Chegg 2013 Annual Report Download - page 129
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CHEGG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table summarizes the change in the fair value of our Level 3 liabilities (in thousands):
Level 3
December 31,
2013 2012
Beginning balance ................................. $7,689 $ 8,374
Additions for new instruments issued .............. 459 1,550
Increase (decrease) in fair value of preferred stock
warrants ................................... 622 (380)
Exercise of preferred stock warrants ............... (152) —
Conversion of preferred stock warrants to common
stock warrants ............................... (7,097) —
Exercise of put options .......................... — (1,855)
Total financial liabilities ............................. $1,521 $ 7,689
As of December 31, 2012, we did not have observable inputs for the valuation of our preferred stock
warrant liabilities. The fair value of the preferred stock warrant liabilities are based in part on aggregate equity
value indications, consistent with the analysis for our common stock valuation using the Monte Carlo Simulation
model for pricing. The significant unobservable input used in the fair value measurement of the convertible
preferred stock warrant liability is the fair value of the underlying preferred stock at the valuation measurement
date. Generally, increases (decreases) in the fair value of the underlying preferred stock would result in a
directionally similar impact to the fair value measurement. The put option liability relates to previous
acquisitions, which provided certain employees of the acquired companies the right to require us to acquire
vested common shares or options at a stated contractual price. As options associated with these put options vest,
the liability is recognized as stock-based compensation expense in our consolidated statements of operations.
The methods described above may produce a fair value calculation that may not be indicative of net
realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are
appropriate and consistent with other market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a different fair value measurement at the
reporting date.
Note 5. Long-Lived Assets
Textbook Library, Net
Textbook library, net consisted of the following (in thousands):
December 31,
2013 2012
Textbook library ................................ $196,742 $181,192
Less accumulated depreciation ..................... (91,634) (92,705)
Textbook library, net ............................. $105,108 $ 88,487
83