Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements and Marketable Securities

v2.4.0.8
Fair Value Measurements and Marketable Securities
6 Months Ended
Jun. 30, 2014
Fair Value Measurements and Marketable Securities

NOTE 6 — FAIR VALUE MEASUREMENTS AND MARKETABLE SECURITIES

The Company accounts for its marketable securities in accordance with ASC 820 “Fair Value Measurements and Disclosures.” ASC 820 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. ASC 820 defines fair value 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. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that 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.

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. For Level 2 securities that have market prices from multiples sources, a “consensus price” or a weighted average price for each of these securities can be derived from a distribution-curve-based algorithm which includes market prices obtained from a variety of industrial standard data providers (e.g. Bloomberg), security master files from large financial institutions, and other third-party sources. Level 2 securities with short maturities and infrequent secondary market trades are typically priced using mathematical calculations adjusted for observable inputs when available.

The following table sets forth the Company’s financial assets (cash equivalents and marketable securities) at fair value on a recurring basis as of June 30, 2014 and December 31, 2013:

 

 

Fair Value as of

June 30,

2014

 

 

Basis of Fair Value Measurements

 

(in thousands)

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

$

6,463

 

 

$

6,463

 

 

$

 

 

$

 

Certificates of deposit

 

2,844

 

 

 

 

 

 

2,844

 

 

 

 

Corporate debt securities

 

40,937

 

 

 

 

 

 

40,937

 

 

 

 

U.S. Government securities

 

20,023

 

 

 

 

 

 

20,023

 

 

 

 

Municipal securities

 

1,450

 

 

 

 

 

 

1,450

 

 

 

 

Commercial paper

 

3,498

 

 

 

 

 

 

3,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cash equivalents and marketable securities

$

75,215

 

 

$

6,463

 

 

$

68,752

 

 

$

 

 

 

 

Fair Value as of

December 31,

2013

 

 

Basis of Fair Value Measurements

 

(in thousands)

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Money market funds

$

4,285

 

 

$

4,285

 

 

$

 

 

$

 

Certificates of deposit

 

1,584

 

 

 

 

 

 

1,584

 

 

 

 

Corporate debt securities

 

49,019

 

 

 

 

 

 

49,019

 

 

 

 

U.S. Government securities

 

21,731

 

 

 

 

 

 

21,731

 

 

 

 

Municipal securities

 

2,815

 

 

 

 

 

 

2,815

 

 

 

 

Commercial paper

 

2,599

 

 

 

 

 

 

2,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total cash equivalents and marketable securities

$

82,033

 

 

$

4,285

 

 

$

77,748

 

 

$

 

 

The Company invests in highly-liquid, investment-grade securities. The following is a summary of the Company’s available-for-sale securities at June 30, 2014 and December 31, 2013:

 

As of June 30, 2014 (in thousands):

Cost Basis

 

 

Unrealized

Gain

 

 

Unrealized

Loss

 

 

Fair

Value

 

Money market funds

$

6,463

 

 

$

 

 

$

 

 

$

6,463

 

Certificates of deposit

 

2,844

 

 

 

 

 

 

 

 

 

2,844

 

Corporate debt securities

 

40,930

 

 

 

12

 

 

 

(5

)

 

 

40,937

 

U.S. Government securities

 

20,013

 

 

 

11

 

 

 

(1

)

 

 

20,023

 

Municipal securities

 

1,450

 

 

 

 

 

 

 

 

 

1,450

 

Commercial paper

 

3,498

 

 

 

 

 

 

 

 

 

3,498

 

 

 

75,198

 

 

 

23

 

 

 

(6

)

 

 

75,215

 

Less cash equivalents

 

6,463

 

 

 

 

 

 

 

 

 

6,463

 

Total marketable securities

$

68,735

 

 

$

23

 

 

$

(6

)

 

$

68,752

 

 

As of December 31, 2013 (in thousands):

Cost Basis

 

 

Unrealized

Gain

 

 

Unrealized

Loss

 

 

Fair

Value

 

Money market funds

$

4,285

 

 

$

 

 

$

 

 

$

4,285

 

Certificates of deposit

 

1,584

 

 

 

 

 

 

 

 

 

1,584

 

Corporate debt securities

 

49,001

 

 

 

25

 

 

 

(7

)

 

 

49,019

 

U.S. Government securities

 

21,722

 

 

 

12

 

 

 

(3

)

 

 

21,731

 

Municipal securities

 

2,814

 

 

 

1

 

 

 

 

 

 

2,815

 

Commercial paper

 

2,599

 

 

 

 

 

 

 

 

 

2,599

 

 

 

82,005

 

 

 

38

 

 

 

(10

)

 

 

82,033

 

Less cash equivalents

 

7,279

 

 

 

 

 

 

 

 

 

7,279

 

Total marketable securities

$

74,726

 

 

$

38

 

 

$

(10

)

 

$

74,754

 

 

There were no realized gains or losses in the three and six months ended June 30, 2014 and 2013, respectively.

As of June 30, 2014, the weighted average maturity for the Company’s available for sale securities was 6.6 months, with the longest maturity being November 2015.

The following table provides the breakdown of the marketable securities with unrealized losses at June 30, 2014 (in thousands):

 

 

In loss position for less

than twelve months

 

As of June 30, 2014 (in thousands):

Fair

Value

 

 

Unrealized

Loss

 

U.S. Government securities

$

8,010

 

 

$

(1

)

Corporate debt securities

 

12,259

 

 

 

(5

)

Total marketable securities

$

20,269

 

 

$

(6

)

 

The Company determined the fair value of the liability associated with its warrants to purchase 8.3 million shares of outstanding common stock using a Black-Scholes Model. See detailed discussion in Note 4 Stockholders’ Equity.