3. Fair Value Measurements

The Company accounts for its financial assets and liabilities using fair value measurements. The authoritative accounting guidance defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about 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 fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

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Level 1 - Quoted prices in active markets for identical assets or liabilities.

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Level 2 - Inputs other than Level 1 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.

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Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 and December 31, 2015 were as follows:


($ in thousands)	Balance as of June 30, 2016			Fair Value Measurements at Reporting Date Using
Description	Balance as of June 30, 2016			Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	106,074		$	106,074	$	—	$	—

Series 1 preferred stock issuance obligation	$	(119,045	)	$	—	$	—	$	(119,045	)


($ in thousands)	Balance as of December 31, 2015		Fair Value Measurements at Reporting Date Using
Description	Balance as of December 31, 2015		Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	137,405	$	137,405	$	—	$	—

The cash equivalents represent deposits in a short term United States treasury money market mutual fund quoted in an active market and classified as a Level 1 asset.

The Company’s Level 3 financial liabilities consist of the Series 1 preferred stock issuance obligation entered into in connection with the 2016 ECP Amendment and 2016 GvHD Amendment with Intrexon on June 29, 2016. The obligation to issue the preferred stock was valued using a probability-weighted approach and a Monte Carlo simulation model. See Note 5 for additional disclosures on the 2016 ECP and 2016 GvHD Amendments and Note 8 for additional disclosure on the rights and preferences of the Series 1 preferred stock and valuation methodology.