FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2015

7. FAIR VALUE MEASUREMENTS

The Company established a fair value hierarchy which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Financial instruments measured and reported at fair value are classified and disclosed in one of the following categories (from highest to lowest) based on inputs:

Level 1—Quoted prices (unadjusted) are available in active markets for identical instruments that the Company has the ability to access as of the reporting date. The Company, to the extent that it holds such instruments, does not adjust the quoted price for these instruments, even in situations in which the Company holds a large position and a sale could reasonably affect the quoted price.

Level 2—Pricing inputs are observable for the instruments, either directly or indirectly, as of the reporting date, but are not the same as those used in Level 1. Fair value is determined through the use of models or other valuation methodologies.

Level 3—Pricing inputs are unobservable for the instruments and include situations in which there is little, if any, market activity for the investments. The inputs into the determination of fair value require significant judgment or estimation by the Company's management.

The estimated fair values of government securities money markets and U.S. Treasury Bills as of December 31, 2015 and 2014 are based on quoted prices for recent trading activity in identical or similar instruments. The Company generally invests in U.S. Treasury Bills with maturities of less than twelve months. See Note 2 for further information on the Company's fair value hierarchy.

During the year ended December 31, 2015, the Company received convertible notes as compensation for its services. These convertible notes do not have readily determinable market values and are categorized accordingly as level 3. The fair value of the convertible notes as of December 31, 2015, was recorded at the initial transaction price and their value was based upon other private-market transactions for convertible notes with identical terms.

The following tables summarize the levels of the fair value hierarchy into which the Company's financial assets and liabilities fall as of December 31, 2015:

	Total		Level 1		Level 2		Level 3
Financial assets:
Included in cash and cash equivalents
U.S. treasury bills	$	100,996	$	71,998	$	28,998	$	—
Government securities money market		77,876		—		77,876		—
Investments
U.S. treasury bills		37,989		19,990		17,999		—
Convertible notes		635		—		—		635

Total financial assets	$	217,496	$	91,988	$	124,873	$	635

The following table summarizes the levels of the fair value hierarchy into which the Company's financial assets fall as of December 31, 2014:

	Total		Level 1		Level 2		Level 3
Financial assets:
Included in cash and cash equivalents
Government securities money market	$	128,739	$	—	$	128,739	$	—
Investments
U.S. treasury bills		39,997		—		39,997		—

Total financial assets	$	168,736	$	—	$	168,736	$	—

The Company's methodology for reclassifications impacting the fair value hierarchy is that transfers in/out of the respective category are reported at fair value as of the beginning of the period in which the reclassification occurred. The changes to the Company's investments classified as Level 3 are as follows for the years ended December 31, 2015 and 2014.

	Convertible notes
January 1, 2015	$	—
Non-cash settlement of customer receivable		635

December 31, 2015	$	635


Unrealized gains (losses) related to investment still held as of December 31, 2015	$	—

	Common Stock
January 1, 2014	$	1,904
Non-cash settlement of customer receivable		1,000
Distribution to Parent		(2,904	)

December 31, 2014	$	—


Unrealized gains (losses) related to investment still held as of December 31, 2014	$	—

There were no transfers between Level 1, Level 2 or Level 3 during the years ended December 31, 2015 and 2014.

Investment Risk Factors and Concentration of Investments

The Company's financial instruments are subject to the following risk factors:

Market Risk

Market risk represents the loss that can be caused by a change in the fair value of a financial instrument.

Currency Risk

The Company is exposed to the risk that the exchange rate of the U.S. dollar relative to other currencies may have an adverse effect on the reported value of the Company's non-U.S. dollar denominated or based assets and liabilities.

- 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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