FAIR VALUE DISCLOSURES (Tables)

9 Months Ended

Sep. 30, 2013

Fair value hierarchy for liabilities measured at fair value on a recurring basis

The following tables present our fair value hierarchy for liabilities measured at fair value on a recurring basis (in thousands):



	September 30, 2013
	Total		Level 1		Level 2		Level 3
Derivative – Warrants⁽¹⁾	$	17,555	$	—	$	—	$	17,555
Derivative – Convertible Notes embedded derivative	—		—		—		—
Other obligations - Bode Earn-out⁽³⁾	7,000		—		—		7,000
	$	24,555	$	—	$	—	$	24,555



	December 31, 2012
	Total		Level 1		Level 2		Level 3
Derivative – Warrants⁽¹⁾	$	4,857	$	—	$	—	$	4,857
Derivative – Convertible Notes embedded derivative⁽²⁾	17,173		—		—		17,173
Other obligations - Bode Earn-out⁽³⁾	7,000		—		—		7,000
	$	29,030	$	—	$	—	$	29,030


(1)	Represents the fair value of the Warrants (see Note 10).

(2)

Represents the compound embedded derivative included in our Convertible Notes (see Note 11). The compound embedded derivative includes the value associated with the noteholders’ conversion option, as well as certain rights to receive “make-whole” amounts. The “make-whole” provision(s) provides that, upon certain contingent events, if conversion is elected on the Convertible Notes, we may be obligated to pay such holder an amount in cash, or shares of common stock, to compensate noteholders who have converted early as a result of these contingent events, interest and time value of the conversion option foregone via the conversion.


(3)	Represents the fair value of the Bode Earn-out (see Note 3). The fair value was determined based on expected payouts that will be due to the former owners based on the achievement of certain incremental sales volume milestones, using a contractual discount rate of 7.0%. These payments are capped at a fair value of $7.0 million.

Reconciliation of the changes in level 3 fair value measurements

A reconciliation of the changes in Level 3 fair value measurements from December 31, 2012 to September 30, 2013 is provided below (in thousands):



	Warrants		Convertible Notes Embedded Derivative			Bode Earn-out
Balance at December 31, 2012	$	4,857	$	17,173		$	7,000
Total losses included in net loss	5,713		12,733			—
Write-off of derivative on Convertible Notes tendered for 2013 Notes ⁽¹⁾	—		(26,641		)	—
Balance at March 31, 2013	10,570		3,265			7,000
Total losses included in net income	1,518		398			—
Write-off of derivative on Convertible Notes tendered for common stock⁽²⁾	—		(13		)	—
Balance at June 30, 2013	$	12,088	$	3,650		$	7,000
Total losses included in net income	$	5,467	$	—		$	—
Write-off of derivative on Convertible Notes tendered for common stock or remaining at the Conversion Termination Date⁽³⁾	$	—	$	(3,650	)	$	—
Balance at September 30, 2013	$	17,555	$	—		$	7,000


(1)	Represents the pro rata portion of derivative liability associated with tendered Convertible Notes measured at the date of exchange, which is included in the nine months ended September 30, 2013 (loss) gain on extinguishment of debt on the accompanying condensed consolidated statements of operations.


(2)	Represents the pro rata portion of derivative liability associated with tendered Convertible Notes measured at the date of tender, which is included in the nine months ended September 30, 2013 (loss) gain on extinguishment of debt on the accompanying condensed consolidated statements of operations.


(3)	Represents the pro rata portion of derivative liability associated with tendered Convertible Notes measured at the date of tender or remaining at the Conversion Termination Date, which is included in the three and nine months ended September 30, 2013 (loss) gain on extinguishment of debt on the accompanying condensed consolidated statements of operations.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period 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 asset.

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