Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2014

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 March 31, 2014 and December 31, 2013 by level within the fair value hierarchy (in thousands):



	March 31, 2014
	Level 1		Level 2		Level 3		Total
Financial Assets
Cash equivalents	$	3,720	$	6,711	$	—	$	10,431
Marketable securities	1,800		80,848		—		82,648
Total	$	5,520	$	87,559	$	—	$	93,079
Financial Liabilities
Derivative liability	$	—	$	—	$	3,680	$	3,680
Warrant liability	—		—		—		—
Total	$	—	$	—	$	3,680	$	3,680



	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 Liability
Derivative liability	$	—	$	—	$	5,914	$	5,914
Warrant liability	—		—		688		688
Total	$	—	$	—	$	6,602	$	6,602

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:



	March 31, 2014			December 31, 2013
Stock price	$	11.61		$	10.89
Conversion rate	121.1240			121.1240
Conversion price	$	8.26		$	8.26
Maturity date	November 1, 2016			November 1, 2016
Risk-free interest rate	1.25		%	1.31		%
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 December 31, 2013 and March 31, 2014 (in thousands):



	March 31, 2014		December 31, 2013
Estimated fair value of the embedded derivative	$	3,680	$	5,914

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 March 31, 2014 (in thousands):




Fair value at December 31, 2013	$	6,602
Change in fair value recorded as a gain from change in fair value of derivative liability	(2,046		)
Adjustment to fair value of derivative liability related to early conversion of notes	(188		)
Change in fair value recorded as a gain from change in fair value of warrant liability	(688		)
Fair value at March 31, 2014	$	3,680

- 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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