3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2015 and 2014 and indicate the level of the fair value hierarchy utilized to determine such fair value:

 

		Fair Value Measurements as of December 31, 2015 Using:
		Level 1				Level 2				Level 3				Total
Assets:
Cash equivalents:
Money market funds		$	—			$	29,879			$	—			$	29,879
Marketable securities:
United States treasury notes			—				44,534				—				44,534
Agency bonds			—				29,746				—				29,746
Total		$	—			$	104,159			$	—			$	104,159
		Fair Value Measurements as of December 31, 2014 Using:
		Level 1				Level 2				Level 3				Total
Assets:
Cash equivalents:
Money market funds		$	—			$	29,103			$	—			$	29,103
Agency bonds			—				7,599				—				7,599
Marketable securities:
United States treasury notes			—				10,026				—				10,026
Agency bonds			—				27,409				—				27,409
Total		$	—			$	74,137			$	—			$	74,137

During the years ended December 31, 2015, 2014 and 2013, there were no transfers between Level 1, Level 2 and Level 3.

The warrant liability was comprised of the values of warrants for the purchase of Series A, B and D redeemable convertible preferred stock and was based on significant inputs not observable in the market, which represented a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the redeemable convertible preferred stock warrants utilized the Black-Scholes option-pricing model, which incorporated assumptions and estimates to value the preferred stock warrants. The Company assessed these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained. Changes in the fair value of the redeemable convertible preferred stock warrants were recognized in the statements of operations for the years ended December 31, 2014 and 2013. Upon the closing of our IPO in July 2014, the Company’s outstanding preferred stock warrants were converted to warrants for the purchase of shares of common stock. (Note 8)

Related to the valuation of the warrants, the quantitative elements associated with the Company’s Level 3 inputs impacting fair value measurement included the fair value per share of the underlying Series A, Series B and Series D redeemable convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield, and expected volatility of the price of the underlying preferred stock. The Company determined the fair value per share of the underlying preferred stock by taking into consideration its most recent sales of its redeemable convertible preferred stock as well as additional factors that the Company deemed relevant. The Company historically had been a private company and lacked company-specific historical and implied volatility information of its stock. Therefore, it estimated its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.

The following table provides a rollforward of the aggregate fair values of the Company’s preferred stock warrants for which fair value was determined by level 3 inputs:

 

Balance, January 1, 2013		$	268
Decrease in fair value			(14	)
Balance, December 31, 2013			254
Issuance of Series D-1 warrants			326
Increase in fair value			380
Conversion of preferred stock warrants to common stock warrants (Note 8)			(960	)
Balance, December 31, 2014		$	—