FAIR VALUE MEASUREMENT

3 Months Ended

Mar. 31, 2020

NOTE 5 - FAIR VALUE MEASUREMENT

The Company’s assets and liabilities that are measured at fair value as of March 31, 2020 and December 31, 2019, are classified in the tables below in one of the three categories described in note 2H above:


	March 31, 2020
	Level 1		Level 2		Level 3		Total
Marketable securities(1)	$	1,024	$	23,187	$	—	$	24,211
CSR(2)	$	—	$	—	$	(19,636)	$	(19,636)
Derivative liability(3)	$	—	$	—	$	(1,190)	$	(1,190)


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Marketable securities(1)	$	1,020	$	15,660	$	—	$	16,680

(1) The Company’s debt securities are traded in markets that are not considered to be active, but are valued based on quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Accordingly, these assets are categorized as Level 2.

(2) See “Note 3 - Business combination” for more information regarding the measurement of the CSR

(3) The Company’s derivative liability consists of equity awards reclassified from additional paid-in capital to derivatives due to the modification of awards as described in Note 9 - Share capital. On the Effective Date the Company reclassified $1,632 from and recognized financial income of $442 during the period. The Company used the Black Scholes valuation model to determine the fair value of the options. The derivative was classified as level 3 since the volatility input was determined based on the historical Menlo volatility combined with volatility of comparable companies.

Foreign exchange risk management

Occasionally, the Company purchases and writes non-functional currency options in order to hedge the currency exposure on the Company’s cash flow. The currency hedged items are denominated in New Israeli Shekels (“NIS”). The purchasing and writing of options is part of a comprehensive currency hedging strategy with respect to salary and rent expenses denominated in NIS. These transactions are at zero cost for periods of up to one year. The counterparties to the derivatives are major banks in Israel. As of March 31, 2020, there were no hedged amounts.

As of March 31, 2020, the Company has a lien in the amount of $281 on the Company’s marketable securities and a lien in the amount $250 on the Company’s checking account, in respect of bank guarantees granted in order to secure the hedging transactions.

- 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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