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Note 2 - Fair Value Measurements

9 Months Ended

Sep. 30, 2014

2. Fair Value Measurements

The Company measures and reports its cash equivalents, foreign currency forward exchange contracts, and convertible preferred stock warrant liabilities at fair value. Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability 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 defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level I—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level II—Inputs other than quoted prices included within Level I that are observable, unadjusted 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 related assets or liabilities.

Level III—Unobservable inputs that are supported by little or no market activity for the related assets or liabilities and typically reflect management’s estimate of assumptions that market participants would use in pricing the assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013 based on the three-tier fair value hierarchy (in thousands):

	As of September 30, 2014
	Fair Value		Level I		Level II		Level III
Assets
Money market funds(1)	$	4,467	$	4,467	$	—	$	—
Foreign currency forwards(2)		191		—		191		—
Total assets measured at fair value	$	4,658	$	4,467	$	191	$	—
Liabilities
Convertible preferred stock warrant liabilities	$	909	$	—	$	—	$	909
Foreign currency forwards(3)		119		—		119		—
Total liabilities measured at fair value	$	1,028	$	—	$	119	$	909

	As of December 31, 2013
	Fair Value		Level I		Level II		Level III

Assets
Money market funds(1)	$	4,966	$	4,966	$	—	$	—
Foreign currency forwards(2)		1		—		1		—
Total assets measured at fair value	$	4,967	$	4,966	$	1	$	—
Liabilities
Convertible preferred stock warrant liabilities	$	760	$	—	$	—	$	760
Foreign currency forwards(3)		314		—		314		—
Total liabilities measured at fair value	$	1,074	$	—	$	314	$	760

(1)	Included in cash and cash equivalents in the consolidated balance sheets. The carrying value of money market funds approximates fair value because of their short maturities.

(2)	Included in prepaid and other current assets in the consolidated balance sheets.

(3)	Included in accrued liabilities in the consolidated balance sheets.

There were no transfers of financial instruments, which are measured at fair value, between Level I, Level II, and Level III during the three and nine months ended September 30, 2014 and 2013.

The following table sets forth a summary of the changes in the fair value of Level III financial liabilities (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Fair value—beginning of period	$	908	$	525	$	760	$	505
Exercise of convertible preferred stock warrants		—		—		—		(13	)
Change in fair value of Level III liabilities recorded in other income (expense), net		1		84		149		117
Fair value—end of period	$	909	$	609	$	909	$	609

- 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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