Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

6. Fair Value of Financial Instruments

The Company’s financial instruments that are carried at fair value mainly consist of Level 1 assets and Level 3 liabilities. Level 1 assets include highly liquid bank deposits and money market funds, which were not material at September 30, 2015 and December 31, 2014. Level 3 liabilities consist of the convertible preferred stock warrant liability. The convertible preferred stock warrant liability was valued using the Black-Scholes option-pricing model. Generally, increases (decreases) in the fair value of the underlying stock and estimated term would result in a directionally similar impact to the fair value of the warrant (see Note 8).

The convertible preferred stock warrants were issued in December 2013 and were still outstanding at December 31, 2014. In July 2015, upon the Merger of the Company and ViewRay Technologies, Inc., and the Private Placement, the convertible preferred stock warrants were converted into warrants to purchase the Company’s common stock. The aggregate fair value of these warrants upon the closing of the Merger is $93 thousand which was reclassified from liabilities to common stock additional paid-in-capital, a component of condensed consolidated stockholder’s equity (deficit), and the Company ceased recording further related periodic fair value change adjustments.

The following table sets forth the fair value of the Company’s financial liabilities by level within the fair value hierarchy (in thousands):

	At September 30, 2015
	Level 1		Level 2		Level 3		Total
			(Unaudited)
Convertible preferred stock warrant liability	$	—	$	—	$	—	$	—

	At December 31, 2014
	Level 1		Level 2		Level 3		Total
Convertible preferred stock warrant liability	$	—	$	—	$	138	$	138

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands):

	Nine Months EndedSeptember30, 2015
	(Unaudited)
Fair value, beginning of period	$	138
Change in fair value of Level 3 financial liabilities		(45	)
Reclassification of preferred stock warrant liabilities to additional paid-in-capital    in conjunction with the conversion of the convertible preferred stock into common    stock upon closing of the Merger		(93	)
Fair value, end of period	$	—

The gains and losses from re-measurement of Level 3 financial liabilities are recorded as part of other income (expense), net in the condensed consolidated statements of operations.