Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2015

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table presents information about the Company’s financial assets and liabilities that have been measured at fair value, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value. The Company determines the fair value of the common stock warrants using Level 3 inputs.

The following table summarizes the assets measured at fair value on a recurring basis at September 30, 2015 (in thousands):



Description	September 30, 2015		Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	46,362	$	46,362	$	—	$	—
Total	$	46,362	$	46,362	$	—	$	—



Description	September 30, 2015		Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Liabilities:
Warrant liability	$	33	$	—	$	—	$	33
Total	$	33	$	—	$	—	$	33

The following table summarizes the assets and liabilities measured at fair value on a recurring basis at December 31, 2014 (in thousands):



Description	December 31, 2014		Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	54,059	$	54,059	$	—	$	—
Total	$	54,059	$	54,059	$	—	$	—



Description	December 31, 2014		Active Markets (Level 1)		Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Liabilities:
Warrant liability	$	3,219	$	—	$	—	$	3,219
Total	$	3,219	$	—	$	—	$	3,219

The Company measures the fair value of the warrants classified as a liability at each reporting date using the Black-Scholes option pricing model using the following assumptions:



	September 30, 2015		December 31, 2014
Risk-free interest rate	0.64	%	1.10	%
Expected dividend yield	0.00	%	0.00	%
Expected term (in years)	2.17		2.92
Expected volatility	60.05	%	56.79	%

The following table sets forth a summary of changes in the fair value of the Company’s common stock warrant liability, which represented a recurring measurement classified within Level 3 of the fair value hierarchy, wherein fair value was estimated using significant unobservable inputs (in thousands):



Beginning balance, January 1, 2015	3,219
Change in fair value	(3,186	)
Ending balance, September 30, 2015	33

The change in the fair value of the warrant liability is primarily influenced by the price of the underlying common stock.

At September 30, 2015, the carrying value of the notes payable approximates fair value, which was determined using Level 3 inputs, including a quoted rate.

There have been no changes to the valuation methods utilized during the three and nine months ended September 30, 2015. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between levels during the three and nine months ended September 30, 2015.

- 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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