Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Note 4—Fair Value Measurements

At September 30, 2017, cash equivalents of $10.0 million consisted of money market funds, which were classified as Level 1 of the fair value hierarchy and are valued using quoted market prices in active markets. The Company had no cash equivalents at December 31, 2016. The carrying amount of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term nature of these instruments. Long-term debt approximates fair value due to the variable rate nature of the debt. The Company had no other material financial instruments that were measured at fair value as of September 30, 2017 and December 31, 2016.

The Company had convertible preferred stock warrants prior to its initial public offering (“IPO”) in September 2016. The Company’s preferred stock warrants were recorded at fair value, which increased during the three and nine months ended September 30, 2016 due to an increase in the valuation of the Company’s preferred stock. The changes in the fair value of preferred stock warrants were as follows (in thousands):

	Three Months Ended			Nine Months Ended
	September 30, 2016			September 30, 2016
Beginning balance	$	7,943		$	6,927
Change in value of convertible preferred stock warrants recorded in other expense, net		4,653			9,458
Reclassification to convertible preferred stock upon net exercise of Series Seed warrant		—			(3,789	)
Conversion of convertible preferred stock warrants to Class B common stock warrants upon the closing of the Company's IPO on September 26, 2016		(12,596	)		(12,596	)
Ending balance	$	—		$	—

The Company determined the fair value of the preferred stock warrants utilizing the Black-Scholes model with the following assumptions:

	As of September 26, 2016
	Series Seed			Series A3
Contractual term (years)		4.9			6.5
Expected volatility		59.1	%		59.1	%
Risk-free interest rate		1.1	%		1.3	%
Estimated dividend yield		—	%		—	%

- 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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