Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Measurements

Fair Value Measurements

4. FAIR VALUE MEASUREMENTS

In accordance with ASC 820-10, Fair Value Measurements and Disclosures, the Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

· Level 1 inputs which include quoted prices in active markets for identical assets or liabilities;

· Level 2 inputs which include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities 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 asset or liability.  For available-for-sale securities, the Company reviews trading activity and pricing as of the measurement date.  When sufficient quoted pricing for identical securities is not available, the Company uses market pricing and other observable market inputs for similar securities obtained from various third-party data providers.  These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and

· Level 3 inputs which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.  Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

The following table represents the fair value hierarchy for the Company’s financial assets and liabilities which require fair value measurement on a recurring basis (in thousands):

	Fair Value Measurements at
	December 31, 2015
	Total		Level 1		Level 2		Level 3
Assets
Money market	$	23,430	$	23,430	$	—	$	—
Corporate debt		56,787		—		56,787		—
U.S. Treasury notes		30,069		—		30,069		—
Total assets measured at fair value	$	110,286	$	23,430	$	86,856	$	—

	Fair Value Measurements at
	December 31, 2014
	Total		Level 1		Level 2		Level 3
Assets
Money market	$	59,303	$	59,303	$	—	$	—
Corporate debt		85,311		—		85,311		—
U.S. Treasury notes		11,965		—		11,965		—
Total assets measured at fair value	$	156,579	$	59,303	$	97,276	$	—

Money market funds are highly liquid investments and are actively traded.  The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date.  This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

Corporate debt and U.S. Treasury notes are measured at fair value using level 2 inputs.  We review trading activity and pricing for these investments as of each measurement date.  When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third party data providers.  These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data.  This approach results in the classification of these securities as Level 2 of the fair value hierarchy. 

Upon issuance of the convertible preferred stock warrants, the Company estimated the fair value of the liability and subsequent remeasurement using the option pricing model at each reporting date, using the following inputs: the risk‑free interest rates; the expected dividend rates; the remaining expected life of the warrants; and the expected volatility of the price of the underlying stock. The estimates were based, in part, on subjective assumptions and could differ materially in future periods. This results in the classification of the preferred stock warrant liability as Level 3 of the fair value hierarchy.

The following table includes a roll forward of the financial instruments classified within Level 3 of the fair value hierarchy (in thousands):

Fair Value Using Level 3 Inputs	Convertible Preferred Stock Warrant Liability
Balance at December 31, 2013	$	6,232
Change in fair value recorded in Other (income) expense, net		983
Exercise of warrants		(7,215)
Balance at December 31, 2014		—
Balance at December 31, 2015	$	—

There were no transfers to or from Level 1 and Level 2 during the years ended December 31, 2015 and 2014.