Note 4 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note

4.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. Carrying amounts of the Company’s financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate their fair values as of the balance sheet dates because of their generally short maturities. The fair value hierarchy distinguishes between (

1

) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (

2

) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of

three

broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level

1

) and the lowest priority to unobservable inputs (Level

3

). The

three

levels of the fair value hierarchy are described below in accordance to ASC

820:

● Level

1:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

● Level

2:

Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are 

not

active. Level

2

also includes assets and liabilities that are valued using models or other pricing methodologies that do

not

require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

● Level

3:

Unobservable inputs that are supported by little or

no

market activity and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

As of

June 30, 2018,

financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows (in thousands):

June 30, 2018	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	2,887	$	—	$	—	$	2,887
Marketable investments:
Available-for-sale securities		—		10,573		—		10,573
Total assets at fair value	$	2,887	$	10,573	$	—	$	13,460

As of

December 31, 2017,

financial assets measured and recognized at fair value on a recurring basis and classified under the appropriate level of the fair value hierarchy as described above were as follows (in thousands):

December 31, 2017	Level 1		Level 2		Level 3		Total
Cash equivalents:
Money market funds	$	126	$	—	$	—	$	126
Marketable investments:
Available-for-sale securities		—		21,728		—		21,728
Total assets at fair value	$	126	$	21,728	$	—	$	21,854

The Company’s Level

1

financial assets are money market funds with fair values that are based on quoted market prices. The Company’s Level

2

investments include U.S. government-backed securities and corporate securities that are valued based upon observable inputs that

may

include benchmark yields, reported trades, broker/dealer quotes, issuer spreads,

two

-sided markets, benchmark securities, bids, offers and reference data including market research publications. The average remaining maturity of the Company’s Level

2

investments as of

June 30, 2018

is less than

7

months and all of these investments are rated by S&P and Moody’s at A or better. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were

no

transfers within the hierarchy during the quarter and year ended

June 30, 2018

and

December 31, 2017,

respectively.