Note 3 - Financial Instruments

12 Months Ended

Dec. 31, 2014

3.	Financial Instruments

Below is a summary of assets and liabilities measured at fair value (in thousands):

	As of December 31, 2014
	Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets
Cash equivalents	$	68,830	$	-	$	-	$	68,830
Government securities		6,508		-		-		6,508
Corporate bonds		-		8,247		-		8,247
Total	$	75,338	$	8,247	$	-	$	83,585

	As of December 31, 2013
	Quoted Prices in Active Markets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Financial assets
Cash equivalents	$	2,781	$	-	$	-	$	2,781
Government securities		2,359		-		-		2,359
Total	$	5,140	$	-	$	-	$	5,140

Financial liabilities
Derivative liability	$	-	$	-	$	1,443	$	1,443
Total	$	-	$	-	$	1,443	$	1,443

As of December 31, 2014 and 2013, the Company's cash equivalents consist principally of money market funds. Government securities consist principally of government debt securities and money market funds which are classified as available-for-sale. Corporate bonds consist of bonds issued by highly-rated corporate entities. Cash equivalents and government securities are stated at fair value and consist of Level 1 financial instruments in the fair value hierarchy. The Company determines the fair value of its government security holdings based on pricing from a service provider. The service provider values the securities based on market prices from a variety of industry-standard independent data providers. Such market prices are quoted prices in active markets for identical assets (Level 1 inputs). Corporate bonds are stated at fair value and consist of Level 2 financial instruments in the fair value hierarchy. The Company determines the fair value of its corporate bonds holdings based on pricing from a service provider. The service provider values the securities based on market prices from a variety of industry-standard independent data providers. Such market prices are based on inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly (Level 2 inputs).

The derivative liability was considered a Level 3 input because its fair value measurement was based, in part, on significant inputs not observed in the market. Any reasonable changes in the assumptions used in the valuation could materially affect the financial results of the Company. The derivative liability was extinguished upon the conversion of the Convertible Notes into Series D Preferred Stock in May 2014.

Available-for-sale securities at December 31, 2014 and 2013 consist of the following (in thousands):

	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
December 31, 2014
Government securities
(Due within 1 year)	$	6,510	$	-	$	(2	)	$	6,508
Corporate bonds
(Due within 1 year)		8,251		-		(4	)		8,247
	$	14,761	$	-	$	(6	)	$	14,755
December 31, 2013
Government securities
(Due within 1 year)	$	2,359	$	-	$	-		$	2,359
	$	2,359	$	-	$	-		$	2,359

- 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