Fair Value Measurements
 9 Months Ended
Sep. 30, 2016
Fair Value Measurements  
Fair Value Measurements

3. Fair Value Measurements

 

The Company classifies fair value based measurements using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: Level 1, quoted market prices in active markets for identical assets or liabilities; Level 2, observable inputs other than quoted market prices included in Level 1 such as quoted market prices for markets that are not active or other inputs that are observable or can be corroborated by observable market data; and Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, including estimates and assumptions developed by the Company, reflective of those that a market participant would use, as inputs to certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

 

Assets measured at fair value on a recurring basis as of September 30, 2016 were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

    

 

 

    

Quoted Prices

    

Significant

    

 

 

 

 

 

 

 

 

in Active

 

Other

 

Significant

 

 

 

 

 

 

Markets for

 

Observable

 

Unobservable

 

 

 

September 30, 

 

Identical Assets

 

Inputs

 

Inputs

 

Financial Assets:

 

2016

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Cash and cash equivalents

 

$
199,874

 

$
199,874

 

$

 —

 

$

 —

 

Money market funds, included in other current assets

 

 
320

 

 
320

 

 

 —

 

 

 —

 

Money market funds, included in other non-current assets

 

 
1,619

 

 
1,619

 

 

 —

 

 

 —

 

Total financial assets

 

$
201,813

 

$
201,813

 

$

—

 

$

—

 

 

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Quoted Prices

    

Significant

    

 

 

 

 

 

 

 

 

in Active

 

Other

 

Significant

 

 

 

 

 

 

Markets for

 

Observable

 

Unobservable

 

 

 

December 31, 

 

Identical Assets

 

Inputs

 

Inputs

 

Financial Assets:

 

2015

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Cash and cash equivalents

 

$
143,180

 

$
143,180

 

$

 —

 

$

 —

 

Money market funds, included in other current assets

 

 
320

 

 
320

 

 

 —

 

 

 —

 

Total financial assets

 

$
143,500

 

$
143,500

 

$

 —

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$
289

 

$

—

 

$

—

 

$
289

 

Total financial liabilities

 

$
289

 

$

 —

 

$

 —

 

$
289

 

 

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

 

 

 

 

 

 

 

    

 

 

Warrant

 

 

 

 

 

Liability

 

Fair value at December 31, 2015

 

 

$
289

 

Changes in fair value recognized in other expense

 

 

 
87

 

Reclassification to additional paid-in capital in connection with IPO

 

 

 
(376)

 

Fair value at September 30, 2016

 

 

$

 —

 

 

There were no transfers between fair value measurement levels during the nine month period ended     September 30, 2016 or 2015. The fair value of the preferred stock warrant liability was determined based on “Level 3” inputs utilizing the Black-Scholes option pricing model. Upon the completion of the IPO, the Company’s outstanding warrant to purchase preferred stock converted into a warrant to purchase common stock and the Company reclassified the fair value of the warrant to additional paid-in capital.

 

Cash and cash equivalents

 

The Company considers all highly liquid securities with original final maturities of three months or less from the date of purchase to be cash equivalents. As of September 30, 2016 and December 31, 2015, cash and cash equivalents comprised of funds in cash and money market accounts.