Financial Instruments:

The Company’s financial instruments consist of cash equivalents, restricted investments, short-term investments, accounts receivable, accounts payable, and lease financing obligations. The carrying value of the Company’s financial instruments approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments, which are classified as either cash equivalents, restricted investments, or short-term investments, and accounts receivable. With respect to its investments, the Company has an investment policy that limits the amount of credit exposure to any one financial institution and restricts placement of the Company’s investments to financial institutions independently evaluated as highly creditworthy. With respect to its accounts receivable, the Company performs ongoing credit evaluations of each of its customers’ financial condition. For a customer whose credit worthiness does not meet the Company’s minimum criteria, the Company may require partial or full payment prior to shipment. Alternatively, prior to shipment, customers may be required to provide the Company with an irrevocable letter of credit or arrange for some other form of coverage to mitigate the risk of uncollectibility, such as a bank guarantee. Additionally, the Company establishes an allowance for doubtful accounts and sales return allowances based upon factors surrounding the credit risk of specific customers, historical trends, and other available information.

Items Measured at Fair Value on a Recurring Basis

On a recurring basis, the Company measures certain of its financial assets, namely its cash equivalents and available-for-sale investments, and its liability related to contingent consideration due to Lumewave shareholders, at fair value. The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs at September 30, 2015 (in thousands):



	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds ⁽¹⁾	$	5,294	$	5,294	$	—	$	—
U.S. government securities⁽²⁾	17,400		—		17,400		—
Total	$	22,694	$	5,294	$	17,400	$	—

Liabilities:
Contingent consideration	$	870	$	—	$	—	$	870
Total	$	870	$	—	$	—	$	870

The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs at December 31, 2014 (in thousands):



	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	Total		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds ⁽¹⁾	$	9,023	$	9,023	$	—	$	—
U.S. government securities⁽²⁾	30,230		—		30,230		—
Total	$	39,253	$	9,023	$	30,230	$	—

Liabilities:
Contingent consideration	$	968	$	—	$	—	$	968
Total	$	968	$	—	$	—	$	968

⁽¹⁾ Included in cash and cash equivalents in the Company’s condensed consolidated balance sheets


⁽²⁾	Represents the portfolio of available for sale securities that is included in restricted investments and short-term investments in the Company’s condensed consolidated balance sheets

Cash equivalents consist of either investments with remaining maturities of three months or less at the date of purchase, or money market funds for which the carrying amount is a reasonable estimate of fair value.

The Company’s available-for-sale securities consist of U.S. government securities with a minimum and weighted average credit rating of A-1+. The Company values these securities based on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. However, the Company classifies all of its fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. The Company's procedures include controls to ensure that appropriate fair values are recorded by comparing prices obtained from a third party independent source.

The contingent consideration payable to Lumewave's shareholders, which the Company recognized upon its purchase of Lumewave in August 2014 and is included in other long-term liabilities in the Company's condensed consolidated balance sheets as of December 31, 2014 and in other current liabilities as of September 30, 2015, is classified within Level 3 because significant assumptions for this obligation are not observable in the market. The table below includes a rollforward of the balance sheet amounts for financial instruments classified by the Company within Level 3 of the valuation hierarchy for the nine months ended September 30, 2015 (in thousands):



	Contingent Consideration
BALANCE AT DECEMBER 31, 2014	$	968
Amortization of interest and change in fair value of contingent consideration	(98		)
BALANCE AT SEPTEMBER 30, 2015	$	870

As of September 30, 2015, the Company’s available-for-sale securities had contractual maturities of eleven months and an average remaining term to maturity of three months. As of September 30, 2015, the amortized cost basis, aggregate fair value, and gross unrealized holding gains and losses of the Company’s short-term investments by major security type were as follows (in thousands):



	Amortized Cost		Aggregate Fair Value		Unrealized Holding Gains		Unrealized Holding Losses
U.S. government securities	$	17,392	$	17,400	$	8	$	—

The amortized cost basis, aggregate fair value and gross unrealized holding gains and losses for the Company’s available-for-sale short-term investments, by major security type, were as follows as of December 31, 2014 (in thousands):



	Amortized Cost		Aggregate Fair Value		Unrealized Holding Gains		Unrealized Holding Losses
U.S. government securities	$	30,237	$	30,230	$	—	$	7

Market values were determined for each individual security in the investment portfolio. The Company reviews its investments on a regular basis to evaluate whether or not any have experienced an other-than-temporary decline in fair value.

Items Measured at Fair Value on a Recurring Basis

In addition to assets and liabilities that are measured at fair value on a recurring basis, the company is also required to measure certain items at fair value on a nonrecurring basis.

In the third quarter of 2014, as part of the Company's review of property, equipment and other assets (long-lived assets), as discussed above, an impairment charge of $4.4 million was recorded against the building asset to write down this asset to its fair value of zero. The impairment was attributable to a combination of factors, including changes in the extent and manner of use of the reporting unit's long-lived assets; market activity, expected tenant improvements and commissions and period of time between recharacterization and lease up. Fair value was determined based on discounted cash flow analyses, which are unobservable Level 3 inputs. The cash flows used in the income approach were based on cash flows from various sub-lease scenarios, including varying lease rates, tenant improvements and commission costs, operating expenses and terms of occupation. We calculated the fair value for the building asset by using a probability weighted average of the estimated fair value from the various scenarios.