Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2013

Financial Instruments Measured at Fair Value on Recurring Basis by Level within Fair Value Hierarchy

The following tables present the Company’s financial instruments that were measured at fair value on a recurring basis as of December 31, 2013 and 2012 by level within the fair value hierarchy (in thousands):


	December 31, 2013
	Level 1		Level 2		Level 3		Total
Financial Assets
Cash equivalents	$	15,683	$	5,869	$	—	$	21,552
Marketable securities		—		112,544		—		112,544

Total	$	15,683	$	118,413	$	—	$	134,096

Financial Liabilities
Derivative liability	$	—	$	—	$	5,914	$	5,914
Warrant liability		—		—		688		688

Total	$	—	$	—	$	6,602	$	6,602


	December 31, 2012
	Level 1		Level 2		Level 3		Total
Financial Assets
Cash equivalents	$	25,781	$	2,829	$	—	$	28,610
Marketable securities—available-for-sale		1,997		116,190		—		118,187

Total	$	27,778	$	119,019	$	—	$	146,797

Financial Liability
Warrant liability	$	—	$	—	$	835	$	835

Summary of Level 3 Inputs to Monte Carlo

The following table sets forth the Level 3 inputs to the Monte Carlo simulation model that were used to determine the fair value of the embedded derivative:


	December 31, 2013			Issuance Date
Stock price	$	10.89		$	6.88
Conversion rate		121.1240			121.1240
Conversion price	$	8.26		$	8.26
Maturity date		November 1, 2016			November 1, 2016
Risk-free interest rate		1.31	%		0.79	%
Estimated stock volatility		50	%		50	%

Estimated Fair Value of the Embedded Derivative

The following table sets forth the estimated fair value of the embedded derivative as of the issuance date and December 31, 2013 (in thousands):


	December 31, 2013		Issuance Date
Estimated fair value of the embedded derivative	$	5,914	$	3,124

Change in Value of Warrant and Derivative Liability Unobservable Inputs Financial Instrument Reconciliation

The following table presents the change in fair values of the Company’s Level 3 financial instruments that were measured on a recurring basis using significant unobservable inputs as of December 31, 2013 (in thousands):


Fair value at December 31, 2012	$	835
Fair value of derivative liability recorded on measurement date		3,124
Change in fair value recorded as a loss from change in fair value of derivative liability		4,406
Adjustment to fair value of derivative liability related to early conversion of notes		(1,616	)
Change in fair value recorded as a loss from change in fair value of warrant liability		(147	)

Fair value at December 31, 2013	$	6,602

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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