Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 and 2015 (in thousands):

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds⁽¹⁾	$	10,156		—		—	$	10,156
Restricted cash (money market funds)⁽²⁾		19,593		—		—		19,593
U.S. government agency securities⁽³⁾		6,800		—		—		6,800
Total financial assets	$	36,549	$	—	$	—	$	36,549
Financial liabilities:
Derivative liability⁽⁴⁾		—		—		—	$	—
Total financial liabilities	$	—	$	—	$	—	$	—

(1)	Included in Cash and Cash Equivalents on accompanying consolidated balance sheets.

(2)	$19.4 million of restricted cash serves as full collateral for the redeemable convertible notes and $125,000 of restricted cash serves as collateral for the Company’s corporate credit card and deposit for its facility lease.

(3)	Included in Short Term Investments on accompanying consolidated balance sheets.

	December 31, 2015
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds⁽¹⁾	$	28,927	$	—	$	—	$	28,927
Restricted cash (money market funds)⁽²⁾		33,919		—		—		33,919
Municipal bonds⁽³⁾		—		296		—		296
Corporate notes⁽³⁾		—		3,106		—		3,106
Total financial assets	$	62,846	$	3,402	$	—	$	66,248
Financial liabilities:
Derivative liability⁽⁴⁾	$	—	$	—	$	1,156	$	1,156
Total financial liabilities	$	—	$	—	$	1,156	$	1,156

(1)	Included in Cash and Cash Equivalents on accompanying consolidated balance sheets.

(2)	$33.8 million of restricted cash serves as full collateral for the redeemable convertible notes and $125,000 of restricted cash serves as collateral for the Company’s corporate credit card and deposit for its facility lease.

(3)	Included in Short Term Investments on accompanying consolidated balance sheets.

(4)

The fair value of the derivative liability is measured using the Black-Scholes option-pricing valuation model. Inputs used to determine the estimated fair value of the conversion option include the fair value of the underlying common stock at the valuation measurement date, the remaining contractual term of the conversion option, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock. In addition, the Company estimated the convertible redeemable note exchange rate based on an analysis of its actual exchange of notes for cash redemption or exchange of notes for conversion to common stock. See Note 9 - Redeemable Convertible Notes for further detail.

Fair Values of Derivative Liabilities Estimated Using Black-Scholes Valuation Model

As of December 31, 2016 the fair value of the derivative liability was immaterial. The estimated reporting date fair value-based measurement of the derivative liability was calculated using the Black-Scholes valuation model, based on the following weighted-average assumptions for the year ended December 31, 2016:

	As of December 31,
	2016			2015
Expected term	1.01			2.00
Expected volatility		80.6	%		81.7	%
Risk-free interest rate		1.20	%		1.06	%
Expected dividend yield		0	%		0	%

Derivative

Derivative Liability Measured at Estimated Fair Value Using Unobservable Inputs

The following table presents the activity for the derivative liability measured at estimated fair value using unobservable inputs for the year ended December 31, 2016 (in thousands):

	Derivative Liability
Balance as of December 31, 2015	$	1,156
Change in fair value included in interest and other income		(1,057	)
Gain on extinguishment of redeemable convertible notes		(99	)
Balance as of December 31, 2016	$	—