Fair Value Measurements

3 Months Ended

Mar. 31, 2017

3.	Fair Value Measurements

For a description of the fair value hierarchy and the Company’s fair value methodology, see “Part II - Item 8 - Financial Statements and Supplementary Data - Note 2 – Summary of Significant Accounting Policies” in the Company’s Annual Report. There were no significant changes in these methodologies during the three months ended March 31, 2017. As of March 31, 2017, the Company’s highly liquid money market funds included cash equivalents and restricted cash, including deposit in an escrow account and as of December 31, 2016, included cash equivalents, U.S. government agency securities and restricted cash, including deposit in an escrow account, these financial assets are valued using Level 1 inputs. There were no transfers in or out of Level 1 and Level 2 during the periods presented.

Liabilities that are measured at fair value consist of the derivative liability and is valued using Level 3 inputs. There were no transfers in or out of Level 3 during the periods presented.

As of March 31, 2017 and 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.

The following tables present the fair value hierarchy for assets and liabilities measured at fair value on a recurring basis as of March 31, 2017 and December 31, 2016 (in thousands):

	March 31, 2017
	Level 1		Level 2		Level 3		Total
Financial assets:
Money market funds⁽¹⁾	$	14,619		—		—	$	14,619
Restricted cash (money market funds)⁽²⁾		12,860		—		—		12,860
Total financial assets	$	27,479	$	—	$	—	$	27,479

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

(2)	$12.7 million of restricted cash in the Indenture 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.

	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

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

(2)	$19.4 million of restricted cash in the Indenture 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 condensed consolidated balance sheets.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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