Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2014

Note 3. Fair Value of Financial Instruments

The Company carries certain financial assets consisting of money market funds and certificates of deposit at fair value on a recurring basis. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1:		Observable inputs which include unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2:		Observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.

Level 3:		Unobservable inputs that are supported by little or no market activity and that are based on management’s assumptions, including fair value measurements determined by using pricing models, discounted cash flow methodologies or similar valuation techniques.

The fair value of assets carried at fair value was determined using the following inputs (in thousands):

	Balance at
	December 31, 2014		(Level 1)		(Level 2)		(Level 3)
Cash equivalents:
Money market funds	$	100,570	$	94,274	$	6,296	$	—
Short-term investments:
Corporate debt securities	$	26,481	$	26,481	$	—	$	—
Commercial paper	$	1,998	$	—	$	1,998	$	—
Other assets:
Certificates of deposit	$	630	$	—	$	630	$	—

	Balance at
	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Cash equivalents:
Money market funds	$	81,817	$	72,717	$	9,000	$	—
Other assets:
Certificates of deposit	$	630	$	—	$	630	$	—

During the third quarter of 2014, the Company purchased investments in commercial paper and corporate debt securities. At December 31, 2014, all investments were designated as available-for-sale and reported at fair value based either upon quoted prices in active markets, quoted prices in less active markets, or quoted market prices for similar investments, with unrealized gains and losses, net of related tax, if any, included in other comprehensive loss. At December 31, 2014, available-for-sale securities consisted of the following (in thousands):

	Available-for-Sale Securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Corporate debt securities	$	26,700	$	45	$	(264	)	$	26,481
Commercial paper		1,996		2		—			1,998
Total	$	28,696	$	47	$	(264	)	$	28,479

The expected maturities of our investments in available-for-sale securities at December 31, 2014 are shown below (in thousands):

Available-for-Sale Securities	Amortized Cost		Estimated Fair Value
Due in less than one year	$	28,696	$	28,479
Total	$	28,696	$	28,479

The Company’s other financial instruments, including accounts receivable, accounts payable and other current liabilities, are carried at cost which approximates fair value due to the relatively short maturity of those instruments.

In June 2013 and August 2013, the Company issued TriplePoint preferred stock warrants in connection with debt agreements that were recorded as liabilities at issuance and were carried at fair value for a portion of the year prior to reclassification (September 26, 2013), the date of effectiveness of the Registration Statement for the IPO, to stockholders’ equity. The fair value of the warrants at the issuance dates in June 2013 and August 2013 were $265,000 and $495,000, respectively. The fair value of the June 2013 and August 2013 warrants at the date of reclassification were $320,000 and $500,000, respectively. The fair value of preferred stock warrants was determined by the Black-Scholes-Merton option pricing model which is a technique using level 3 inputs which are detailed in Note 6.

On December 31, 2013, the Company refinanced a substantial portion of its outstanding debt obligations. Based on borrowing rates available to the Company for loans with similar terms, the stable interest rate environment and considering the Company’s credit risks, management concluded the carrying value of debt approximated fair value at December 31, 2013. At December 31, 2014, the Company estimated the fair value of its debt primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities, and considering its own credit risk. The estimated fair value of the Company’s current and non-current debt obligations was $25,671,000 at December 31, 2014, compared to its carrying amount of $24,577,000 at that date. If the debt was measured at fair value in the consolidated balance sheets, the Company’s current and non-current debt would be classified in Level 2 of the fair value hierarchy.

- 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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