Note 6 - Fair Value Measurement and Financial Instruments

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

6.     Fair value measurement and financial instruments

As of June 30, 2014, the Company has $28.0 million of securities consisting of money market funds, commercial paper, U.S. government sponsored enterprise securities and corporate debt securities with maturities that range from 1 day to 9 months with an overall average time to maturity of 2.5 months. The Company has the ability to liquidate these investments without restriction. The Company determines fair value for securities with Level 1 inputs through quoted market prices. The Company determines fair value for securities with Level 2 inputs through broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. The Company’s Level 2 securities have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, typically utilizing third party pricing services or other observable market data. The pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, and other industry and economic events. The Company’s Level 3 inputs are unobservable inputs based on the Company’s assessment that market participants would use in pricing the instruments.

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis for the periods presented (in thousands):

	June 30, 2014		Level 1		Level 2		Level 3
Assets:
Money market funds	$	1,793	$	1,793	$	—	$	—
Commercial paper		21,297		—		21,297		—
U.S. government sponsored enterprise securities		2,006		—		2,006		—
Corporate debt securities		2,875		—		2,875		—
Total assets	$	27,971	$	1,793	$	26,178	$	—
Liabilities:
Warrant liability	$	—	$	—	$	—	$	—
Stock-based compensation liability		84		—		—		84
Total liabilities	$	84	$	—	$	—	$	84

	December 31, 2013		Level 1		Level 2		Level 3
Assets:
Money market funds	$	55	$	55	$	—	$	—
Commercial paper		23,570		—		23,570		—
U.S. government sponsored enterprise securities		17,005		—		17,005		—
Corporate debt securities		6,507		—		6,507		—
Total assets	$	47,137	$	55	$	47,082	$	—
Liabilities:
Warrant liability	$	883	$	—	$	—	$	883
Stock-based compensation liability		202		—		—		202
Total liabilities	$	1,085	$	—	$	—	$	1,085

The Company calculates the fair value of the common share purchase warrants with exercise prices denominated in Canadian dollars (level 3) at each reporting period utilizing a Black-Scholes pricing model. The following inputs were utilized in the Black-Scholes pricing model:

	June 30, 2014			December 31, 2013
Stock price	$	2.24		$	3.70
Weighted average exercise price	$	31.68		$	25.45
Risk-free interest rate		0.11	%		0.62	%
Volatility		51.24	%		115.09	%
Dividend yield		0.00	%		0.00	%
Expected life in years		0.71			2.51
Calculated fair value per common share purchase warrant	$	-		$	0.96

The Company calculates the fair value of the stock-based compensation liability (level 3) at each reporting period utilizing a Black-Scholes pricing model. The following inputs were utilized in the Black-Scholes pricing model:

	June 30, 2014			December 31, 2013
Stock price	$	2.24		$	3.70
Weighted average exercise price	$	17.53		$	17.66
Risk-free interest rate		0.85	%		1.00	%
Volatility		95.37	%		94.53	%
Dividend yield		0.00	%		0.00	%
Expected life in years		2.93			3.42
Calculated fair value per stock option	$	0.41		$	1.17

The following table presents a reconciliation of the warrant liability measured at fair value using unobservable inputs (Level 3) (in thousands):

	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
Liabilities:
Balance at beginning of period:	$	20		$	883
Reclassification of fair value of warrant liability to equity as a result of the amendment to convert the exercise price of certain warrants from Canadian dollars to U.S dollars of the underlying common share purchase warrants		-			(834	)
Change in fair value of warrant liability included in other income (expense), net		(20	)		(49	)
Balance at end of period:	$	-		$	-

The following table presents a reconciliation of the stock-based compensation liability measured at fair value using unobservable inputs (Level 3) (in thousands):

	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
Liabilities:
Balance at beginning of period:	$	181		$	202
Change in fair value of stock-based compensation liability recorded as an adjustment to contributed surplus		(97	)		(118	)
Balance at end of period:	$	84		$	84

There were no transfers of assets or liabilities between the fair value measurement classifications.