Note 4 – Investments and Fair Value of Financial Instruments

Investments consist of available-for-sale securities, which are carried at fair value. Interest and dividends on investments are included in finance income, net.

As of June 30, 2020, the Company did not have any investments. The following table summarizes, by major security type, the Company's investments as of December 31, 2019:

The Company accounts for financial instruments in accordance with ASC 820, "Fair Value Measurements and Disclosures" ("ASC 820"). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices in non-active markets or in active markets for similar assets or liabilities, observable inputs other than quoted prices, and inputs that are not directly observable but are corroborated by observable market data;

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

There were no changes in the fair value hierarchy leveling during the three and six months ended June 30, 2020 and during the year ended December 31, 2019.

The following table summarizes the fair value of the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis, by level within the fair value hierarchy, as of June 30, 2020 and December 31, 2019:

Financial instruments with carrying values approximating fair value include cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, and certain other current liabilities, due to their short-term nature.

Contingent Royalty Obligation

In estimating the fair value of the Company's contingent royalty obligation (see Note 9), the Company used the discounted cash flow method as of June 30, 2020 and December 31, 2019. Based on the fair value hierarchy, the Company classified contingent royalty obligation within Level 3 because valuation inputs are based on projected revenues discounted to a present value.

The following table sets forth a summary of changes in the estimated fair value of the Company's Level 3 contingent royalty obligation for the six months ended June 30, 2020:

The contingent royalty obligation is re-measured at each balance sheet date using the following assumptions: 1) discount rate of 21% at both June 30, 2020 and December 31, 2019, and 2) rate of royalty payment of 3% at both June 30, 2020 and December 31, 2019.

In accordance with ASC-820-10-50-2(g), the Company performed a sensitivity analysis of the liability, which was classified as a Level 3 financial instrument. The Company recalculated the fair value of the liability by applying a +/- 2% change to the input variable in the discounted cash flow model; the discount rate. A 2% decrease in the discount rate would increase the liability by $178 and a 2% increase in the discount rate would decrease the liability by $158.