17. Fair Value

In accordance with FASB ASC 820, Fair Value Measurements and Disclosures, the following table represents the Company’s fair value hierarchy for its financial liabilities measured at fair value on a recurring basis as of December 31, 2015 and 2014:


December 31, 2015	Level 2		Level 3		Total
	(in thousands)		(in thousands)		(in thousands)
Derivative instruments	$	12,343	$	35,623	$	47,966


December 31, 2014:	Level 2		Level 3		Total
	(in thousands)		(in thousands)		(in thousands)
Derivative instruments	$	5,506	$	24,414	$	29,920

Level 3 financial instruments consist of common stock warrants and embedded conversion features. The fair value of these warrants and embedded conversion features that have exercise reset features are estimated using a Monte Carlo valuation model. The unobservable input used by the Company was the estimation of the likelihood of a reset occurring on the embedded conversion feature of the Convertible Notes, the embedded conversion feature of the Reimbursement Notes, the embedded conversion feature of the Bridge Notes, and the embedded feature of Amended and Restated June 2010 Warrants. These estimates of the likelihood of completing an equity raise that would meet the criteria to trigger the reset provisions are based on numerous factors, including the remaining term of the financial statements and the Company’s overall financial condition.

The following table summarizes the changes in fair value of the Company’s Level 3 financial instruments for the years ended December 31, 2015 and 2014:


	Year Ended December 31,
	2015		2014
Beginning Balance	$	24,414	$	11,587
Derivative liability of embedded conversion feature of the Bridge Notes		312		221
Derivative liability of embedded conversion feature of the Reimbursement Notes		105		47
Derivative liability of embedded conversion feature of the Convertible Notes		3,648		2,272
Change in fair value		7,144		10,287

Ending Balance	$	35,623	$	24,414

Changes in the unobservable input values would likely cause material changes in the fair value of the Company’s Level 3 financial instruments. The significant unobservable input used in the fair value measurement is the estimation of the likelihood of the occurrence of a change to the contractual terms of the financial instruments. A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement.