Note 4 - Fair Value Measurements

3 Months Ended

Mar. 31, 2019

Fair Value Measurements

Fair value is defined 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. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The FASB Accounting Standards Codification (“ASC”) Topic

820,

Fair Value Measurements and Disclosures

, establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

●

Level

— Observable inputs such as quoted prices in active markets for identical assets or liabilities.

●

Level

— Inputs other than Level

that are observable, either directly or indirectly, 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

— Unobservable inputs that are supported by little or

market activity and that are significant to the fair value of the assets or liabilities.

We measure cash, cash equivalents and short-term investments at fair value on a recurring basis. The fair values of such assets were as follows (in thousands):

			Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Balance at		for Identical		Observable		Unobservable
	March 31,		Assets		Inputs		Inputs
	201 9		(Level 1)		(Level 2)		(Level 3)
Cash and money market funds	$	23,461	$	23,461	$	—	$	—
U.S. treasury bills and government agency obligations		89,283		89,283		—		—
U.S. corporate debt securities		51,310		—		51,310		—
Foreign corporate debt securities		5,038		—		5,038		—
U.S. commercial paper		50,176		—		50,176		—
Foreign commercial paper		69,970		—		69,970		—
Total	$	289,238	$	112,744	$	176,494	$	—

			Fair Value Measurements at Reporting Date Using
			Quoted Prices in		Significant
			Active Markets		Other		Significant
	Balance at		for Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
	201 8		(Level 1)		(Level 2)		(Level 3)
Cash and money market funds	$	22,751	$	22,751	$	—	$	—
U.S. treasury bills and government agency obligations		59,741		59,741		—		—
U.S. corporate debt securities		59,087		—		59,087		—
Foreign corporate debt securities		5,046		—		5,046		—
U.S. commercial paper		61,885		—		61,885		—
Foreign commercial paper		123,861		—		123,861		—
Total	$	332,371	$	82,492	$	249,879	$	—

We have

not

transferred any investment securities between the

three

levels of the fair value hierarchy.

As of

March 31, 2019,

short-term investments included

$265.8

million of available-for-sale securities with contractual maturities of

three

months to

one

year. As of

December 31, 2018,

cash equivalents included

$9.1

million of available-for-sale securities with contractual maturities of

three

months or less, and short-term investments included

$300.5

million of available-for-sale securities with contractual maturities of

three

months to

one

year. The money market funds as of

March 31, 2019

and

December 31, 2018

are included in cash and cash equivalents on the unaudited condensed consolidated balance sheets.

A company

may

elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would

not

be recognized at inception and non-cash warranty obligations where a warrantor is permitted to pay a

third

party to provide the warranty goods or services. If the use of fair value is elected, any upfront costs and fees related to the item such as debt issuance costs must be recognized in earnings and cannot be deferred. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects

not

to measure based on fair value. Unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings and any changes in fair value are recognized in earnings. We have elected to

not

apply the fair value option to our financial assets and liabilities.

Financial instruments, including cash, cash equivalents, receivables, inventory, prepaid expenses, other current assets, accounts payable and accrued expenses are carried at cost, which is considered to be representative of their respective fair values because of the short-term maturity of these instruments. Short-term available-for-sale investments are carried at fair value. Our Convertible Notes outstanding at

March 31, 2019

not

have a readily available ascertainable market value, however, the carrying value is considered to approximate its fair value.

- 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.

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