Quarterly report pursuant to Section 13 or 15(d)

Note 3 - Summary of Significant Accounting Policies

v3.19.2
Note 3 - Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2019
Notes to Financial Statements  
Significant Accounting Policies [Text Block]
3.
Summary of Significant Accounting Policies
 
Interim f
inancial
s
tatements
 
We have prepared the accompanying condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and with the instructions to Form
10
-Q and Regulation S-
X
of the Securities and Exchange Commission (“SEC”). Accordingly, they do
not
include all of the information and footnotes required by US GAAP for complete financial statements. These condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals which, in the opinion of management, are necessary to present fairly our consolidated financial position, consolidated results of operations, consolidated statement of shareholders’ equity and consolidated cash flows for the periods and as of the dates presented. Our fiscal year ends on
December 31.
The condensed consolidated balance sheet as of
December 31, 2018
was derived from audited consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto. The nature of our business is such that the results of any interim period
may
not
be indicative of the results to be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current basis of presentation.
 
Cash and
cash e
quivalents
 
The Company considers all bank deposits, including money market funds, and other investments, purchased with an original maturity to the Company of
three
months or less, to be cash and cash equivalents.
 
Concentration of c
redit
r
isk
 
Financial instruments that potentially expose the Company to concentration of credit risk consist primarily of cash and cash equivalents and marketable securities.
 
The Company maintains its cash balances primarily with
two
financial institutions. These balances exceed federally insured limits. The Company has
not
experienced any losses in such accounts and believes it is
not
exposed to any significant credit risk in cash and cash equivalents.
 
The Company believes that the credit risk related to marketable securities is limited due to the adherence to an investment policy focused on the preservation of principal.
 
Marketable s
ecurities
 
The Company’s marketable securities consist solely of available-for-sale securities and were valued in accordance with the fair value measurement guidance discussed below. Available-for-sale securities are carried at fair value with unrealized gains and losses reported as a component of shareholders’ equity in accumulated other comprehensive income (loss). Realized gains and losses, if any, are calculated on the specific identification method and are included in other income in the condensed consolidated statements of operations.
 
Available-for-sale securities are reviewed for possible impairment at least quarterly, or more frequently if circumstances arise that
may
indicate impairment. When the fair value of the securities declines below the amortized cost basis, impairment is indicated and it must be determined whether it is other than temporary. Impairment is considered to be other than temporary if the Company: (i) intends to sell the security, (ii) will more likely than
not
be forced to sell the security before recovering its cost, or (iii) does
not
expect to recover the security’s amortized cost basis. If the decline in fair value is considered other than temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported in earnings. Subsequent increases or decreases in fair value are reported as a component of shareholders’ equity in accumulated other comprehensive income (loss).
 
Fair value m
easurements
 
Under the authoritative guidance for fair value measurements, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
 
The hierarchy is broken down into
three
levels defined as follows:
 
Level
1
Inputs
— quoted prices in active markets for identical assets and liabilities
Level
2
Inputs
— observable inputs other than quoted prices in active markets for identical assets and liabilities
Level
3
Inputs
— unobservable inputs
 
As of
June 30, 2019,
the Company believes that the carrying amounts of its other financial instruments, including amounts receivable, accounts payable and accrued liabilities, approximate their fair value due to the short-term maturities of these instruments. See Note
4,
titled “
Marketable Securities
” for additional information.
 
Recently adopted accounting p
ronouncements
 
In
February 2016,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No.
2016
-
02,
Leases
. The guidance in ASU
2016
-
02
supersedes the lease recognition requirements in the Accounting Standards Codification Topic
840,
Leases
. ASU
2016
-
02
requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard requires the immediate recognition of all excess tax benefits and deficiencies in the statements of operations and requires classification of excess tax benefits as an operating activity as opposed to a financing activity in the statements of cash flows. This standard became effective for us on
January 1, 2019.
 
The FASB has subsequently issued the following amendments to ASU
2016
-
02,
which have the same effective date and transition date of
January 1, 2019,
and which we collectively refer to as the new leasing standards:
 
 
ASU
No.
2018
-
01,
Leases (Topic
842
): Land Easement Practical Expedient for Transition to Topic
842
, which permits an entity to elect an optional transition practical expedient to
not
evaluate under Topic
842
land easements that existed or expired prior to adoption of Topic
842
and that were
not
previously accounted for as leases under the prior standard, ASC
840,
Leases
.
 
 
ASU
No.
2018
-
10,
Codification Improvements to Topic
842,
Leases
, which amends certain narrow aspects of the guidance issued in ASU
2016
-
02.
 
 
ASU
No.
2018
-
11,
Leases (Topic
842
): Targeted Improvements
, which allows for a transition approach to initially apply ASU
2016
-
02
at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption as well as an additional practical expedient for lessors to
not
separate non-lease components from the associated lease component.
 
 
ASU
No.
2018
-
20,
Narrow-Scope Improvements for Lessors
, which contains certain narrow scope improvements to the guidance issued in ASU
2016
-
02.
 
Additional information and disclosures required by this new standard are contained in Note
8,
titled “
Operating Lease
.”
 
We adopted the new leasing standards on
January 1, 2019,
using a modified retrospective transition approach to be applied to leases existing as of, or entered into after,
January 1, 2019;
and, consequently, financial information will
not
be updated and the disclosures required under Topic
842
will
not
be provided for dates and periods prior to
January 1, 2019.
We have reviewed our existing lease contracts and the impact of the new leasing standards on our consolidated results of operations, financial position and disclosures. Upon adoption of the new leasing standards, we recognized a lease liability and related right-of-use asset on our condensed consolidated balance sheet of approximately
$205,000
.
 
In
June 2018,
the FASB issued ASU
No.
2018
-
07,
Improvements to Nonemployee Share-Based Payment Accounting
,” to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. This ASU is effective for public entities for fiscal years beginning after
December 15, 2018.
Prior to the adoption of this ASU, share-based compensation awarded to non-employees was subject to revaluation over its vesting terms. Subsequent to the adoption of this ASU, non-employee share-based payment awards are measured on the date of grant, similar to share-based payment awards granted to employees. We adopted this standard on
January 1, 2019
and the adoption of this ASU did
not
have a material impact on our financial position or our condensed consolidated statements of operations.