Note 3 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE

3

.  

Fair Value of Financial Instruments

Fair value accounting is applied for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Financial instruments include cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities that approximate fair value due to their relatively short maturities. As short-term investments are classified as held-to-maturity, they are recorded at their amortized cost.

Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance also establishes a

three

-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The

three

-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 

1

 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 

2

 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities 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 related assets or liabilities; and

Level 

3

 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or

no

market data.

The Company’s money market funds are classified within Level 

1

of the fair value hierarchy and are valued based on quoted prices in active markets for identical securities. The Company’s convertible preferred stock warrant liability was classified within Level 

3

of the fair value hierarchy as it was valued using inputs that were unobservable in the market.

The Company’s only recurring financial assets that are measured at fair value were

$15,000

held in money market funds and classified as cash equivalents as of both 

June 30, 2019

and

December 

31,

2018,

with

no

recurring financial liabilities held at either date or in the

six

months ended

June 30,

2019

. The following table presents a reconciliation of all liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 

3

) for the

six

months ended

June 30,

2018

:

	Convertible
	Preferred Stock
	Warrant Liability			Total
	(in thousands)
Balance at January 1, 2018	$	67		$	67
Issuances		—			—
Revaluation loss included in loss on revaluation of financial instruments, net		3			3
Settlements		(70	)		(70	)
Balance at June 30, 2018	$	—		$	—
Total gains included in other income and (expenses) attributable to liabilities still held as of June 30, 2018	$	—		$	—