FAIR VALUE

We group our financial assets and liabilities measured at fair value on a recurring basis in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:

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

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data.

Level 3 - Fair value is derived from valuation techniques in which one or more significant inputs are unobservable, including assumptions and judgments made by us.

Assets and Liabilities Measured and Recorded at Fair Value on a Recurring Basis

We measure certain assets and liabilities at fair value on a recurring basis such as our financial instruments and derivatives. There have been no transfers between Level 1, 2 or 3 assets or liabilities during the fiscal year ended September 29, 2017.

Assets and liabilities measured at fair value on a recurring basis consist of the following (in thousands):



	September 29, 2017
	Fair Value		Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets
Money market funds	$	36	$	36	$	—	$	—
Commercial paper	57,911		—		57,911		—
Corporate bonds	26,210		—		26,210		—
Total assets measured at fair value	$	84,157	$	36	$	84,121	$	—
Liabilities
Contingent consideration	$	1,679	$	—	$	—	$	1,679
Common stock warrant liability	40,775		—		—		40,775
Total liabilities measured at fair value	$	42,454	$	—	$	—	$	42,454



	September 30, 2016
	Fair Value		Active Markets for Identical Assets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets
Money market funds	$	1,172	$	1,172	$	—	$	—
Commercial paper	102,928		—		102,928		—
US treasuries and agency bonds	6,002		—		6,002		—
Corporate bonds	14,799		—		14,799		—
Total assets measured at fair value	$	124,901	$	1,172	$	123,729	$	—
Liabilities
Contingent consideration	$	848	$	—	$	—	$	848
Warrant liability	38,253		—		—		38,253
Total liabilities measured at fair value	$	39,101	$	—	$	—	$	39,101

The quantitative information utilized in the fair value calculation of our Level 3 liabilities are as follows:



Liabilities	Valuation Technique	Unobservable Input	September 29, 2017	September 30, 2016
Contingent consideration	Discounted cash flow	Discount rate	9.2%	12.9%
		Probability of achievement	70% - 100%	75% - 100%
		Timing of cash flows	2 - 8 months	1 year
Warrant liability	Black-scholes model	Volatility	44.9%	43.2%
		Discount rate	1.62%	1.14%
		Expected life	3.2 years	4.2 years
		Exercise price	$14.05	$14.05
		Stock price	$44.61	$42.34
		Dividend rate	—%	—%

The fair values of the contingent consideration liabilities were estimated based upon a risk-adjusted present value of the probability-weighted expected payments by us. Specifically, we considered base, upside and downside scenarios for the operating metrics upon which the contingent payments are to be based. Probabilities were assigned to each scenario and the probability-weighted payments were discounted to present value using risk-adjusted discount rates.

The changes in assets and liabilities with inputs classified within Level 3 of the fair value hierarchy consist of the following (in thousands):



	Fiscal Year 2017
	September 30, 2016		Net Realized/Unrealized Losses (Gains) Included in Earnings		Purchases and Issuances		Sales and Settlements			Transfers in and/or (out) of Level 3		September 29, 2017
Contingent consideration	$	848	$	180	$	1,701	$	(1,050	)	$	—	$	1,679
Warrant liability	$	38,253	$	2,522	$	—	$	—		$	—	$	40,775



	Fiscal Year 2016
	October 2, 2015		Net Realized/Unrealized Losses (Gains) Included in Earnings		Purchases and Issuances		Sales and Settlements			Transfers in and/or (out) of Level 3		September 30, 2016
Contingent consideration	$	1,150	$	98	$	—	$	(400	)	$	—	$	848
Warrant liability	$	21,822	$	16,431	$	—	$	—		$	—	$	38,253



	Fiscal Year 2015
	October 3, 2014		Net Realized/Unrealized Losses (Gains) Included in Earnings		Purchases and Issuances		Sales and Settlements			Transfers in and/or (out) of Level 3		October 2, 2015
Trading securities	$	250	$	—	$	500	$	(750	)	$	—	$	—
Contingent consideration	$	820	$	330	$	—	$	—		$	—	$	1,150
Warrant liability	$	15,802	$	6,020	$	—	$	—		$	—	$	21,822