6. Financial Instruments

Financial Assets

The following tables summarize the estimated fair value of the Company's financial assets measured on a recurring basis as of the dates indicated, which were comprised solely of available-for-sale securities with remaining contractual maturities of one year or less (in thousands):


March 31, 2012	Input Level		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Money market funds		Level 1	$	4,989	$	0	$	0		$	4,989
U.S. corporate debt obligations		Level 2		12,380		5		(1	)		12,384
U.S. commercial paper		Level 2		12,562		10		0			12,572
Foreign government obligations		Level 2		501		0		0			501
Foreign corporate debt obligations		Level 2		4,143		0		(6	)		4,137

Total available-for-sale securities				34,575		15		(7	)		34,583
Less: amounts classified as cash equivalents				4,989		0		0			4,989

Amounts classified as marketable securities			$	29,586	$	15	$	(7	)	$	29,594


December 31, 2011	Input Level		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Money market funds		Level 1	$	7,156	$	0	$	0		$	7,156
U.S. corporate debt obligations		Level 2		16,619		5		(1	)		16,623
U.S. commercial paper		Level 2		14,556		18		0			14,574
Foreign government obligations		Level 2		3,607		1		0			3,608
Foreign corporate debt obligations		Level 2		1,476		0		(3	)		1,473

Total available-for-sale securities				43,414		24		(4	)		43,434
Less: amounts classified as cash equivalents				8,632		0		(2	)		8,630

Amounts classified as marketable securities			$	34,782	$	24	$	(2	)	$	34,804

The following table summarizes the available-for-sale securities that were in an unrealized loss position as of March 31, 2012, each having been in such a position for less than 12 months, and none deemed to be other-than-temporarily impaired (in thousands):


March 31, 2012	Gross Unrealized Losses			Estimated Fair Value
Corporate debt obligations	$	(7	)	$	11,462

No significant facts or circumstances have arisen to indicate that there has been any deterioration in the creditworthiness of the issuers of these securities. The gross unrealized losses are not considered to be significant and have been for relatively short durations. The Company does not intend to sell these securities and it is not more likely than not that they will need to be sold prior to the recovery of their amortized cost basis. There were no sales of available-for-sale securities in the three months ended March 31, 2012 and 2011.

Financial Liabilities

The following table summarizes the inputs and assumptions and estimated fair value of the Company's financial liabilities measured on a recurring basis as of the dates indicated, which were comprised solely of a liability for warrants issued in connection with an underwritten offering completed in October 2010:


	March 31, 2012			December 31, 2011
Inputs and assumptions:
Fair market value of Company's common stock	$	2.87		$	1.17
Exercise price	$	2.52		$	2.52
Expected term (years)		3.5			3.8
Expected volatility		99.9	%		98.9	%
Risk-free interest rate		0.7	%		0.5	%
Expected dividend yield		0.0	%		0.0	%
Fair value:
Estimated fair value per warrant share	$	1.94		$	0.62
Shares underlying outstanding warrants classified as liabilities (in thousands)		3,679			3,679

Total estimated fair value of outstanding warrants (in thousands)	$	7,155		$	2,276

The warrants have been classified as a derivative liability in the Company's balance sheet due to the potential for the warrants to be settled in cash upon the occurrence of certain transactions specified in the warrant agreements. The warrants were initially recorded at their fair value of $4.5 million, which was estimated using the Black-Scholes model. At each subsequent balance sheet date, the estimated fair value of the outstanding warrants is determined using the Black-Scholes model and recorded to the balance sheet, with the change in fair value recorded to other income (expense) in the statements of comprehensive income (loss).

The Black-Scholes model requires Level 3 inputs such as the expected term of the warrants and share price volatility. These inputs are subjective and generally require significant analysis and judgment to develop. Any changes in these inputs could result in a significantly higher or lower fair value measurement. The following table summarizes the changes in the fair value of the Company's Level 3 financial liabilities for the periods indicated (in thousands):


	Warrant Liability
Balance as of December 31, 2010		8,154
Change in fair value of warrant liability included in other income (expense)		(5,878	)

Balance as of December 31, 2011	$	2,276
Change in fair value of warrant liability included in other income (expense)		4,879

Balance as of March 31, 2012	$	7,155