Fair Value Measurements

12 Months Ended

Dec. 31, 2014

4. Fair Value Measurements

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):


	Fair Value Measurements at December 31, 2014
	Total		Level 1		Level 2		Level 3
Assets
Money market funds	$	160,125	$	160,125	$	—	$	—

	Fair Value Measurements at December 31, 2013
	Total		Level 1		Level 2		Level 3
Assets
Money market funds	$	12,761	$	12,761	$	—	$	—
Liabilities
Convertible preferred stock warrant liability	$	474	$	—	$	—	$	474
Convertible preferred stock call option liability		21		—		—		21
Total liabilities	$	495	$	—	$	—	$	495

The fair value measurement of the convertible preferred stock warrant liability and convertible preferred stock call option liability is based on significant inputs not observed in the market and thus represents a Level 3 measurement. Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s assumptions in measuring fair value. The Company’s estimated fair value of the convertible preferred stock warrant liability is calculated using an option pricing model and key assumptions including the probabilities of settlement scenarios, enterprise value, time to liquidity, risk-free interest rates, discount for lack of marketability and volatility. The Company’s estimated fair value of the preferred stock call option liability is calculated using an option pricing model and key assumptions including the estimated fair value of the Company’s preferred stock, risk-free interest rates and volatility and the probability of the closing of the future financing tranche. The estimates are based, in part, on subjective assumptions and could differ materially in the future.

During the periods presented, the Company has not changed the manner in which it values liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the years ended December 31, 2014 or 2013.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial instruments as follows:

	Convertible			Convertible
	preferred stock			preferred stock
	call option			warrant
	liability			liability
Balance at January 1, 2014	$	21		$	474
Fair value of call option liability recognized upon issuance of preferred stock		—			—
Change in fair value recorded in other income (expense), net		9,560			2,278
Conversion of preferred stock into common stock and reclassification to permanent equity		(9,581	)		(2,752	)
Balance at December 31, 2014	$	—		$	—

	Convertible			Convertible
	preferred stock			preferred stock
	call option			warrant
	liability			liability
Balance at January 1, 2013	$	—		$	433
Issuance of financial instruments		1,116			—
Fair value of call option liability recognized upon issuance of preferred stock		(126	)		—
Change in fair value recorded in other income (expense), net		(969	)		41
Balance at December 31, 2013	$	21		$	474

- 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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