FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2017

NOTE 4:-

FAIR VALUE MEASUREMENTS

In accordance with ASC 820, "Fair Value Measurements and Disclosures", the Company measures its cash equivalents, available-for-sale marketable securities and acquisition related contingent consideration at fair value on recurring basis. Cash equivalents and marketable securities are classified within Level 1 or Level 2. This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.

The liability with respect to contingent consideration regarding Seculert Ltd. acquisition is classified within Level 3 because this liability is valued using valuation techniques. Some of the inputs to these models are unobservable in the market and are significant.

The Company's financial assets and liabilities measured at fair value on a recurring basis, including interest receivable components consisted of the following types of instruments as of December 31, 2017 and 2016:

	December 31, 2017
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Assets

Cash equivalents:
Money market funds	$	501	$	-	$	-	$	501

Available-for-sale:

Foreign banks and government debentures		-		50,043		-		50,043
Corporate debentures		-		46,957		-		46,957

Total financial assets	$	501	$	97,000	$	-	$	97,501

Liabilities

Contingent consideration	$	-	$	-	$	1,550	$	1,550

Total financial liabilities	$	-	$	-	$	1,550	$	1,550

	December 31, 2016
	Fair value measurements using input type
	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	578	$	-	$	-	$	578

Available-for-sale:

Foreign banks and government debentures		-		54,100		-		54,100
Corporate debentures		-		41,319		-		41,319

Total financial assets	$	578	$	95,419	$	-	$	95,997

The table below presents the changes in Level 3 contingent consideration obligation measured on a recurring basis and related to business combination of Seculert in January 2017:

	December 31, 2017

Fair value at the beginning of the year	$	-
Acquisition date fair value of contingent consideration related to investment in Seculert (see Note 1c)		1,981
Changes in the fair value of contingent consideration in Seculert		(431	)

Fair value at the end of the year	$	1,550

The fair value of the contingent consideration related to the investment in Seculert was $1,550 as of December 31, 2017. The Company estimated the fair value of the contingent consideration using Monte Carlo simulation with a discount rate of 16% and based on various probabilities for Seculert to meet the revenues milestone and the completion of the R&D development (refer to Note 1c for further details). As of December 31, 2017 the R&D millstone was not achieved and no payments to Seculert's shareholders were due. Accordingly, the Company recorded a net income of $431 in 2017.

Changes in the contingent consideration are recorded in the statements of operations in operating expenses under Research and development, net.

- 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.

+ References + Details