(1) The fair value of Level 1 securities is estimated based on quoted prices in active markets for identical assets or liabilities.

The Company classifies investments available to fund current operations as current assets on its balance sheets. As of December 31, 2021 and 2020, the Company did not hold any investment securities exceeding a one-year maturity.

The Company maintains $1.3 million as collateral under a letter of credit for the Company’s facility lease obligations in Chesterbrook, Pennsylvania. The Company has recorded this deposit and accumulated interest thereon as restricted cash on its balance sheet.

Accretion of bond discount on marketable securities is included in other income as a separate component of other income (expense) on the statement of operations and comprehensive loss. Interest income on marketable securities is recorded as interest income on the statement of operations and comprehensive loss.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. The Company does not hold material Level 3 securities, and therefore, there were no transfers in or out of Level 3 in the hierarchy during the years ended December 31, 2021 or 2020.