4. FAIR VALUE MEASUREMENTS

The Company has certain financial assets and liabilities that are recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

•

Level 1 — quoted prices for identical instruments in active markets;

•

Level 2 — quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

•

Level 3 — valuations derived from valuation techniques in which one or more significant value drivers are unobservable.

The tables below present information about the Company’s financial assets and liabilities that are measured and carried at fair value and indicate the level within the fair value hierarchy of the valuation techniques it utilizes to determine such fair value:


	Fair Value Measurement as of September 30, 2014
	Total		Level 1		Level 2		Level 3
	(in thousands)
Money market funds	$	576	$	576	$		$	—
Commercial paper		2,995		—		2,995
Government and government agency bonds		92,822		—		92,822		—
Corporate bonds		87,901		—		87,901		—
Certificates of deposit		4,647		4,647		—		—

Total assets	$	188,941	$	5,223	$	183,718	$	—


	Fair Value Measurement as of December 31, 2013
	Total		Level 1		Level 2		Level 3
	(in thousands)
Money market funds	$	185,000	$	185,000	$	—	$	—
Certificates of deposit		7,897		7,897		—		—

Total assets	$	192,897	$	192,897	$	—	$	—


	Fair Value Measurement as of September 30, 2014
	Total		Level 1		Level 2		Level 3
	(in thousands)
Warrants	$	—	$	—	$	—	$	—

Total liabilities	$	—	$	—	$	—	$	—


	Fair Value Measurement as of December 31, 2013
	Total		Level 1		Level 2		Level 3
	(in thousands)
Warrants	$	9,006	$	—	$	—	$	9,006

Total liabilities	$	9,006	$	—	$	—	$	9,006

The Company’s assets with fair value categorized as Level 1 within the fair value hierarchy include money market funds and certificates of deposit. Money market funds are publicly traded mutual funds and are presented as cash equivalents on the unaudited condensed consolidated balance sheets as of September 30, 2014.

The Company’s assets with fair value categorized as Level 2 within the fair value hierarchy consist of commercial paper, government and government agency bonds and corporate bonds. These assets have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, through income-based approaches utilizing market observable data.

The Company’s liabilities with fair value categorized as Level 3 within the fair value hierarchy consist of warrants issued in January and August 2009. The fair value of these liabilities is determined using the Black-Scholes-Merton option-pricing model, which requires the use of significant judgment and estimates for the inputs in the model. As of September 30, 2014, all outstanding warrants issued in January and August 2009 had been exercised or expired. For additional information related to the determination of fair value of warrants and a reconciliation of changes in fair value, please read Note 7, Warrants of the unaudited condensed consolidated financial statements.

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts reported for long-term debt and notes payable approximate fair value based on market activity for other debt instruments with similar characteristics and comparable risk.