0000950159-13-000211.txt : 20130328 0000950159-13-000211.hdr.sgml : 20130328 20130328172022 ACCESSION NUMBER: 0000950159-13-000211 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 20121231 FILED AS OF DATE: 20130328 DATE AS OF CHANGE: 20130328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TENGION INC CENTRAL INDEX KEY: 0001296391 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 200214813 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-34688 FILM NUMBER: 13725070 BUSINESS ADDRESS: STREET 1: 3929 WESTPOINT BLVD. STREET 2: SUITE G CITY: WINSTON-SALEM STATE: NC ZIP: 27103 BUSINESS PHONE: 336-722-5855 MAIL ADDRESS: STREET 1: 3929 WESTPOINT BLVD. STREET 2: SUITE G CITY: WINSTON-SALEM STATE: NC ZIP: 27103 10-K 1 tengion10k.htm TENGION, INC FORM 10-K tengion10k.htm
 
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-K
 
(Mark One)
 
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2012
 
OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____ to _____
 
Commission file number 001-34688
 
 
Tengion, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of
incorporation or organization)
20-0214813
(I.R.S. Employer Identification No.)
 
3929 Westpoint Boulevard, Suite G
Winston-Salem, NC 27103
(Address of principal executive offices)
 
(336) 722-5855
(Registrant’s telephone number, including area code)
 

Securities registered pursuant to Section 12(b) of the Act
 
Title of each Class
 Name of Exchange on which Registered
 Common Stock, par value $0.001 per share
OTC Markets, Inc.
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes  o
No  x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes 
No  x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x
No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  x
No  o
 
 
 
 
 
 

 
 
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer, as defined in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  o
Accelerated filer  o
Non-accelerated filer  o
Smaller reporting company  x
 
Indicate by check mark whether the registrant is a shell company, as defined in Rule 12b-2 of the Exchange Act.
Yes  o
No  x
 
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of June 30, 2012 was $5,030,184.  This calculation excludes 761,767 shares held on June 30, 2012 by the registrant’s directors and executive officers and by each other person who may be deemed to be an affiliate.  As of March 22, 2013, there were 3,119,718 shares of the registrant’s common stock outstanding.
 

 
 
 
 
 
 
 
 
 
1

 

 
TENGION, INC.
FORM 10-K
INDEX
 
Item 1.
Business
  3
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4.
Mine Safety Disclosures
 
PART II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
 
 
Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
 
 
Matters
Item 13.
Certain Relationships and Related Party Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
 
 
SIGNATURES

 
Tengion® and the Tengion logo® are our registered trademarks and Tengion Neo-Urinary Conduit™, Tengion Neo-Kidney™, Tengion Neo-Kidney Augment™, Tengion Neo-Vessel™, Tengion Neo-Vessel Replacement™, Tengion Neo-Bladder Replacement™, Neo-Bladder Augment™, Tengion Organ Regeneration Platform™ and Organ Regeneration Platform™ are our trademarks. Other names are for informational purposes only and may be trademarks of their respective owners.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2

 
 
 
Item 1.    Business
 
Overview
 
Tengion, Inc. is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ.  Using our Organ Regeneration Platform, we create these neo-organs using a patient’s own cells, or autologous cells.  We believe our proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues.  Our product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications.  In addition, our neo-organs are designed to replace the need to substitute other tissues of the body for a purpose to which they are poorly suited.
 
Building on our clinical and preclinical experience, we are initially leveraging our Organ Regeneration Platform to develop our Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and our Neo-Kidney Augment for patients with advanced chronic kidney disease.
 
Our Neo-Urinary Conduit is intended to replace the use of bowel tissue in bladder cancer patients requiring a non-continent urinary diversion after bladder removal surgery, or cystectomy.  We are able to manufacture our Neo-Urinary Conduit using a proprietary process that takes four weeks or less and uses smooth muscle cells derived from a routine biopsy.  We are currently conducting a Phase I clinical trial for our Neo-Urinary Conduit in bladder cancer patients to assess its safety and preliminary efficacy, as well as to translate the surgical implantation procedure utilized in preclinical studies.  This trial is an open-label, single-arm study, which is currently expected to enroll up to ten patients.  In the first quarter of 2013, we enrolled the seventh patient in this trial.  Surgeons from three new clinical sites attended the surgery for the seventh patient for training purposes and those clinical sites are now actively recruiting patients.  In October 2012, we announced the death of two patients enrolled in our Neo-Urinary Conduit Phase I clinical trial.  One patient died of metastatic bladder cancer and the other died of cardiopulmonary arrest following a myocardial infarction, or heart attack.  Each of these patients’ Neo-Urinary Conduits was properly functioning at the time of their death.  Both patients died due to afflictions unrelated to the Neo-Urinary Conduit or the surgical procedure.  We notified the Data Safety Monitoring Board of these events and the Phase I clinical trial is ongoing.  In March 2013, we announced that one patient enrolled in the trial for ten months, who had metastases prior to implantation, had developed metastatic bladder cancer requiring chemotherapy.  In order to permit the entire therapeutic approach with this patient to be consistent with the current standard of care, the Neo-Urinary Conduit has been removed and replaced with an ileal conduit. W e and our clinical investigators believe that the surgical technique used in animal models has been successfully translated to humans.  We are actively recruiting patients for the Phase I clinical trial of our Neo-Urinary Conduit product candidate.  Seven patients have been implanted with the Neo-Urinary Conduit to date and we are focused on completing implantation of the remaining three patients in the trial and then working with the U.S. Food and Drug Administration (FDA) during 2013 to plan for a potential Phase 2/3 clinical trial of this product candidate.

Our Neo-Kidney Augment is being developed to prevent or delay dialysis by increasing renal function in patients with advanced chronic kidney disease.  Our Neo-Kidney Augment is based on our proprietary technology, which uses the patient’s cells, procured by a needle biopsy of the patient’s kidney, to create an injectable product candidate that can catalyze the regeneration of functional kidney tissue.  In April 2012, we completed a successful Pre-IND meeting with the U.S. Food and Drug Administration (“FDA”) for the Neo-Kidney Augment.  We and the FDA have agreed on a good laboratory practice (“GLP”) animal study program required to support an Investigational New Drug (“IND”) filing and initiation of a Phase I clinical trial in chronic kidney disease (“CKD”) patients.  We anticipate initiating two clinical trials in 2013 to dose CKD patients with our Neo-Kidney Augment. We filed a Clinical Trial Application ("CTA") with the Medical Products Agency ("MPA") in Europe during the first quarter of 2013.  We received MPA approval of the CTA on March 26, 2013 and expect to commence a clinical trial in CKD patients in Sweden during the second quarter of 2013.  We plan to file an IND with FDA during the second quarter of 2013 and commence a clinical trial in CKD patients during the fourth quarter of 2013.
 
To date, we have devoted substantially all of our resources to the development of our Organ Regeneration Platform and product candidates, as well as to our facilities that we employ to manufacture our neo-organs.  Since our inception in July 2003, we have had no revenue from product sales, and have funded our operations principally through the private and public sales of equity securities and debt financings.  We have never been profitable and, as of December 31, 2012, we had an accumulated deficit of $247.2 million.  We expect to continue to incur significant operating losses for the foreseeable future as we advance our product candidates from discovery through preclinical studies and clinical trials and seek marketing approval and eventual commercialization.
 
We were incorporated in Delaware in 2003.  Our corporate headquarters are located at 3929 Westpoint Boulevard, Suite G, Winston-Salem, North Carolina and our telephone number is (336) 722-5855.
 
 
 
 
 
 
 
 
 
 
3

 
 
 
Our Organ Regeneration Platform
 
Our Organ Regeneration Platform involves testing different combinations of cell types and biomaterials.  We believe this approach enables us to identify accurately the mixture of various cell types and biomaterials for a specific organ necessary to elicit a regenerative response.  We own or license 19 U.S. patents and patent applications and over 100 international patents and filings related to our Organ Regeneration Platform and product candidates.  The organ regeneration process enabled by our proprietary Organ Regeneration Platform involves the following steps:
 
 
·
Isolation and expansion of progenitor cells.  Our autologous organ regeneration process begins with receipt of a small tissue sample, obtained by a biopsy from the patient.  This sample is then sent to our clinical production facility in North Carolina where our scientists engage in a specialized process to isolate the necessary committed progenitor cells that form the basis of the target organ’s or tissue’s essential function.  Committed progenitor cells have been programmed by the body to become specific cell types, but are not yet developed into a single cell type, retaining the ability to promote regeneration.  We then use our proprietary cell growth process to grow, or expand, the specifically isolated progenitor cells ex vivo, or outside of the body, until an adequate number of cells are produced.
 
 
·
Seeding and growth.  Once we have completed our cell expansion process, we combine those cells with a biomaterial to stabilize and form our product candidate.  Depending upon the type of neo-organ being created, we use biomaterials that, when combined with the isolated and expanded cell populations, promote the desired regenerative outcome.  We select the type of material based upon our knowledge of the organ or tissue we are seeking to regenerate and extensive testing to determine the optimal material characteristics, treatment, and shape that will encourage cell growth and catalyze the body’s regenerative power.  Composition and design of the biomaterials are essential elements of our technology that help promote native-like tissue regeneration.  The expanded cell populations and selected biomaterial are formulated, using our proprietary bioprocesses, packaged, and then shipped to the patient’s physician ready for implantation.
 
 
·
Implantation.  The neo-organ is typically shipped from our manufacturing facility to the patient’s physician within four weeks after we receive the patient’s biopsy.  Both before and during the initial clinical trial for our product candidates, we collaborate with a small number of key opinion leaders to translate the surgical procedure used in preclinical studies for use in humans.
 
 
·
Regeneration.  Based on data from preclinical and clinical studies, we believe that our neo-organs serve as a catalyst for the body to regenerate native-like organs and tissues.  Native tissue supporting structure, for example blood vessels, grows into the implanted neo-organ and the biomaterial is absorbed by the body.  In preclinical tests, we have observed that the newly grown tissue integrates with its surroundings and becomes substantially indistinguishable over time from the native tissue.  We have also observed that, in this regenerative process, the body regulates the growth and development of the organ to ensure that it is not under- or over-developed. Similarly, the neo-organ takes on native-like functional activities.
 
Our Strategy
 
Our goal is to become the leading regenerative medicine company focused on the development and commercialization of neo-organs for a variety of diseases and disorders.  To achieve this objective, we intend to:
 
 
·
Advance the Neo-Urinary Conduit.  We have an active IND for our Neo-Urinary Conduit and are currently conducting a Phase I clinical trial in bladder cancer patients who require removal of their bladders and are in need of a urinary diversion.  In the first quarter of 2013, we enrolled the seventh patient in this trial.  Surgeons from three new clinical sites attended the surgery for the seventh patient for training purposes and those clinical sites are now actively recruiting patients.  We are focused on completing implantation of the remaining three patients in the trial and then working with the FDA during 2013 to plan for a potential Phase 2/3 clinical trial of this product candidate.
 
 
·
Advance the Neo-Kidney Augment.  We are devoting a significant portion of our resources and business efforts to our Neo-Kidney Augment development program.  In April 2012, we completed a successful Pre-IND meeting with the FDA for the Neo-Kidney Augment.  We and the FDA have agreed on a GLP animal study program required to support an IND filing and initiation of a Phase I clinical trial in CKD patients.  We anticipate initiating two clinical trials in 2013 to dose CKD patients with our Neo-Kidney Augment.  We filed a CTA with the MPA in Europe during the first quarter of 2013.  We received MPA approval of the CTA on March 26, 2013 and expect to commence a clinical trial in CKD patients in Sweden during the second quarter of 2013.  We plan to file an IND with FDA during the second quarter of 2013 and commence a clinical trial in CKD patients during the fourth quarter of 2013.
 
 
 
 
 
 
 
 
4

 
 
 
 
·
Leverage our Organ Regeneration Platform to develop additional neo-organs.  We believe our technology is broadly applicable to other indications including certain types of urologic, renal, gastrointestinal and vascular diseases.  We have generated significant proprietary know-how and intellectual property in the development and manufacture of our various product candidates.  We plan to continue to apply our technologies to other neo-organs as treatments for other conditions.
 
 
·
Selectively pursue strategic partnerships to accelerate and maximize the potential of our product candidates and technology while preserving significant commercial rights.  We intend to selectively pursue strategic partnership opportunities that we believe may allow us to accelerate the development or commercialize our products to maximize the value of our product candidates.
 
Neo-Urinary Conduit
 
Our Neo-Urinary Conduit is a combination of autologous smooth muscle cells and bioabsorbable scaffold that is intended to catalyze regeneration of a native urinary tissue conduit, passively transporting urine from the ureters, through a stoma, or hole in the abdomen, into a standard ostomy bag.  We expect that it will be a safe and effective alternative to the creation of a urinary diversion from bowel tissue after bladder removal.  Our Neo-Urinary Conduit is intended to avoid complications such as bowel obstruction, urine absorption, infection and mucus secretion associated with the use of bowel tissue in the urinary tract, as well as the potential surgical issues that arise from the procedure involved in harvesting bowel tissue.  We produce our Neo-Urinary Conduit using smooth muscle cells from a routine fat biopsy and not cells from the diseased bladder, eliminating the risk of reintroducing cancerous cells from the bladder into the patient.
 
We produce our Neo-Urinary Conduit for our Phase I clinical trial at our cGMP qualified clinical production facility using our Organ Regeneration Platform.  We are able to deliver our Neo-Urinary Conduit in four weeks or less after we receive the patient’s fat biopsy.  This timing is consistent with the clinical practice of bladder removal in these patients.  To create our Neo-Urinary Conduit, we isolate the smooth muscle cells from the biopsy, expand the cells ex vivo and then seed them onto a bioabsorbable scaffold, which is composed of biomaterials similar to those used in bioabsorbable sutures.  Each surgeon implanting one of our Neo-Urinary Conduits will be trained in and receive specific procedures and protocols based on routine surgical techniques to implant our Neo-Urinary Conduit in the patient.  We have an active IND and are currently conducting a Phase I clinical trial for the treatment of bladder cancer patients who require bladder removal.
 
Market Overview
 
The following table indicates the number of urinary conduit procedures performed per year in the United States and the European Union.
 
Estimated Surgical Procedures Per Year
 
United States(1)
   
European Union(2)
 
Urinary Conduit
           
Cancer
    12,000       10,800  
Other
    2,000       2,300  
Total Urinary Conduit Procedures
    14,000       13,100  
_______________________
Sources:
(1)
Based on interviews and analysis by an independent third party consultant.
(2)
EU: Government data sources for the United Kingdom, France and Germany; other EU countries estimated from population census.

Bladder Cancer
 
According to the National Cancer Institute, bladder cancer is the sixth most common form of cancer in the United States.  The American Cancer Society estimates there will be 73,500 new cases of bladder cancer diagnosed in the United States in 2012, and nearly 15,000 deaths.  The European Cancer Observatory estimates that there were over 110,000 new cases of bladder cancer in Europe in 2008.  In the United States, there are approximately 10,000 cases per year of bladder cancer requiring bladder removal, according to data compiled from a 2005 National Inpatient Sample, or NIS, performed by the Healthcare Cost and Utilization Project, or HCUP, a family of healthcare databases and related software tools and projects developed through a federal-state-industry partnership and sponsored by the Agency for Healthcare Research and Quality.
 
Following removal of a bladder, patients require some form of urinary diversion.  Most patients are currently treated by using a segment of bowel tissue to construct a conduit for urine to exit from the body.  In its simplest form, the reconstruction involves creating a tubular structure out of bowel tissue and then connecting it to the ureters at one end and the skin at the other in a procedure that was pioneered in the 1930s.  Urine output is not controlled and the patient wears a collection device at all times.
 
 
 
 
5

 
 
 
The other diversionary option for patients is the creation of a continent reservoir which is most commonly a bladder-shaped pouch fashioned from bowel tissue, to which the ureters and urethra are connected.  We believe that less than 10% of the urinary diversions performed after bladder removal are bladder replacements and the remaining diversions are urinary conduits, based upon data compiled from a 2005 NIS performed by HCUP.  There are multiple factors that affect the decision concerning which form of post-bladder removal urinary diversion is optimal for a given patient, including stage of disease, health and mental status, manual dexterity, physique and, importantly, patient preference.
 
The following graphic illustrates two urinary diversion options for patients who require bladder removal.
 
 
 
Limitations of Current Therapies
 
There are many complications associated with the current standard of care surgery to remove or repair the bladder, such as adhesions and obstructions.  In the case of traditional surgery to construct a conduit for urine to exit from the body into an ostomy bag, complications such as ureteral detachment, ureteral stricture and hydroureter / hydronephrosis, or swelling in the ureters or kidneys resulting from the backup of urine, are related to the attachment of the ureters to the conduit.  Other complications, such as stomal stenosis, involve the attachment of the conduit to the abdominal wall.
 
While there is variation across procedures and patient types, there are risks and complications common to all procedures that rely on harvesting bowel tissue and placing it in the urinary tract.  These complications may include:
 
 
·
Bowel complications.  Bowel surgery required to harvest tissue for reconstructive use can result in complications, such as prolonged recovery of bowel function, ileus (temporary bowel paralysis), obstructions, leaks and fistulas.  Because vitamin B12 is absorbed in the bowel tissue, the loss of tissue can result in anemia and neurologic abnormalities.  Additionally, malabsorption of salts and lipids can lead to diarrhea.
 
 
·
Metabolic issues.  Use of bowel tissue often leads to electrolyte and metabolic imbalances, which can cause bone loss.  Certain drugs taken by the patient may be reabsorbed by the implanted bowel tissue, potentially leading to unintended levels of toxins.  The exposure of an intestinal surface to urine may also result in the inappropriate absorption of ammonium, chloride and hydrogen ions as well as potassium loss, leading to chronic metabolic abnormalities.
 
 
·
Infection.  Persistent and recurrent infections are common in patients with bowel tissue reconstruction.  For example, based upon an article entitled “Long Term Outcome of Ileal Conduit Diversion” by S. Madersbacher, et al., which appeared in the Journal of Urology in 2003, as many as 23% of patients with bowel tissue conduits have recurrent urinary tract infections, or UTIs, and according to “Use of intestinal segments in urinary diversion” by D. M. Dahl and W. S. McDougal in Campbell-Walsh Urology in 2007, approximately 10% to 17% of bowel tissue conduit patients have UTIs that reach the kidney.  Bacteria normally found in bowel tissue can serve as a source of infection and septic complications when repositioned into the urinary tract.  One of the consequences of persistent infection is the development of stones, which are hard masses that can cause pain, bleeding, obstruction of urine, and infections and damage to the kidneys.
 
 
 
 
 
 
 
 
 
 
 
 
6

 
 
 
 
·
Mucus.  Bowel tissue repositioned in the urinary tract secretes mucus into the urine.  Mucus increases the risk of stone formation and the viscosity of urine leading to hydronephrosis.
 
 
·
Cancer.  Malignancy, although rare, is a well-recognized complication following enterocystoplasty and other reconstructive surgeries that incorporate bowel segments into the genitourinary tract.
 
Patients requiring some form of urinary diversion with today’s standard of care are at risk of complications associated with the use of bowel tissue as well as those associated with the surgery to harvest the bowel tissue.
 
Preclinical History and Background of the Neo-Urinary Conduit
 
Our preclinical studies utilized various large animal models for bladder removal and implantation of our product candidate.  In these studies, animals receiving our product candidate underwent bladder removal and the animals’ ureters were attached to one end of our Neo-Urinary Conduit using bioabsorbable sutures and the other end was connected to the skin in the abdominal wall, providing an outlet for urine to flow out of the body.
 
Principal observations of our Neo-Urinary Conduit in preclinical animal models have shown that:
 
 
·
Implantation of our Neo-Urinary Conduit created from fat-derived smooth muscle cells results in the formation of a functional conduit.
 
 
·
By three months post-implantation, the scaffold is no longer present and is replaced by a tri-layered native-like urinary tissue consisting of urothelium, submucosa and smooth muscle cells.
 
 
·
 There is no evidence of abnormal cell growth, tissue development or adverse immune response, or adverse systemic effects in response to the biomaterials, autologous cells, or our Neo-Urinary Conduit.
 
 
·
Our Neo-Urinary Conduit regenerates native-like urinary tissue with complete mucosal lining at the ureteral and skin junctions.  The function of the regenerated urinary tissue is similar to native urinary tissue in that it allows elimination of urine in a water-tight fashion and does not absorb urine or secrete mucus or electrolytes.
 
These preclinical animal studies suggest that by using current standards of clinical care and specific surgical and post-operative procedures associated with urinary conduits, our Neo-Urinary Conduit may be safe and effective for treating patients who have had their bladders removed.
 
Clinical Development Plan
 
We have an active IND for our Neo-Urinary Conduit and commenced a Phase I study in March 2010.  The program is designed to provide data to support the use of our Neo-Urinary Conduit in patients who are undergoing bladder removal due to bladder cancer.  The FDA has granted the Neo-Urinary Conduit “Orphan Product” designation.
 
This trial is designed to assess the safety and preliminary efficacy of the Neo-Urinary Conduit, as well as to translate the surgical implantation procedure utilized in preclinical studies.  This trial is an open-label, single-arm study which is currently expected to enroll up to ten patients.  We are working with clinical investigators who have expertise in the surgical treatment of bladder cancer and significant experience performing bladder removals and urinary diversions.  This study does not have a control group as the surgical procedure, post-operative care, and other clinical parameters preclude the possibility of blinding treatment options.
 
In addition, this trial is intended to allow our investigators to optimize the post-surgical care of patients.   A limited number of clinical centers are being utilized to minimize variations in surgical technique and provide the most controlled setting in which the surgical approach is optimized through working with a clinical investigator.  We have designed the trial to allow for close observation and assessment of any treatment or procedure-related complications, post-operative recovery, tolerability, and safety.
 
To date, seven patients have been enrolled and implanted in the clinical trial.  Data from the first three of these patients allowed clinical investigators to design surgical modifications in an effort to address stoma patency, conduit integrity and vascular supply.  The complications that arose with each of these patients were resolved successfully and, following new surgeries to construct a urinary diversion using bowel tissue, all three patients recovered well.  In October 2012, we announced the death of two patients enrolled in our Neo-Urinary Conduit Phase I clinical trial.  One patient died of metastatic bladder cancer and the other died of cardiopulmonary arrest following a myocardial infarction, or heart attack.  Each of these patients’ Neo-Urinary Conduits was properly functioning at the time of their death.  Both patients died due to afflictions unrelated to the Neo-Urinary Conduit or the surgical procedure.  In March 2013, we announced that one patient enrolled in the trial for ten months, who had metastases prior to implantation, has developed metastatic bladder cancer and is in need of chemotherapy.  In order to ensure that the entire therapeutic approach with this patient is consistent with the current standard of care, the Neo-Urinary Conduit has been removed and replaced with an ileal conduit. We and our clinical investigators believe that the surgical technique used in animal models has now been successfully translated to humans.  We are actively recruiting patients for the Phase I clinical trial of our Neo-Urinary Conduit product candidate. We are focused on completing implantation of the remaining three patients in the trial and then working with the FDA during 2013 to plan for a potential Phase 2/3 clinical trial of this product candidate.
 
 
7

 
 
 
The primary safety and efficacy assessment of our Neo-Urinary Conduit will be made at 12 months post-implantation and patients will be followed for an additional 48 months in order to assess long term safety and durability.  During this first year, however, patients will be seen frequently by the study investigator and/or designated clinical team: every one to two weeks after hospital discharge through week eight, and then at month 3, 6, 9 and 12.  Imaging, either CT scan or ultrasound, will be performed at three-month intervals for the first year to examine the neo-organ’s structure, patency and identify any obstructions or other abnormalities.  This frequent evaluation and the open-label nature of this study will provide us significant ongoing feedback throughout the study.
 
The Tengion Neo-Kidney Augment
 
Our Neo-Kidney Augment is being developed to prevent or delay dialysis by increasing renal function in patients with advanced chronic kidney disease, or CKD.  Our Neo-Kidney Augment is based on our proprietary technology, which is expected to use the patient’s cells, procured by a needle biopsy of the patient’s kidney, to create an injectable product candidate that can catalyze the regeneration of functional kidney tissue.  We submitted a pre-IND filing with FDA for this program in February 2012 and met with FDA in March 2012 to define the GLP program necessary to enter into a Phase I clinical trial in the U.S. in patients with chronic kidney disease.  We anticipate initiating two clinical trials in 2013 to dose CKD patients with our Neo-Kidney Augment.  We filed a CTA in Europe during the first quarter of 2013 that received MPA approval on March 26, 2013 and plan to commence a clinical trial in CKD patients in Sweden during the second quarter of 2013.  We plan to file an IND with FDA during the second quarter of 2013 and commence a clinical trial in CKD patients during the fourth quarter of 2013.

Neo-Kidney Augment Clinical Development Plan
 
The Neo-Kidney Augment is being developed as an Advanced Therapy Medicinal Product (ATMP) in Europe and as a biologic under CBER with assistance from CDRH in the U.S.  During the first quarter of 2013, we filed a Clinical Trial Application (CTA) with the Medical Products Agency (MPA) in Sweden to initiate a Phase 1 clinical trial to evaluate safety and delivery of its Neo-Kidney Augment product in up to five patients with chronic kidney disease (CKD).  The protocol submitted in the CTA is a first-in-human (FIH) trial designed to assess the safety and delivery optimization of NKA in three-to-five patients enrolled at the Karolinska University Hospital Huddinge in Stockholm, Sweden.  We received MPA approval of the CTA on March 26, 2013 and we expect to initiate a Phase 1 trial in Sweden in the second quarter of 2013.  We also expect to submit an IND filing for the Neo-Kidney Augment to the FDA during the second quarter of 2013.  The U.S. clinical trial in anticipated to be a Phase 1b/2a randomized, repeat-dose and dose escalation study designed to assess the safety and preliminary efficacy of Neo-Kidney Augment implantation in patients with CKD.  The first cohort of patients (Phase 1b) would be enrolled at three-to-five clinical centers before expanding the study to a greater number of centers in the US for Phase 2a trial that would initiate in 2014.  Following FDA approval of the IND, we expect to initiate a Phase 1 clinical trial in the U.S. in the fourth quarter of 2013 and anticipate that this trial will provide initial human proof-of-concept data in 2014.
 

Market Overview and Limitations of Current Therapies
 
According to the 2011 Annual Report of the United States Renal Data System, or the USRDS, which is funded by the National Institutes of Health, or NIH, there are over 40 million people in the United States with chronic kidney disease.  Patients with end stage renal disease, or ESRD, have CKD that has progressed to a point of little to no kidney function.  These patients require dialysis or a kidney transplant to survive.  According to the USRDS, $29 billion in Medicare costs each year are attributable just to ESRD patients.  ESRD is associated with an approximate 20% mortality rate per year.  In addition, bone loss and anemia is a common complication of advanced CKD, mainly due to an inability of the kidneys to produce enough Vitamin D and erythropoietin, a hormone that controls red blood cell production.
 
Dialysis extends the lives of patients with ESRD, but has many limitations, including infections, hernias and the need to undergo the procedure up to three times per week.  Kidney transplantation remains the most desirable and cost-effective form of kidney replacement therapy at this time; however, there is a chronic shortage of organs.  In 2009, only 18,000 kidney transplants were performed.  In addition to the high cost of organ procurement and the subsequent surgery, kidney transplant patients also require a lifetime of drug therapy to prevent organ rejection.  There is a clear need for a product that can prevent or delay the need for dialysis or kidney transplant in patients with advanced CKD.
 
Our Solution
 
Through our Organ Regeneration Platform, we have identified a specific combination of renal cells that provides the foundation for the Neo-Kidney Augment and are currently optimizing the formulation to achieve the desired product profile.  We obtain cells through a routine needle biopsy of the kidney and, using our Organ Regeneration Platform, we are able to produce our Neo-Kidney Augment grown from these cells in as short as four weeks from biopsy receipt.
 
 
 
 
 
 
 
 
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This product development program has demonstrated function in multiple animal models.  We have isolated and characterized the necessary cells from both healthy and diseased human kidneys, which we believe supports translation of this approach to human patients. In our animal studies, diseased kidney function was improved by the selected regenerative cells that form the active biological component of our Neo-Kidney Augment.  In these studies, renal function was shown to be enhanced as early as seven weeks after implantation and was associated with improvements to functional kidney mass as indicated by improved or stabilized kidney filtration, reduced urinary protein loss, and enhanced urine concentrating ability.  Systemic functions controlled by the kidney were also improved including metabolic condition (electrolyte and mineral balance), blood pressure, weight gain and correction of anemia.  Improved survival was demonstrated in two animal models which were followed up to one year.  In one animal study, selected regenerative cells taken from human kidneys were able to improve kidney function of chronically diseased kidneys.
 
We have assessed the regenerative capabilities of the Neo-Kidney Augment in a rodent model of chronic kidney disease in which renal failure is induced by removal of approximately 80% of the kidney tissue.  These studies extend up to six months post-treatment and have demonstrated that animals implanted with our Neo-Kidney Augment have prolonged survival with no additional supportive care.  Stabilization and improvement in functional renal mass are evident within several weeks after implantation and continue for the duration of the studies.  In these studies, we have seen improvement or stabilization of various biomarkers including certain proteins, lipids, bone remodeling and vitamin levels, as well as organism-level improvements in weight gain and blood pressure.
 
We also have conducted a preclinical study in a rodent model of chronic, progressive renal failure that develops due to obesity, diabetes, and hypertension – three common co-morbid conditions often seen in patients with renal failure.  This study demonstrated that our proprietary therapeutic approach, using specific regenerative cells isolated from diseased kidney tissue, can provide increased functional kidney mass with resulting improvements in kidney filtration, urine concentration, and electrolyte balance, as well as a significant reduction in blood pressure.  At one year of age, which is approaching end-of-life in this aggressive model, the treated animals demonstrated improved kidney function, delayed disease progression, and better survival compared to the age- and disease-matched untreated control animals.
 
The rodent studies described above demonstrated the Neo-Kidney Augment offers therapeutic benefits when used in various animal models of CKD.  To further evaluate the effects of the Neo-Kidney Augment, a canine model of CKD, established via 70% surgical mass reduction of the kidney and a high salt diet, was used to evaluate potential cross-species therapeutic effects.  This model has functional kidney mass reduction similar to that of a clinical CKD Stage 3 patient.  Using this established model for CKD and multiple clinically relevant end-points (serum creatinine, blood urea nitrogen, and estimated glomerular filtration rate), the Neo-Kidney Augment was shown to provide measurable and significant improvement or stabilization of renal function. Homeostatic improvements included weight gain, and renal improvements were both functional and enhanced histological structure.
 
We have also evaluated the regenerative effects of the Neo-Kidney Augment in a canine model of kidney mass reduction and CKD with assessment of up to one year durability. We have demonstrated significantly reduced proteinuria (a clinically accepted marker of risk for progression of CKD).  We also demonstrated a direct reduction of CKD linked kidney tissue damage (interstitial, tubular and glomerular degeneration). Since proteinuria is considered to be an early indicator of and a contributor to progression of human and canine CKD, these results provided additional support for continued development of the Neo-Kidney Augment product.
 
Manufacturing
 
We believe our product manufacturing capability provides us with a competitive advantage.  We manufacture our product candidates in a facility specifically designed for the production of patient-specific materials and have implemented quality control systems to ensure our manufacturing processes and facilities comply with applicable current good manufacturing processes, or cGMP, current Good Tissue Practices, or cGTP, and medical device quality systems regulations, or QSR standards.  We have exercised these manufacturing and quality control processes while producing materials for preclinical and clinical studies and have established a significant knowledge base relating to the manufacture of our product candidates.  This knowledge base is maintained in a set of standard operating procedures that detail the techniques and standards for manufacturing.
 
Manufacturing of product candidates for our existing preclinical and clinical studies is conducted in our pilot manufacturing facility in Winston-Salem, North Carolina.  The pilot manufacturing facility contains approximately 38,400 square feet of laboratories, offices, and clean room manufacturing space.  We expect to manufacture early stage product candidates through Phase II clinical trials at this facility.  The facility is designed to prevent cross-contamination of patient specific materials and to provide physical segregation while processing these materials.  Our products are manufactured as individual units using disposable processing materials for storage and containment of the product.  We do not face many of the traditional challenges of biopharmaceutical companies in maintaining batch quality as manufacturing is scaled up to commercial quantities because our batch size remains consistent at one unit and because the core manufacturing processes remain consistent regardless of production volume.
 
 
 
 
 
 
 
 
 
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As our product candidates advance into later-stage clinical trials toward commercialization, we will need to either develop our own internal manufacturing capability or contract with a third-party manufacturer to conduct this manufacturing on our behalf.
 
Sales and Marketing
 
We believe the product candidates we are currently developing will be used primarily by a relatively small number of hospital-based specialty surgeons.  We intend to explore building the necessary marketing and sales infrastructure to market and sell our current product candidates, if approved by the FDA, as well as hire additional personnel to train physicians on the surgical techniques used with our product candidates.  We will also explore the possibility of entering into strategic partnerships for the development and marketing our product candidates.
 
Intellectual Property
 
We have established a patent position surrounding our technology and product candidates in regenerative medicine.  As of February 5, 2013, we owned three issued U.S. patents and had licenses to 18 issued U.S. patents, 16 of which are exclusive and two of which are non-exclusive.  We also have 16 U.S. patent applications and international Patent Cooperation Treaty (PCT) applications, and over 100 foreign patents and patent applications.  The patent portfolio owned by us relates to the composition, design and methods of manufacture for our Neo-Urinary Conduit, Neo-Bladder Replacement and Neo-Bladder Augment product candidates, as well as technological advances associated with our Neo-Kidney Augment, Neo-Vessel Replacement, and Neo-GI Augment development programs.  The licensed patent portfolio relates to technology developed by scientists and researchers associated with Children’s Medical Center Corporation and Wake Forest University Health Sciences.  Also included within our portfolio are patents that address an array of regenerative medicine and tissue engineering technologies and product candidates outside the scope of our current product pipeline.  In addition to our patent portfolio, we have developed proprietary information, trade secrets and know-how in the development and manufacture of neo-organs.  We are committed to protecting our intellectual property position and to aggressively pursue our patent portfolio as well as the protection of our proprietary information, know-how and trade secrets.

Our Patent Portfolio
 
Our urologic product candidates currently include our Neo-Urinary Conduit, our Neo-Bladder Replacement, and our Neo-Bladder Augment.  Our urologic-related patent portfolio is currently composed of 15 issued U.S. patents; four granted European patents, which have been validated in 12 European countries; 11 issued patents in other foreign jurisdictions; five pending U.S. non-provisional patent applications; and 29 pending foreign patent applications, all of which relate to a PCT application.  We own two and have licensed 13 of the issued patents.  We own four of the U.S. non-provisional patent applications and 26 of the foreign patent applications.  We have licensed all of the other pending applications.
 
The issued U.S. patents, which will expire between 2013 and 2031, contain claims directed to urinary conduit constructs, organ constructs, cell-matrix structures, organ scaffolds, and laminarly organized luminal organ or tissue structure constructs; methods of making the same, and methods of treatment using the same.  If claims in the pending U.S. patent applications covering urinary conduit constructs, methods for producing the same, and methods of treatment using the same; methods of treatment using laminarly organized luminal organ or tissue structure constructs; and methods for correcting tissue defects in urological structures, are allowed, they would expire between 2018 and 2031.  The granted European patents, which will expire between 2018 and 2020, contain claims directed to organ constructs, cell-matrix structures, organ scaffolds, and laminarly organized luminal organ or tissue structure constructs; and methods of making and using the same.  The pending foreign and U.S. applications contain claims directed to urinary conduit constructs, organ constructs, cell-matrix structures, organ scaffolds, and laminarly organized luminal organ or tissue structure constructs; methods of making and using the same; and rational design of regenerative medicine products.  These patent applications, if issued, will expire between 2019 and 2031.
 
Our gastrointestinal (GI) development program is our Neo-GI Augment.  Our GI-related patent portfolio is currently composed of one pending U.S. patent application and seven foreign patent applications owned by us.  If claims issue from patent applications filed from the PCT application, they will expire in 2031.
 
Our renal development program is our Neo-Kidney Augment.  Our renal-related patent portfolio is currently composed of 11 issued U.S. patents; five granted European patents, which have been validated in 12 European countries; 15 issued patents in other foreign jurisdictions; eight pending U.S. non-provisional patent applications; two pending PCT applications; and 35 pending foreign patent applications, 33 of which relate to a PCT application.  We own one and have licensed all of the other issued patents.  We own three of the U.S. non-provisional patent applications, both of the PCT applications and 21 of the foreign applications.  We have licensed all of the other pending applications.
 
 
 
 
 
 
 
 
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The issued U.S. patents, which will expire between 2013 and 2030, contain claims directed to renal cell admixtures, prosthetic kidneys, organ constructs, cell-matrix structures, organ scaffolds; methods of making the same, and methods of treatment using the same.  If claims in the pending U.S. patent applications covering renal cell preparations and augmentation constructs, methods for producing the same, methods of treatment using the same, and rational design of regenerative medicine products are allowed, they would expire between 2019 and 2030.  The granted European patents, which will expire between 2017 and 2022, contain claims directed to prosthetic kidneys, organ constructs, cell-matrix structures, organ scaffolds; and methods of making and using the same.  The pending PCT and foreign applications contain claims directed to renal cell preparations and augmentation constructs, methods for producing and using the same; renal cell formulations and drug screening assays.  These patent applications, if issued, will expire between 2019 and 2032.
 
Our vascular development program is our Neo-Vessel Replacement.  Our vessel-related patent portfolio is currently composed of two pending U.S. non-provisional patent applications, and 14 pending foreign patent applications.  We own each of the pending applications.  If claims in our pending patent applications covering tissue engineering scaffolds having a mechanical response to stress and strain substantially similar to that of a response by a native blood vessel, and methods of making the same, are allowed, they would expire in 2031.

Confidential Information and Inventions Assignment Agreements
 
We require our employees, consultants and members of our research and development advisory board to execute confidentiality agreements upon the commencement of employment, consulting or collaborative relationships with us.  These agreements provide that all confidential information developed or made known during the course of the relationship with us be kept confidential and not disclosed to third parties except in specific circumstances.  In the case of employees, the agreements provide that all inventions resulting from work performed for us, utilizing our property or relating to our business and conceived or completed by the individual during employment shall be our exclusive property to the extent permitted by applicable law.
 
License Agreements and Research Agreements
 
Exclusive License Agreement with Children’s Medical Center Corporation
 
In October 2003, we entered into a license agreement with Children’s Medical Center Corporation, or CMCC, for the license of certain patent rights and intellectual property rights owned or controlled by CMCC related to tissue engineering technology.  The CMCC patent rights include patent rights owned by CMCC, as well as CMCC’s right to sublicense certain patent rights owned or controlled by Massachusetts Institute of Technology, or MIT.  Under the terms of this license agreement, CMCC has granted us exclusive worldwide, sublicensable licenses under certain of CMCC’s patent rights related to implantable matrices for the development and commercialization of tissue engineered products for human and animal therapeutics in the subfields of genitourinary, vascular tissue, nervous tissue, trachea and other subfields later agreed upon by us and CMCC.  Our license from CMCC is exclusive in all subfields for patent rights related to organ constructs; cell matrix structures; laminarly organized luminal organ or tissue structure constructs; prosthetic kidneys; kidney augmenting constructs; stents; reproductive organs and tissue structure constructs; as well as methods for making and using the same.  Our license to CMCC’s patent rights related to implantable cartilaginous structures, implantable genitourinary cell-seeded matrices, and mammalian urothelial cell preparation is non-exclusive, except in the genitourinary subfield where the license is exclusive.  Our license to CMCC’s patent rights relating to organ decellularization is non-exclusive for all subfields covered by the license agreement.  Under the license agreement, we were also granted a non-exclusive, non-sublicensable, non-transferable license to certain CMCC biological materials and know-how related to unpatented manufacturing and scientific information, except that such license may be sublicensed or transferred to our affiliates and contractors for purposes specified in the license agreement.  CMCC has retained a royalty-free, non-exclusive right to practice, use and license to other academic and nonprofit research organizations to practice and/or use the patent rights and licensed products for research, educational, clinical and/or charitable purposes only.
 
We are required under the license agreement to use reasonably diligent efforts, as defined in the license agreement, to bring one or more licensed products to market as soon as practicable and to obtain all necessary government approvals for the manufacture, use, sale and distribution of licensed products.  If we fail to meet the diligence requirements set forth in the license agreement, we may be required under certain circumstances to grant a sublicense to a third party chosen by CMCC relating to the licensed product or subfield for which we have failed to meet our diligence obligations.
 
Under the license agreement, we are required to make payments to CMCC for accrued and continuing patent prosecution costs and also upon the achievement of certain development and sales milestones as well as certain consideration received from a sublicensee.  If we develop and obtain regulatory approval of a licensed product in each of the four subfields, we will be required to pay CMCC development milestones aggregating approximately $6.9 million.  Also, if cumulative net sales of all licensed products reach a certain level, we will be required to make a one-time sales milestone payment of $2.0 million.  We have previously paid a license issue fee of $175,000 and $350,000 of development milestones to CMCC and as of December 31, 2012, we did not owe any milestone payments to CMCC under the license agreement.  A portion of the milestone payments we make will be credited against our future royalty payments.  We must pay CMCC royalties in the mid-single digit range based on net sales of licensed products as defined in the agreement by us, our affiliates and our sublicensees, which royalties will be reduced for certain amounts we are required to pay to license patents or intellectual property from third parties and under certain circumstances if there is a competing product.  No royalties will be payable with respect to sales of licensed products in countries where there is no valid patent claim, unless we advised CMCC not to file for patent protection in that country and later choose to market and sell licensed products in such country.  The license agreement, and our obligation to pay royalties terminates on the later of the expiration, on a country-by-country basis, of the last patent right and October 2018.
 
 
 
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Either party may terminate the license agreement upon 90 days prior written notice upon a material, unremedied breach or default of the other party.  CMCC may terminate the agreement immediately upon our insolvency or as otherwise provided in the agreement and also upon 45 days prior written notice for our failure to pay royalties due in a timely manner.  We may terminate at any time, with or without cause, upon six months prior written notice and payment to CMCC of accrued amounts due and a $50,000 termination fee.
 
Wake Forest University Health Sciences License Agreement
 
In January 2006 we entered into a license agreement with Wake Forest University Health Sciences, or WFUHS, which was amended in May 2007, for the license of WFUHS’s intellectual property (including know-how) related to research performed by WFUHS employee, Dr. Anthony Atala, a former employee of the Children’s Hospital Boston, an affiliate of CMCC, and the inventor or co-inventor on certain inventions and patents held by CMCC, which are licensed to us under our license agreement with CMCC.
 
Under the terms of this amended license agreement, WFUHS has granted us a worldwide, exclusive, sublicensable license to make, use and sell products covered by certain of WFUHS’s patent rights that relate to improvements of the existing inventions and patents included in the patent rights licensed to us under our license agreement with CMCC, or the improvement patents, and to new development inventions and patents arising out of the performance of a separate agreement, the WFUHS Research Agreement, or the new development patents, in the fields of human and animal organs, tissues and tissue-engineered and regenerative medicine directed to their functions in the subfields of genitourinary tissue, kidney tissue, cardiovascular tissue and nervous tissue.  This license agreement also granted us a non-exclusive, worldwide, sublicensable license to certain know-how related to unpatented manufacturing and scientific information provided by WFUHS.  Our license to patents claiming inventions conceived after the expiration or other termination of the WFUHS Research Agreement may be terminated at any time by WFUHS following expiration or other termination of the WFUHS Research Agreement.  On January 11, 2012, WFUHS exercised this right to terminate our license to improvement patents claiming inventions conceived after termination of the WFUHS Research Agreement.
 
We are obligated to use commercially reasonable efforts to bring licensed products to market.  If WFUHS believes that we have failed to comply with this obligation and an arbitrator agrees with WFUHS, we will be required to enter into a sublicense for the relevant product or grant WFUHS the right to enter into a sublicense for the that product.  We are not required to make any milestone payments to WFUHS related to the development or commercialization of the licensed products.  In addition, we are required to meet certain time deadlines with respect to initiating the first human clinical trial, filing for marketing approval with the FDA and achieving the first commercial sale in the United States with respect to the first product covered by the new development patents in each subfield.  If we fail to meet any of these deadlines, WFUHS may, in its sole option, terminate our license with respect to such product covered by the new development patents.
 
Under the license agreement, we also issued WFUHS a warrant to purchase 320 shares of our common stock through January 1, 2016 at an exercise of $23.20 per share and are required to pay WFUHS a percentage of certain consideration received from a sublicensee.  We are required to pay certain license maintenance fees with respect to each product covered by new development patents, commencing two years after we initiate the first animal study conducted under cGLP, with respect to such product.  These license maintenance fees, which are in the low six figure range with respect to each product, will be creditable against royalties we are obligated to pay to WFUHS for such product.  In addition, we are required to pay WFUHS royalties in the low- to mid-single digit range based on net sales of licensed products in all countries.  With respect to any product covered by an improvement patent, our obligation to pay royalties to WFUHS terminates upon the later of the expiration, on a product-by-product basis, of the last to expire patent covering such product and the date that is 15 years from the first commercial sale of such product, provided that no such royalty is payable more than seven years after expiration of the last-to-expire patent covering such product.
 
With respect to any licensed product that is not covered by an improvement patent, our obligation to pay royalties to WFUHS terminates, on a product-by-product basis, on the date that is five years from the first commercial sale of such product, provided that the first commercial sale occurs prior to January 1, 2021 (for each day after January 1, 2021 that the first commercial sale does not occur, the five-year period is reduced by one day).
 
Pursuant to the terms of the amended license agreement, we have provided $2.8 million of funding for research activities under the WFUHS research agreement through December 31, 2010.  We have made no other payments under the license agreement with WFUHS.
 
The agreement continues in effect on a country-by-country basis until the later of the expiration of the last to expire new improvement patent and January 1, 2021, unless earlier terminated as provided in the agreement.  We may terminate the license agreement at any time, with or without cause, upon 90 days prior written notice.  WFUHS may terminate the license agreement upon our default in paying a license fee or providing a report required to be provided under the license agreement, our material breach or our making a knowingly false report, upon 45 days prior written notice, provided that we may cure such default or breach within the 45-day period.
 
 
 
 
 
 
 
 
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In January 2006, we entered into a research agreement with WFUHS, which was amended in September 2006.  Under the research agreement, WFUHS agreed to perform sponsored research in return for quarterly payments.  The sponsored research involved the experiments and studies set out in annual research plans and milestones established under the agreement.  We terminated this agreement effective December 31, 2011.
 
Medtronic Right of First Refusal and Right of First Negotiation Agreement
 
On March 1, 2011, we entered into a Right of First Refusal and Right of First Negotiation Agreement with Medtronic, Inc. pursuant to which we granted Medtronic a right of first refusal to the license, sale, assignment, transfer or other disposition by us of any material portion of intellectual property (including patents and trade secrets) or other assets related to our Neo-Kidney Augment program (an NKA transaction) until October 31, 2013.  On October 2, 2012, we and Medtronic mutually terminated this agreement.
 
Celgene Right of First Negotiation
 
On October 2, 2012, we entered into a Right of First Negotiation Agreement with Celgene Corporation ("Celgene"), pursuant to which we granted Celgene a right of first negotiation to the license, sale, assignment, transfer or other disposition by us of any material portion of intellectual property (including patents and trade secrets) or other assets related to our Neo-Urinary Conduit program.  In consideration for receiving rights under this agreement, Celgene agreed to receive a warrant to purchase 50% fewer shares in connection with our October 2012 private placement than otherwise would have been issued to Celgene.  In the event of a change in control of the Company, the agreement and all of Celgene’s rights pursuant thereto will automatically terminate in all respects and be of no further force and effect.
 
Competition
 
Our industry is subject to rapid and intense technological change.  While we do not believe we currently have any commercial competitors who are developing autologous organs and tissues for the target populations that we are addressing, we face, and will continue to face, intense competition from medical device, pharmaceutical, biopharmaceutical and biotechnology companies, as well as numerous academic and research institutions and governmental agencies who are generally engaged in tissue engineering and regenerative medicine activities or funding.  In addition, there are companies and academic institutions developing drugs, medical devices, and surgical techniques to treat many of the medical conditions our product candidates are designed to treat.
 
Regenerative Medicine
 
While we are, to our knowledge, the only regenerative medicine company presently developing a range of neo-organs for implant that are designed to regenerate into functional organs and tissues, there are companies that are researching and developing regenerative cell-based products or therapies, which may seek to address the medical indications that our neo-organ product candidates seek to address.  The companies include Mesoblast, Athersys, Aastrom, and Neusentis Regenerative Medicine.  In addition, several large pharmaceutical companies with much greater resources have demonstrated a strategic interest in regenerative medicine, including Sanofi Aventis, Johnson & Johnson, Pfizer and Celgene.
 
Bladder Treatment
 
We expect that our Neo-Urinary Conduit will compete with the current standard of care, which is the use of bowel tissue to create a urinary diversion. Companies that are researching, developing and marketing products to treat bladder dysfunction include Allergan, which is developing Botox for bladder dysfunction; Speywood Biopharma, which is developing Dysport for bladder dysfunction; and Medtronic, which is marketing Interstim for bladder dysfunction.  Further, many large pharmaceutical companies market anticholinergenic medications, such as Detrol and Ditropan, which can be used to treat bladder dysfunction.
 
Advanced Chronic Kidney Disease
 
There are many companies searching for therapeutics to address chronic kidney disease.  These companies include larger companies, such as Reata, Abbott, Eli Lilly, and Merck, as well as smaller biotechnology companies, such as Anexon, ProMetic, and Nile Therapeutics.
 
Many of the companies competing against us have financial and other resources substantially greater than our own.  In addition, many of our competitors have significantly greater experience in testing therapeutic products, obtaining FDA and other marketing approvals of products, and marketing and selling those products.  Accordingly, our competitors may succeed more rapidly than we will in obtaining FDA approval for products and achieving widespread market acceptance.
 
We expect to compete based upon, among other factors, our unique mechanism of action, our broad-based therapeutic impact, our intellectual property portfolio, our substantial process know-how with respect to scalable manufacturing capabilities, and the efficacy and safety profile of our product candidates.  Our ability to compete successfully will depend, in part, on our continued ability to attract and retain skilled and experienced scientific, clinical development and executive personnel, to develop viable autologous neo-organs.
 
 
 
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Government Regulation
 
Regulation by governmental authorities in the United States and other countries is a significant factor in the development, manufacture, commercialization and reimbursement of our neo-organs.  All of the products we are seeking to develop will require marketing approval, or licensure, by governmental agencies prior to commercialization.  In particular, human therapeutic products are subject to rigorous preclinical and clinical testing, approval and marketing regulations promulgated by the FDA and similar regulatory authorities in other countries.  Various governmental statutes and regulations also govern or influence testing, manufacturing, quality control, safety, labeling, packaging, storage and record keeping related to such products and their marketing.  State, local and other authorities may also regulate manufacturing facilities used for our neo-organs.  The process of obtaining these approvals and the subsequent compliance with appropriate statutes and regulations require the expenditure of substantial time and money, and there can be no guarantee that approvals will be granted.
 
FDA Approval Process
 
Our neo-organs will require approval from the FDA and corresponding agencies in other countries before they can be marketed.  The FDA regulates human therapeutic products in one of three broad categories: biologics, drugs, or medical devices.  Our product candidates that are currently under development are combination products having features of both a biologic and a medical device.  The FDA has determined that the primary mode of action for our Neo-Urinary Conduit is cellular and, therefore, they will be regulated as biologics.  We currently believe other neo-organs that we develop will also be regulated as biologics and will therefore require approval via a Biologics License Application, or BLA.  The FDA regulates biological products under both the Federal Food, Drug, and Cosmetic Act and the Public Health Service Act, and implementing regulations for both statutes.  The FDA generally requires the following steps for pre-market approval or licensure of a new biological product:
 
 
·
completion of preclinical laboratory and animal tests conducted in compliance with FDA’s Good Laboratory Practice, or GLP, requirements and applicable requirements for the humane use of laboratory animals, to assess a product’s biological activity, biocompatibility and to identify potential safety problems and to characterize and document the product’s manufacturing controls and stability;
 
 
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submission to the FDA of an IND application, which must become effective before clinical testing in humans can begin;
 
 
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development of clinical protocols to establish the safety and efficacy of the product in humans in clinical trials;
 
 
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obtaining approval of clinical protocols by institutional review boards, or IRBs, of clinical sites in order to introduce the product into humans in clinical trials;
 
 
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completion of adequate and well-controlled human clinical trials to establish the safety and efficacy of the product for its intended indication conducted in compliance with the FDA’s Good Clinical Practice, or GCP, requirements, as well as any additional requirements for the protection of human research subjects and their health information;
 
 
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compliance with cGMP and if applicable, cGTP and QSR, regulations and standards concerning quality and the use of human cellular and tissue products;
 
 
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submission to the FDA of a BLA, for marketing approval that includes substantive evidence of safety and effectiveness from adequate results of preclinical testing and clinical trials;
 
 
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FDA review of the marketing application in order to determine, among other things, whether the product is safe and effective for its intended uses; and
 
 
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obtaining FDA approval of the BLA, including inspection and approval of the product manufacturing facility as compliant with cGMP and if applicable, cGTP and QSR, requirements, prior to any commercial sale or shipment of the product.
 
Once a biological product is identified for development, it enters the preclinical testing stage.  An IND sponsor must submit the results of the preclinical tests together with manufacturing information, analytical data and any available clinical data or literature to the FDA as part of the IND.  The sponsor also will include a protocol detailing, among other things, the objectives of the initial clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the initial clinical trial lends itself to an efficacy evaluation.  Some preclinical testing may continue even after the IND is submitted.  The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA places the clinical trial on a clinical hold within that 30-day time period.  In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.  Clinical holds also may be imposed by the FDA at any time before or during trials due to safety concerns or non-compliance with regulatory requirements.
 
 
 
 
 
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All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCP regulations.  These regulations include the requirement that all research subjects provide informed consent.  Further, an IRB must review and approve the plan for any clinical trial before it commences at any institution.  An IRB considers, among other things, whether the risks to individuals participating in the trials are minimized and are reasonable in relation to anticipated benefits.  The IRB also approves the information regarding the clinical trial and the consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completion.
 
Each new clinical protocol and any amendments to the protocol must be submitted under the IND for FDA review, and to the IRBs for approval.  Protocols detail, among other things, the objectives of the clinical trial, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety.
 
Typically, clinical testing involves a three-phase process although the phases may overlap.  Generally, Phase I clinical trials are conducted in a small number of healthy volunteers or patients, except in circumstances where clinical testing would be not appropriate in healthy volunteers, as is the case with our product candidates, and are designed to provide information about product safety.  In Phase II, clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine optimal dose, preliminary efficacy and expanded evidence of safety.  Phase III clinical trials are generally large-scale, multi-center, comparative trials conducted with patients afflicted with a target disease in order to provide statistically valid proof of efficacy, as well as safety and potency.  In some circumstances, the FDA may require Phase IV or post-marketing trials if it feels that additional information needs to be collected about the product after it is on the market, particularly for long term safety follow up.  During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data and clinical trial investigators.  Progress reports detailing the results of clinical trials must be submitted at least annually to the FDA.  The FDA may, at its discretion, re-evaluate, alter, suspend, or terminate the testing based upon the data which have been accumulated to that point and its assessment of the risk/benefit ratio to the patient.  Monitoring all aspects of clinical trials to minimize risks is a continuing obligation and process.  All serious and unexpected adverse events that are deemed to be associated with the product must be reported to the FDA in written IND safety reports.
 
The results of the preclinical and clinical testing are submitted to the FDA along with descriptions of the manufacturing process.  In the case of vaccines, gene and cell therapies and products such as our current product candidates, the results of clinical trials are submitted as a BLA.  Under the Pediatric Research Equity Act of 2003, or PREA, which was reauthorized under the FDAAA, a BLA or a supplement to a BLA must contain data to assess the safety and effectiveness of the biological product for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.  The FDA may grant deferrals for submission of data or full or partial waivers.  Unless otherwise required by regulation, PREA does not apply to any biological product for an indication for which orphan designation has been granted.
 
The FDA reviews all BLAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing.  The FDA may request additional information rather than accept a BLA for filing.  In this event, the BLA must be resubmitted with the additional information.  The resubmitted application also is subject to review before the FDA accepts it for filing.  Once the submission is accepted for filing, the FDA begins an in-depth substantive review.  The FDA reviews a BLA to determine, among other things, whether the product is safe, has an acceptable purity profile and is adequately effective, and whether its manufacturing meets standards designed to assure the product’s continued identity, safety, purity, and potency.
 
The FDA may grant marketing approval, or the FDA may request additional clinical data or deny approval if the FDA determines that the application does not satisfy its marketing approval criteria.  FDA review of a BLA typically takes nine months, but may last longer, especially if the FDA asks for more information or clarification of information already provided.  The FDA may refer the BLA to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions.  An advisory committee is a panel of experts who provide advice and recommendations when requested by the FDA on matters of importance that come before the agency.  The FDA is not bound by the recommendations of the advisory committee, but it generally follows such recommendations.
 
The process of obtaining marketing approval is lengthy, uncertain, and requires the expenditure of substantial resources.  Each BLA must be accompanied by a user fee, pursuant to the requirements of the Prescription Drug User Fee Act, or PDUFA, and its amendments.  The FDA adjusts the PDUFA user fees on an annual basis.  According to the FDA’s fee schedule, effective through September 30, 2013, the user fee for an application requiring clinical data, such as a BLA, is $1,958,800.  PDUFA also imposes an annual product fee for biologics ($98,380), and an annual establishment fee ($526,500) on facilities used to manufacture prescription biologics.  Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.  Additionally, no user fees are assessed on BLAs for products designated as orphan drugs, unless the drug also includes a non-orphan indication.  We have received an orphan designation for our Neo-Urinary Conduit product candidate.
 
 
 
 
 
 
 
 
 
 
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Before FDA approves a BLA, all facilities and manufacturing techniques used for the manufacture of products must comply with applicable FDA regulations governing cGMP.  Among other things, the manufacturer must develop methods for testing the identity, potency and purity of the final product.  A local field division of the FDA is responsible for completing the pre-approval inspection and providing recommendation for or against approval.  This effort is intended to assure appropriate facility and process design to avoid potentially lengthy delays in product approvals due to inspection deficiencies.  Similarly, before approving a BLA, the FDA also may conduct pre-licensing inspections of a company, its contract research organizations and/or its clinical trial sites to ensure that clinical, safety, quality control and other regulated activities are compliant with GCP.  To assure such cGMP and GCP compliance, the applicants must incur significant expenditure of time, money and effort in the area of training, record keeping, production, and quality control.  Following approval, the manufacture, holding, and distribution of a product continues to require significant resources in order for the sponsor to maintain full compliance in these areas.  For human cellular products, cGTP requirements apply.  For a biologic/device combination product, the product must be manufactured also in compliance with QSR requirements for the device component.
 
After marketing approval has been obtained, the FDA will require post-marketing safety reporting to monitor the side effects of the product.  Further studies may be required to provide additional data on the product’s risks, benefits, and optimal use, and further clinical trials will be required to gain approval for the use of the product as a treatment for clinical indications other than those for which the product was initially tested.  Results of post-marketing programs may limit or expand the further marketing of the product.  Further, if there are any modifications to the product, including changes in indication, labeling, or a change in the manufacturing process, manufacturing facility, or product composition, a BLA supplement may be required to be submitted to the FDA.
 
Other FDA Regulatory Requirements
 
Maintaining substantial compliance with applicable federal, state and local statutes and regulations requires the expenditure of substantial time and financial resources.  Any biological products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including:
 
 
·
record-keeping requirements;
 
 
·
reporting of adverse experiences with the biologic;
 
 
·
providing the FDA with updated safety and efficacy information;
 
 
·
reporting of cGMP deviations that may affect the identity, potency, purity and overall safety of a distributed product;
 
 
·
reporting on advertisements and promotional labeling; and
 
 
·
complying with electronic record and signature requirements.
 
In addition, the FDA strictly regulates labeling, advertising, promotion and other types of information on products that are placed on the market.  There are numerous regulations and policies that govern various means for disseminating information to health-care professionals as well as consumers, including to industry sponsored scientific and educational activities, information provided to the media and information provided over the Internet.  Prescription biologics may be promoted only for the approved indications and in accordance with the provisions of the approved label.  Biological product manufacturers and other entities involved in the manufacturing and distribution of approved biological products are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP and other laws.
 
The FDA has very broad enforcement authority and the failure to comply with applicable regulatory requirements can result in administrative or judicial sanctions being imposed on us or on the manufacturers and distributors of our approved products, including, without limitation, warning or untitled letters, refusals of government contracts, clinical holds, civil penalties, injunctions, restitution, disgorgement of profits, recall or seizure of products, total or partial suspension of production or distribution, withdrawal of approvals, refusal to approve pending applications, and criminal prosecution resulting in fines and incarceration.  The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.  In addition, even after marketing approval is obtained, later discovery of previously unknown problems with a product may result in restrictions on the product or even complete withdrawal of the product from the market.
 
 
 
 
 
 
 
 
 
 
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FDA Amendments Act
 
On September 27, 2007, the President signed into law the Food and Drug Administration Amendments Act of 2007, or the FDAAA.  This new legislation grants significant new powers to the FDA, many of which are aimed at assuring the safety of drugs and biologics after approval.  In particular, the new law authorizes the FDA to, among other things, require post-approval studies and clinical trials, mandate changes to drug and biologic labeling to reflect new safety information, and require risk evaluation and mitigation strategies for certain drugs and biologics.  In addition, the new law significantly expands the federal government’s clinical trial registry and results databank and creates new restrictions on the advertising and promotion of drugs and biologics.  Under the FDAAA, companies that violate these and other provisions of the new law are subject to substantial civil monetary penalties.
 
The requirements and changes imposed by the FDAAA may make it more difficult, and more costly, to obtain and maintain approval for new biologics, or to produce, market and distribute existing products.  In addition, the FDA’s regulations, policies and guidance are often revised or reinterpreted by the agency or the courts in ways that may significantly affect our business and our products.  It is impossible to predict whether additional legislative changes will be enacted, or FDA regulations, guidance or interpretations changed, or what the impact of such changes, if any, may be.
 
Follow-on Biologics, or Biosimilars
 
In the past few years, there have been a number of legislative initiatives that intended to create a regulatory pathway for approval of follow-on biologics, or biosimilars.  The forms of the proposed legislation differed in several aspects, including the length and scope of intellectual property protection, and the clinical testing standards.  At this time it is not possible to predict whether any of the biosimilar proposals will be enacted and become law, and if so, which version of the proposals will be enacted.  However, if a regulatory pathway is established for biosimilars in the future pursuant to the enactment of biosimilar legislation, our business may be adversely affected, although the extent of the impact will depend on the details of the biosimilar law.
 
Expedited Development and Review Programs
 
A Fast Track product is defined as a new drug or biologic intended for the treatment of a serious or life-threatening condition that demonstrates the potential to address unmet medical needs for this condition.  Under the Fast Track program, the sponsor of a new drug or biologic may request the FDA to designate the drug or biologic as a Fast Track product at any time during the clinical development of the product.  This designation assures access to FDA personnel for consultation throughout the development process and provides an opportunity to request priority review of a marketing application providing a six-month review timeline for the designated product.  If a preliminary review of the clinical data suggests that a Fast Track product may be effective, the FDA may initiate review of sections of a marketing application for a Fast Track product before the sponsor completes the application.  This rolling review is available if the applicant provides a schedule for submission of remaining information and pays applicable user fees.  However, the time periods specified under PDUFA concerning goals to which the FDA has committed to reviewing an application do not begin until the sponsor submits the complete application.  Products that receive Fast Track designation may also be eligible for accelerated approval, or approval based on a clinical endpoint other than survival or irrevocable morbidity or on a surrogate endpoint that is reasonably likely to predict clinical benefit.
 
Orphan Drug Designations
 
The Orphan Drug Act provides incentives to manufacturers to develop and market drugs and biologics for rare diseases and conditions affecting fewer than 200,000 persons in the United States at the time of application for orphan drug designation, or more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug or biological product available in the United States for this type of disease or condition will be recovered from sales of the product.  Orphan product designation must be requested before submitting a new drug application, or NDA, or BLA.  After the FDA grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA.  Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.  The first developer to receive FDA marketing approval for an orphan biologic is entitled to a seven year exclusive marketing period in the United States for that product as well as a waiver of the BLA user fee.  The exclusivity prevents FDA approval of another application for the same product for the same indication for a period of seven years, except in limited circumstances where there is a change in formulation in the original product and the second product has been proven to be clinically superior to the first.
 
Legislation similar to the Orphan Drug Act has been enacted in other jurisdictions, including the European Union.  The orphan legislation in the European Union is available for therapies addressing conditions that affect five or fewer out of 10,000 persons.  The marketing exclusivity period is for ten years, although that period can be reduced to six years if, at the end of the fifth year, available evidence establishes that the product is sufficiently profitable not to justify maintenance of market exclusivity.  We have received orphan drug designation for our Neo-Urinary Conduit for the treatment of bladder dysfunction requiring incontinent urinary diversion.
 
 
 
 
 
 
 
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Human Cellular and Tissue-Based Products
 
Human cells or tissue intended for implantation, transplantation, infusion, or transfer into a human recipient in the U.S. are regulated by the FDA as human cells, tissues, and cellular and tissue-based product, or HCT/Ps.  Certain types of HCT/Ps are regulated differently from drug or biologic products because they are minimally manipulated tissues intended for homologous use in the patient’s body, are not combined with a drug, device or biologic, and do not have systemic or metabolic effects on the body.  The FDA does not require pre-market approval for these types of HCT/Ps, however, it does require strict adherence to federally mandated current Good Tissue Practice, or cGTP, regulations for all HCT/Ps.  These regulations are analogous to the cGMP regulations described above in terms of manufacturing standards.  In addition, the FDA’s regulations include other requirements to prevent the introduction, transmission and spread of communicable disease.  These requirements apply to all HCT/Ps, including those regulated as drugs, biologics or devices.  Specifically, the FDA’s regulations require tissue establishments to register and list their HCT/Ps with the FDA and, when applicable, to evaluate donors through screening and testing.  We submit an annual registration and listing form to the FDA for our Winston-Salem facility as an HCT/Ps facility.
 
Advanced therapy Medicinal Products
 
The Advanced therapy Medicinal Products (ATMP) regulation enables the European Medicines Agency (EMA) to determine whether or not a given product meets the scientific criteria to be classified under various regulations that control medical product development.  The ATMP classification is based on the evaluation of whether a given product fulfils one of the definitions of somatic cell therapy medicinal product (sCTMP) or tissue engineered product (TEP) and whether the product fulfils the definition of a combined ATMP.  Clinical trials in the EU are under the responsibility of the National Competent Authorities and submitting a clinical trial dossier under the appropriate EU classification facilitates the most relevant criteria and procedures to apply in regulating the development and evaluation of a medical product intended for human use.

Privacy Law
 
Federal and state laws govern our ability to obtain and, in some cases, to use and disclose data we need to conduct research activities.  Through the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (as incorporated in the American Recovery and Reinvestment Act of 2009) Congress required the Department of Health and Human Services to issue a series of regulations establishing standards for the electronic transmission of certain health information.  Among these regulations were standards for the privacy of individually identifiable health information.  Most health care providers were required to comply with the Privacy Rule as of April 14, 2003.
 
HIPAA does not preempt, or override, state privacy laws that provide even more protection for individuals’ health information.  These laws’ requirements could further complicate our ability to obtain necessary research data from our collaborators.  In addition, certain state privacy and genetic testing laws may directly regulate our research activities, affecting the manner in which we use and disclose individuals’ health information, potentially increasing our cost of doing business, and exposing us to liability claims.  In addition, patients and research collaborators may have contractual rights that further limit our ability to use and disclose individually identifiable health information.  Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.
 
Other Regulations
 
In addition to privacy law requirements and regulations enforced by the FDA, we also are subject to various local, state and federal laws and regulations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances.  These laws include, but are not limited to, the Occupational Safety and Health Act, the Toxic Test Substances Control Act and the Resource Conservation and Recovery Act.
 
Foreign Regulation
 
We will most likely have to obtain approval for the manufacturing and marketing of each of our products from regulatory authorities in foreign countries prior to the commencement of marketing of the product in those countries.  The approval procedure varies among countries, may involve additional preclinical testing and clinical trials, and the time required may differ from that required for FDA approval or licensure.  Although there is now a centralized European Union approval mechanism in place, this applies only to certain specific medicinal product categories.  In respect of all other medicinal products each European country may impose certain of its own procedures and requirements in addition to those requirements set out in the appropriate legislation, many of which could be time-consuming and expensive.
 
Employees
 
As of December 31, 2012, we had 26 employees, including 25 full-time employees, of which 21 employees were engaged in research, development, and facilities management, and 5 employees were engaged in administration and finance.  All of our employees have entered into non-disclosure agreements with us regarding our intellectual property, trade secrets and other confidential information.  None of our employees are represented by a labor union or covered under a collective bargaining agreement, nor have we experienced any work stoppages.
 
 
 
 
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Corporate Website
 
Our Internet website address is http://www.tengion.com.  Our filings on Form 10-K, Form 10-Q, Form 3, Form 4, Form 5, Form 8-K and any and all amendments thereto are available free of charge through this internet website as soon as reasonably practicable after they are filed or furnished to the Securities and Exchange Commission, or the SEC.  They are also available through the SEC at http://www.sec.gov/edgar/searchedgar/companysearch.html.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Item 1A.Risk Factors
 
Our business is subject to numerous risks.  We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us in filings with the SEC, press releases, communications with investors and oral statements.  Any or all of our forward-looking statements in this Annual Report on Form 10-K and in any other public statements we make may turn out to be wrong.  They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties.  Many factors mentioned in the discussion below will be important in determining future results.  Consequently, forward-looking statements cannot be guaranteed.  Actual future results may differ materially from those anticipated in forward-looking statements.  We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.  You are advised, however, to consult any further disclosure we make in our reports filed with the SEC or in a press release.
 
Risks Related to Our Financial Position and Need for Additional Capital
 
In order to fund our operations, we will need to raise significant amounts of capital.  We may not be able to raise additional capital when necessary or on acceptable terms to us, if at all.  
 
Based upon our current expected level of operating expenditures and debt repayment, and assuming we are not required to settle any outstanding warrants in cash or redeem, or pay cash interest on, any of our Senior Secured Convertible Notes (Convertible Notes), we expect to be able to fund operations through May 2013.  This period could be shortened if there are any significant increases in planned spending on development programs other than as anticipated or other unforeseen events.  We intend to pursue additional sources of capital to continue our business operations as currently conducted and fund deficits in operating cash flows.  There is no assurance that such financing will be available when needed or, if available, on terms acceptable to us.  If we do not raise additional capital by May 31, 2013, we may not be able to fund our operations or remain in business. Our future capital requirements will depend on many factors, including:
 
 
·
the scope and results of our clinical trials, particularly regarding the number of patients required and the required duration of follow-up for our clinical trials in support of our product candidates; 
 
 
·
the scope and results of our research and preclinical development programs; 
 
 
·
the costs of operating our research and development facility to support our research and early clinical activities; 
 
 
·
the time, complexity and costs involved in obtaining marketing approvals for our product candidates, which could take longer and be more costly than obtaining approval for a new conventional drug candidate, given the FDA’s limited experience with clinical trials and marketing approval for products derived from a patient’s own cells;
 
 
·
the costs of securing commercial manufacturing capacity to support later-stage clinical trials and subsequent commercialization activities, if any; 
 
 
·
the costs of maintaining, expanding, protecting and enforcing our intellectual property portfolio, including potential dispute and litigation costs and any associated liabilities and potentially challenging the intellectual property of others; 
 
 
·
the costs of entering new markets outside the United States; and 
 
 
·
the extent of our contractual obligations and amount of debt service payments we are obligated to make.
 
 
As a result of these factors, among others, we will need to seek additional funding before we are able to generate positive cash flow from operations.  We will need to raise additional funds through collaborative arrangements, public or private sales of debt, equity or equity-linked securities, commercial loan facilities, or some combination thereof.  Additional funding may not be available to us on acceptable terms, or at all.  If we obtain capital through collaborative arrangements, these arrangements could require us to relinquish some rights to our technologies or product candidates and we may become dependent on third parties.  If we raise capital through the sale of equity, or securities convertible into equity, dilution to our then-existing stockholders would result.  If we obtain funding through the incurrence of debt, we would likely become subject to covenants restricting our business activities, and holders of debt instruments would have rights and privileges senior to those of our equity investors.  In addition, servicing the interest and repayment obligations under our current and future borrowings would divert funds that would otherwise be available to support research and development, clinical or commercialization activities.
 
 
 
 
 
 
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If we are unable to obtain adequate financing on a timely basis, we may be required to delay, reduce the scope of or eliminate one or more of our development programs, reduce our personnel, or default on our outstanding debt and contractual obligations, any of which could raise substantial doubt about our ability to continue as a going concern and remain in business.
 
We have a substantial amount of debt and contractual obligations that expose us to risks that could adversely affect our business, operating results and financial condition.  
 
As of March 15, 2013, we had outstanding debt with an aggregate principal amount of $18.6 million, which is secured by liens on substantially all of our assets.  Our outstanding debt includes approximately $15 million in Convertible Notes issued in the 2012 Financing and a $3.6 million loan from our venture debt lender, Horizon Credit II LLC.

Under the terms of the Convertible Notes, beginning January 1, 2013, we were required to make quarterly interest payments in cash or shares of our common stock at 10% per annum.  On December 31, 2012, holders of the Convertible Notes agreed to extend the interest payments that were due on January 1, 2013 to February 1, 2013 and on January 30, 2013, the holders agreed to extend the interest payment date to February 15, 2013. The Convertible Notes are due October 2, 2015.  We are permitted, subject to certain restrictions, to satisfy our interest obligations under the Convertible Notes through issuance of shares of our common stock.  On February 15, 2013, we issued 482,804 shares of common stock to Convertible Note holders in satisfaction of our interest obligation on that date.  The holders of our Convertible Notes also have the right to require us to issue on or before June 30, 2013 up to an additional $20 million of securities.
 
Under the terms of our loan with Horizon Credit II LLC, we are obligated to make interest-only payments through June 1, 2013, followed by monthly payments of principal and interest at an interest rate of 13% per annum through May 1, 2014.  
 
We expect that the annual principal and interest payments on our outstanding debt will be approximately $3.9 million, $3.3 million, and $16.4 million in 2013, 2014, and 2015, respectively.  The level and nature of our indebtedness could, among other things:
 
 
·
make it difficult for us to obtain any necessary financing in the future; 
 
 
·
limit our flexibility in planning for or reacting to changes in our business;
 
 
·
reduce funds available for use in our operations; 
 
 
·
impair our ability to incur additional debt because of financial and other restrictive covenants or the liens on our assets which secure our current debt; 
 
 
·
hinder our ability to raise equity capital because in the event of a liquidation of the business, debt holders receive a priority before equity holders; 
 
 
·
make us more vulnerable in the event of a downturn in our business; or 
 
 
·
place us at a possible competitive disadvantage relative to less leveraged competitors and competitors that have better access to capital resources.
 
 
The lease agreement for our Pennsylvania manufacturing facility requires us to provide security and restoration deposits totaling $2.2 million to the landlord.  In satisfaction of these security deposit obligations, we have deposited $2.2 million with the landlord.
 
In November 2011, we made a business decision to restructure our corporate operations, consolidate our operations in our Winston-Salem research and development facility and seek to exit our commercial-scale manufacturing facility.  We currently have three years left under the lease agreement for our commercial-scale manufacturing facility and a gross rental obligation of $1.3 million.   While we will seek to sublease or otherwise reduce the net rental obligation of this facility, there can be no assurance that we will be successful in doing so and we will remain contractually liable for the rental obligations under this lease.
 
Unless we raise substantial additional capital or generate substantial revenue from a licensing transaction or strategic partnership involving one of our product candidates, and there can be no assurance that we will be able to do so, we may not be able to service or repay our debt when it becomes due, in which case our lenders could seek to accelerate payment of all unpaid principal and foreclose on our assets or continue to execute our current business and product development plans.  Any such event would raise substantial doubt about our ability to continue as a going concern and have a material adverse effect on our business, operating results and financial condition.
 
 
 
 
 
 
 
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We have a history of net losses and may not achieve or sustain profitability.  
 
Our recurring losses from operations and our need for significant additional capital to fund anticipated future losses from operations and debt repayment raise substantial doubt about our ability to continue as a going concern, and as a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements as of and for the year ended December 31, 2012 related to this uncertainty.  We have incurred losses in each year since our inception and expect to experience losses for the foreseeable future.  As of December 31, 2012, we had an accumulated deficit of $247.2 million.  We had net losses of $19.1 million, and $16.9 million in the years ended December 31, 2011 and 2012, respectively.  These losses resulted principally from costs incurred in our clinical trials, research and development programs, construction of our research laboratories and commercial manufacturing facility, and from our general and administrative expenses.  These losses, among other things, have had and will continue to have an adverse effect on our stockholders’ equity, total assets and working capital.
 
We expect to continue to incur significant operating expenses and anticipate that our expenses and losses will increase in the foreseeable future as we seek to further develop our product candidates, technology and manufacturing capabilities.  Our expenses are expected to relate to the following:
 
 
·
continuing research and development efforts, including relating to our Neo-Kidney Augment; 
 
 
·
conducting our Phase I clinical trial for our Neo-Urinary Conduit for patients with bladder cancer who require removal of their bladder; 
 
 
·
maintaining, expanding, protecting and enforcing our intellectual property portfolio and assets and potentially challenging the intellectual property of others; 
 
 
·
expanding our manufacturing capabilities to support commercialization of our current and future product candidates; and 
 
 
·
servicing and repaying indebtedness.
 
 
The extent of our future operating losses is highly uncertain, and we may never achieve or sustain profitability.  If we are unable to achieve and then maintain profitability, the market value of our common stock will decline.
 
If we do not successfully develop our product candidates and obtain the necessary marketing approvals to commercialize them, we will not generate sufficient revenues to continue our business operations.  
 
In order to obtain marketing approval of our product candidates so that we can generate revenues once they are commercialized, we must conduct extensive preclinical studies and clinical trials to demonstrate that our product candidates are safe and effective and obtain and maintain approval of our manufacturing facilities.  Our early stage product candidates, including our Neo-Urinary Conduit, for which we have commenced a Phase I clinical trial, may fail to perform as we expect.  Moreover, our Neo-Urinary Conduit and our other product candidates may ultimately fail to demonstrate the necessary safety and efficacy for marketing approval.  Even if results from preclinical studies and early phase clinical trials are positive, there can be no assurances that later stage studies or trials will be successful.  We will need to conduct additional research and development, and devote significant additional financial resources and personnel to develop commercially viable products and obtain the necessary marketing approvals, and if we fail to do so successfully, we may cease operations altogether.
 
Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.  
 
We are a development-stage company.  We commenced operations in July 2003.  Our operations to date have been limited to organizing and staffing, acquiring and developing our technology, and undertaking preclinical studies and clinical trials of our product candidates.  We have not demonstrated an ability to successfully complete large-scale clinical trials, obtain marketing approvals for product registration, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.  As a result, we have a limited operating history.

Even if we are successful in obtaining marketing approval for any of our product candidates, we will need to transition from a company with a research focus to a company capable of supporting commercial activities.  We may not be successful in such a transition.
 
 
 
 
 
 
 
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If we fail to satisfy our registration obligations in connection with the 2012 Financing, we would be required to make certain cash payments to holders of the 2012 Warrants and Convertible Notes and the holders of the Convertible Notes may declare the Convertible Notes immediately due and payable.

In connection with the 2012 Financing, we have agreed to file a registration statement, to register for resale the shares of common stock issuable upon exercise of the 2012 Warrants, the conversion of the Convertible Notes, and upon adjustments to the 2012 Warrants and Convertible Notes, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations.  We are obligated to use our best efforts to cause the initial registration statement to become effective as soon as practicable, but in no event later than March 31, 2013.  Because SEC limitations have prohibited us from registering all of the shares of common stock underlying the Convertible Notes and 2012 Warrants on a registration statement, the holders of the Convertible Notes and 2012 Warrants have agreed that, at this time, we need only register the shares of common stock issuable upon the exercise of the 2012 Warrants, subject to the limitations set by the SEC on the number of shares permitted to be registered by us at one time.  If any of the shares are unable to be included on the initial registration statement, we have agreed to file subsequent registration statements by certain dates until all the underlying shares have been registered or may be freely tradable.  We are obligated to maintain the effectiveness of the registration statements until all the shares are sold or otherwise can be sold without registration and without any restrictions.  If we fail to satisfy our registration obligations or specified filing and effectiveness dates, we must make cash payments to the holders of the 2012 Warrants and the Convertible Notes.  Such cash payments would significantly reduce funds available for use in our operations and could adversely affect our business. If a registration failure under the 2012 Warrants is not cured within the applicable period, the holders of the 2012 Warrants can also cause us to redeem the 2012 Warrants at a value based on the Black-Scholes option pricing model and the holders of the Convertible Notes may declare the Convertible Notes immediately due and payable. In such event, we may not have the financial resources to make such payments.
 
Risks Related to the Development of Our Product Candidates
 
Our clinical trials may not be successful.  
 
We will only obtain marketing approval to commercialize a product candidate if we can demonstrate to the satisfaction of the FDA or the applicable non-United States regulatory authority, in clinical trials, that the product candidate is safe and effective, and otherwise meets the appropriate standards required for approval for a particular indication.  Clinical trials are lengthy, complex and extremely expensive processes with uncertain results.  A failure of one or more of our clinical trials may occur at any stage of testing.
 
We are currently conducting a Phase I open-label, single-arm study of our Neo-Urinary Conduit in patients who are undergoing bladder removal due to bladder cancer.  We have designed this trial to assess the safety and preliminary efficacy of the Neo-Urinary Conduit.  This trial is also intended to allow our clinical investigators to optimize and, as necessary, modify the surgical implantation technique and post-operative care based on the experience gained by prior patients enrolled.  As we have limited experience with this product candidate in humans, we may have difficulty optimizing the surgical implantation of the Neo-Urinary Conduit.  Seven patients have been enrolled and implanted in this clinical trial; two patients, however, died as a result of health issues unrelated to our Neo-Urinary Conduit product candidate.  Based upon the experience of the first three patients, clinical investigators have made surgical modifications in an effort to address stoma patency, conduit integrity and vascular supply.  We are focused on completing implantation of the remaining three patients in the trial and then working with the FDA during 2013 to plan for a potential Phase 2/3 clinical trial of this product candidate.  However, there may be delays in recruiting patients for this clinical trial, which would delay our development of our Neo-Urinary product candidate.  There can be no assurance that, as part of our Phase I clinical trial, patients will not experience additional complications, additional serious adverse events related to our Neo-Urinary Conduit, or serious adverse events that, although not related to our product candidate, could have a materially detrimental impact on our clinical trial.  Additionally, we may determine, based upon this trial, that our Neo-Urinary Conduit demonstrates limited safety or efficacy.

We may find it difficult to enroll patients in our clinical trials.  
 
Our initial product candidates are designed to treat diseases that affect relatively few patients.  This could make it difficult for us to enroll the number of patients that may be required for the clinical trials we would be required to conduct in order to obtain marketing approval for our product candidates.
 
In addition, we may have difficulty finding eligible patients to participate in our clinical trials because our trials may include stringent enrollment criteria.  For example, a patient may require a concomitant surgical procedure that would prevent them from being enrolled in a clinical trial, may be using alternative therapies, or the extent of a patient’s overall medical condition may render such patient ineligible to participate in our trials.  Our Neo-Urinary Conduit has limited experience in humans and patients may not want to enroll in a trial where they are among the first group of patients to receive this product candidate.  Additionally, as we have been developing the surgical procedure in the first group of patients, each of the first three patients receiving our Neo-Urinary Conduit experienced complications and serious adverse events, which could have the effect of discouraging others from enrolling in this trial.  Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether.
 
 
 
 
 
 
 
 
 
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Our product development programs are based on novel technologies and are inherently risky.  
 
We are subject to the risks of failure inherent in the development of products based on new technologies.  The novel nature of our Organ Regeneration Platform creates significant challenges with respect to product development and optimization, manufacturing, government regulation and approval, third-party reimbursement and market acceptance.  For example, the FDA has relatively limited experience with the development and regulation of autologous neo-organs and, therefore, the pathway to marketing approval for our product candidates may accordingly be more complex, lengthy and uncertain than for a more conventional new drug candidate.  The FDA may not approve our product candidates or may approve them with certain restrictions that may limit our ability to market our product candidates, and our product candidates may not be successfully commercialized, if at all.
 
We have limited experience in conducting and managing the preclinical development activities and clinical trials necessary to obtain marketing approvals necessary for marketing our product candidates, including approval by the FDA.  
 
Our efforts to develop all of our product candidates are at an early stage.  We may be unable to progress our product candidates that are undergoing preclinical testing into clinical trials.  Success in preclinical testing and early clinical trials does not ensure that later clinical trials will be successful, and favorable initial results from a clinical trial do not necessarily predict outcomes in subsequent clinical trials.  The indications of use for which we are pursuing development may have clinical effectiveness endpoints that have not previously been reviewed or validated by the FDA, which may complicate or delay our effort to ultimately obtain FDA approval.  We cannot guarantee that our clinical trials will ultimately be successful.

We have not obtained marketing approval or commercialized any of our product candidates.  We may not successfully design or implement clinical trials required for marketing approval to market our product candidates.  We might not be able to demonstrate that our product candidates meet the appropriate standards for marketing approval, particularly as our technology may be the first of its kind to be reviewed by the FDA.  If we are not successful in conducting and managing our preclinical development activities or clinical trials or obtaining marketing approvals, we might not be able to commercialize our product candidates, or might be significantly delayed in doing so, which will materially harm our business.
 
If we are not able to retain qualified management and scientific personnel, we may fail to develop our technologies and product candidates.  
 
Our future success depends to a significant extent on the skills, experience and efforts of the principal members of our scientific and management personnel.  These members include John L. Miclot, our President and Chief Executive Officer, and Timothy Bertram, D.V.M., Ph.D., our President, Research and Development and Chief Scientific Officer.  The loss of either or both of these individuals could harm our business and might significantly delay or prevent the achievement of research, development or business objectives.  Competition for personnel is intense and our financial position may make it difficult to retain or attract management and scientific qualified personnel.  We may be unable to retain our current personnel or attract or integrate other qualified management and scientific personnel in the future.
 
We rely on third parties to conduct certain preclinical development activities and our clinical trials, and those third parties may not perform satisfactorily.  
 
We do not conduct in our facilities certain preclinical development activities of our product candidates, such as preclinical studies in animals, nor do we conduct clinical trials for our product candidates ourselves.  We rely on, or work in conjunction with, third parties, such as contract research organizations, medical institutions and clinical investigators, to perform these functions.  Our reliance on these third parties for preclinical and clinical development studies reduces our control over these activities.  We are responsible for ensuring that each of our preclinical development activities and our clinical trials is conducted in accordance with the applicable U.S. federal and state laws and foreign regulations, general investigational plans and protocols.  However, other than our contracts with these third parties, we have no direct control over these researchers or contractors, as they are not our employees.  Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, or GCP, for conducting, recording and reporting the results of our clinical trials to assure that data and reported results are credible and accurate and that the rights, safety and confidentiality of trial participants are protected.  Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements.  Furthermore, these third parties also may have relationships with other entities, some of which may be our competitors.  If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical development activities or our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.  These third parties may be warned, suspended or otherwise sanctioned by the FDA or other government or regulatory authorities for failing to meet the applicable requirements imposed on such third parties.  As a result, the third parties may not be able to fulfill their contractual obligations, and the results obtained from the preclinical and clinical research using their services may not be accepted by the FDA to support the marketing approval of our product candidates.  If the third parties or their employees become debarred by the FDA, we cannot use the research data derived from their services to support the marketing approval of our product candidates.  Finally, these third parties may be bought by other entities, change their business plans or strategies or they may go out of business, thereby preventing them from meeting their contractual obligations to us.

 
 
 
 
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We may not be able to secure and maintain relationships with research institutions and clinical investigators that are capable of conducting and have access to necessary patient populations for the conduct our clinical trials.
 
We rely on research institutions and clinical investigators to conduct our clinical trials.  Our reliance upon research institutions, including hospitals and clinics, provides us with less control over the timing and cost of clinical trials and the ability to recruit subjects.  If we are unable to reach agreement with suitable research institutions and clinical investigators on acceptable terms, or if any resulting agreement is terminated because, for example, the research institution and/or clinical investigators lose their licenses or permits necessary to conduct our clinical trials, we may be unable to quickly replace the research institution and/or clinical investigator with another qualified research institution and/or clinical investigator on acceptable terms.  We may not be able to secure and maintain agreement with suitable research institutions to conduct our clinical trials.
 
Compliance with governmental regulations regarding the treatment of animals used in research could increase our operating costs, which would adversely affect the commercialization of our technology.  
 
The Animal Welfare Act, or AWA, is the federal law that covers the treatment of certain animals used in research.  Currently, the AWA imposes a wide variety of specific regulations that govern the humane handling, care, treatment and transportation of certain animals by producers and users of research animals, most notably relating to personnel, facilities, sanitation, cage size, feeding, watering and shipping conditions.  Third parties with whom we contract are subject to registration, inspections and reporting requirements.  Furthermore, some states have their own regulations, including general anti-cruelty legislation, which establish certain standards in handling animals.  If we or any of our contractors fail to comply with regulations concerning the treatment of animals used in research, we may be subject to fines and penalties and adverse publicity, and our operations could be adversely affected.
 
Public perception of ethical and social issues may limit or discourage the type of research we conduct.  
 
Our clinical trials involve people, and we and third parties with whom we contract also do research involving animals.  Governmental authorities could, for public health or other purposes, limit the use of human or animal research or prohibit the practice of our technology.  Public attitudes may be influenced by claims that our technology or that regenerative medicine generally is unsafe for use in research or is unethical and akin to cloning.  In addition, animal rights activists could protest or make threats against our facilities, which may result in property damage and subsequently delay our research.  Ethical and other concerns about our methods, particularly our use of human subjects in clinical trials or the use of animal testing, could adversely affect our market acceptance.
 
Risks Related to the Manufacturing of Our Product Candidates
 
We have only limited experience manufacturing our product candidates.  We may not be able to manufacture our product candidates in quantities sufficient for our clinical trials and/or any commercial launch of our product candidates.  
 
We may encounter difficulties in the production of our product candidates.  Construction of neo-organs from autologous live human cells involves strict adherence to complex manufacturing and storage protocols and procedures.  Early stage clinical manufacturing is conducted in our pilot facility and, while we have supported clinical manufacturing from this location, future difficulties may arise that limit our production capability and delay progress in our clinical trials.  Currently, we also occupy a commercial-scale manufacturing facility.  As a result of our November 2011 business decision to restructure our corporate operations, we have decided to consolidate our operations in our Winston-Salem research and development facility and to seek to exit our commercial-scale manufacturing facility.  As a result of this decision, as our product candidates advance into later-stage clinical trials toward commercialization, we will need to either develop our own internal manufacturing capability or contract with a third-party manufacturer to conduct this manufacturing on our behalf.  Obtaining our own commercial scale manufacturing capacity will be costly and time consuming.  Additionally, we may have difficulty finding suitable third parties with the manufacturing expertise that we need.  These occurrences could increase our costs or cause delays in the production of our product candidates necessary for any Phase III clinical trial and/or any anticipated commercial launch of our product candidates, any of which could damage our reputation and harm our business.

The current manufacture of our product candidates involves the use of regulated animal tissues, and future product candidates may also use animal-sourced materials.  
 
We currently utilize several bovine-derived products, such as growth media, in the manufacture of our Neo-Urinary Conduit.  Bovine-sourced materials are strictly regulated in the United States and other jurisdictions due to their capacity to transmit the prior disease Bovine Spongiform Encephalopathy, or BSE, which manifests itself in humans as Creutzfeldt-Jakob Disease.  Although we obtain our supply of bovine-based materials from closed herds in jurisdictions that are not currently known to carry BSE, there can be no assurance that these herds will remain BSE-free or that a future outbreak or presence of other unintended and potentially hazardous agents would not adversely affect our product candidates or patients that may receive them.  Further, our future product candidates may involve the use of bovine-sourced or other animal-based materials, which could increase the risk of transmission of other diseases carried by such animals.
 
 
 
 
 
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If a natural or man-made disaster strikes our manufacturing facility, we would be unable to manufacture our product candidates for a substantial amount of time, which would harm our business.
 
Our manufacturing facility and manufacturing equipment would be difficult to replace and could require substantial replacement lead-time and additional funds if we lost use of either the facility or equipment.  Our facility may be affected by natural disasters, such as floods.  We do not currently have back-up capacity, so in the event our facility or equipment was affected by man-made or natural disasters, we would be unable to manufacture any of our product candidates until such time as our facility could be repaired or rebuilt.  Although, currently we maintain global property insurance with personal property limits of $26.9 million and business interruption insurance coverage of $5.4 million for damage to our property and the disruption of our business from fire and other casualties, such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.
 
Our business involves the use of hazardous materials that could expose us to environmental and other liability.  
 
Our research and development processes and our operations involve the controlled storage, use and disposal of hazardous materials including, but not limited to, biological hazardous materials.  We are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of these materials and waste products.  Although we believe that our safety procedures for handling and disposing of these hazardous materials comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely eliminated.  In the event of an accident, we could be held liable for any damages that result, and any liability could exceed the limits or fall outside the coverage of our insurance.  Moreover, we may not be able to maintain insurance to cover these risks on acceptable terms, or at all.  We could also be required to incur significant costs to comply with current or future laws and regulations relating to hazardous materials.  We currently maintain insurance coverage that is consistent with similar companies in our stage of development.  In addition to global property insurance, we maintain general liability insurance coverage of $1 million each occurrence and $2 million in the aggregate, umbrella liability insurance of $4 million, and workers’ compensation coverage with statutory limits, including employer’s liability coverage of $0.5 million per incident.  Such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.
  
Risks Related to Marketing Approval and Other Government Regulations
 
We cannot market and sell our product candidates in the United States or in other countries if we fail to obtain the necessary marketing approvals or licensure.  
 
We cannot sell our product candidates until regulatory agencies grant marketing approval, or licensure.  The process of obtaining such marketing approval is lengthy, expensive and uncertain.  It is likely to take many years to obtain the required marketing approvals for our product candidates or we may never gain the necessary approvals.  Any difficulties that we encounter in obtaining marketing approval may have a substantial adverse impact on our operations and cause our stock price to decline significantly.  Any adverse events in our clinical trials for one of our product candidates could negatively impact the clinical trials and approval process for our other product candidates.
 
To obtain marketing approvals in the United States for our product candidates, we must, among other requirements, complete carefully controlled and well-designed clinical trials sufficient to demonstrate to the FDA that the product candidate is safe and effective for each indication for which we seek approval.  Several factors could prevent completion or cause significant delay of these trials, including an inability to enroll the required number of patients or failure to obtain FDA approval to commence a clinical trial.  Negative or inconclusive results from, or adverse events during, a preclinical safety study or clinical trial could cause the preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are successful.  The FDA can place a clinical trial on hold if, among other reasons, it finds that patients enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury.  If safety concerns develop, we, an Institutional Review Board, or IRB, or the FDA could stop our trials before completion.  The populations for which we are developing our product candidates may have other medical complications that would affect their experience in our trials and would affect their experience with our product candidates, if approved.  A serious adverse event is an event that results in significant medical consequences, such as hospitalization or prolonged hospitalization, disability or death, and if unexpected must be reported to the FDA.  We cannot guarantee that other safety concerns regarding our product candidates will not develop.  
 
The pathway to marketing approval for our product candidates may be more complex and lengthy than for approval of a conventional new drug or biologic.  Similarly, to obtain approval to market our product candidates outside of the United States, we will need to submit clinical data concerning our product candidates and receive marketing approval from governmental agencies, which in certain countries includes approval of the price we intend to charge for our product.  We may encounter delays or rejections if changes occur in regulatory agency policies, or if reports from preclinical and clinical testing on similar technology or products raise safety and/or efficacy concerns, during the period in which we develop a product candidate or during the period required for review of any application for marketing approval.  If we are not able to obtain marketing approvals for use of our product candidates under development, we will not be able to commercialize such products and, therefore, may not be able to generate sufficient revenues to support our business.
 
 
 
 
 
 
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The FDA may impose requirements on our clinical trials that could harm our business.  
 
The requirements the FDA may impose on clinical trials for our product candidates are uncertain.  As a result, we cannot guarantee that we will be able to comply with such requirements.  For example, the FDA may require endpoints in our late-stage clinical trials that are different from, or in addition to, either the endpoints in our early-stage clinical trials or the endpoints that we may propose.  The endpoints or other study elements, including sample size, the FDA requires may make it less likely that our Phase III clinical trials are successful or may delay completion of the trials.  If we are unable to comply with the FDA’s requirements, we will not be able to get approval for our product candidates and our business will suffer.
 
If we are not able to conduct our clinical trials properly and on schedule, marketing approval by the FDA and other regulatory authorities may be delayed or denied.  
 
Our clinical trials may be delayed or terminated for many reasons, including, but not limited to, if:
 
 
·
the FDA does not grant permission to proceed or places the trial on clinical hold; 
 
 
·
subjects do not enroll or remain in our trials at the rate we expect; 
 
 
·
we fail to manufacture necessary amounts of product candidate; 
 
 
·
our pilot manufacturing facility is ordered by FDA or other government or regulatory authority to temporarily or permanently shut down due to violations of current Good Manufacturing Practice, or cGMP, or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process; 
 
 
·
subjects choose an alternative treatment for the indications for which we are developing our product candidates, or participate in competing clinical trials; 
 
 
·
subjects experience an unacceptable rate or severity of adverse side effects; 
 
 
·
reports from preclinical or clinical testing on similar technologies and products raise safety and/or efficacy concerns; 
 
 
·
third-party clinical investigators lose their license or permits necessary to perform our clinical trials, do not perform our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, Good Clinical Practice and regulatory requirements, or other third parties do not perform data collection and analysis in a timely or accurate manner;  
 
 
·
inspections of clinical trial sites by the FDA or IRBs find regulatory violations that require us to undertake corrective action, suspend or terminate one or more sites, or prohibit us from using some or all of the data in support of our marketing applications; 
 
 
·
third-party contractors become debarred or suspended or otherwise penalized by FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or any of the data produced by such contractors in support of our marketing applications; or 
 
 
·
one or more IRBs or our Data Safety Monitoring Board, or DSMB, refuses to approve, suspends or terminates the trial at an investigational site, precludes enrollment of additional subjects, or withdraws its approval of the trial.
 
 
If we are unable to conduct our clinical trials properly and on schedule, the FDA may delay or deny marketing approval.
 
Final marketing approval of our product candidates by the FDA or other regulatory authorities for commercial use may be delayed, limited, or denied, any of which would adversely affect our ability to generate operating revenues.  
 
Any of the following factors, if one or more were to occur, could cause final marketing approval for our product candidates to be delayed, limited or denied:
 
 
·
our product candidates could fail to demonstrate safety and efficacy in preclinical or clinical testing; 
 
 
·
the manufacturing processes for our product candidates could fail to consistently demonstrate their safety and purity; 
 
 
 
 
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·
the FDA could disagree with the clinical endpoints we propose for our clinical trials and refuse to allow us to conduct clinical trials utilizing clinical endpoints we believe are appropriate; 
 
 
·
it could take many years to complete the testing of our product candidates, and failure can occur at any stage of the process; 
 
 
·
negative results or adverse side effects during a clinical trial could cause us to delay or terminate development efforts for a product candidate; 
 
 
·
the FDA could seek the advice of an Advisory Committee of physician and patient representatives that may view the risks of our product candidates as outweighing the benefits; 
 
 
·
the FDA could require us to expand the size and scope of the clinical trials; or 
 
 
·
the FDA could impose post-marketing restrictions.
 
 
Our development costs will increase if we have material delays in our clinical trials, or if we are required to modify, suspend, terminate or repeat a clinical trial.  If marketing approval for our product candidates is delayed, limited or denied, our ability to market products, and our ability to generate product sales, would be adversely affected.
 
Any product for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved.  
 
Any product for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and comparable regulatory authorities, including through periodic inspections.  These requirements include, but are not limited to, submissions of safety and other post-marketing information and reports, registration requirements, cGMP and Quality System Regulation, or QSR, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.  Even if marketing approval of a product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to other conditions of approval, or may contain requirements for costly and time consuming post-marketing testing and surveillance to monitor the safety or efficacy of the product.  Discovery after approval of previously unknown problems with our product candidates or manufacturing processes, or failure to comply with regulatory requirements, may result in actions such as:
 
 
·
restrictions on such products’ manufacturers or manufacturing processes; 
 
 
·
restrictions on the marketing or distribution of a product, including refusals to permit the import or export of products; 
 
 
·
warning letters or untitled letters; 
 
 
·
warning labels on the products; 
 
 
·
withdrawal of the products from the market; 
 
 
·
refusal to approve pending applications or supplements to approved applications that we submit; 
 
 
·
suspension of any ongoing clinical trials; 
 
 
·
recall of products; 
 
 
·
fines, restitution or disgorgement of profits or revenue; 
 
 
·
suspension or withdrawal of marketing approvals; 
 
 
·
product seizure; 
 
 
·
injunctions; or 
 
 
·
imposition of civil or criminal penalties.
 
 
 
 
 
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In addition, if any of our product candidates are approved, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review.  The FDA strictly regulates the promotional claims that may be made about prescription products.  In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling.  The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant sanctions.
 
Current or future legislation may make it more difficult and costly for us to obtain marketing approval of our product candidates.  
 
In 2007, the Food and Drug Administration Amendments Act of 2007, or the FDAAA, became law.  This legislation grants significant new powers to the FDA, many of which are aimed at assuring the safety of drugs and biologics after approval.  For example, FDAAA granted the FDA new authority to impose post-approval clinical study requirements, require safety-related changes to product labeling and require the adoption of risk management plans, referred to as risk evaluation and mitigation strategies, or REMS.  The REMS may include requirements for special labeling or medication guides for patients, special communication plans to health care professionals, and restrictions on distribution and use.  Pursuant to FDAAA, if the FDA makes the requisite findings, it might require that a new product be used only by physicians with specified specialized training, only in specified designated health care settings, or only in conjunction with special patient testing and monitoring.  The legislation also included requirements for disclosing clinical study results to the public through a clinical study registry, and renewed requirements for conducting clinical studies to generate information on the use of products in pediatric patients.  Under the FDAAA, companies that violate the new law are subject to substantial civil monetary penalties.  The requirements and changes imposed by the FDAAA may make it more difficult, and more costly, to obtain and maintain approval of new biological products.
 
In addition, the FDA’s regulations, policies or guidance may change and new or additional statutes or government regulations may be enacted that could prevent or delay marketing approval of our product candidates or further restrict or regulate post-approval activities.  For example, proposals have been made to further expand post-approval requirements and restrict sales and promotional activities.  It is impossible to predict whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes or the marketing approvals of our product candidates, if any, may be.
 
Risks Related to the Commercialization of Our Product Candidates
 
If we fail to educate and train physicians as to the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our product candidates, our sales will not grow.  
 
Acceptance of our product candidates depends, in large part, on our ability to train physicians in the proper implantation of our neo-organs, which will require significant expenditure of our resources.  Convincing physicians to dedicate the time and energy necessary to properly train to use new products and techniques is challenging, and we may not be successful in these efforts.  If physicians are not properly trained, they may ineffectively implant our product candidates.  Such misuse or ineffective implantation may result in unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us.  Accordingly, even if our product candidates are superior to alternative treatments, our success will depend on our ability to gain and maintain market acceptance for our product candidates.  If we fail to do so, our sales will not grow and our business, financial condition and results of operations will be adversely affected.  We may not have adequate resources to effectively educate the medical community and/or our efforts may not be successful due to physician resistance or perceptions regarding our product candidates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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We face uncertainty related to pricing, reimbursement and health care reform, which could reduce our revenue. 
 
Sales of our product candidates, if approved for commercialization, will depend in part on the availability of coverage and reimbursement from third-party payors such as government insurance programs, including Medicare and Medicaid, private health insurers, health maintenance organizations and other health care related organizations.  If our product candidates are approved for commercialization, pricing and reimbursement may be uncertain.  Both the federal and state governments in the United States and foreign governments continue to propose and pass new legislation affecting coverage and reimbursement policies, which are designed to contain or reduce the cost of health care.  Further federal and state proposals and health care reforms are likely that could limit the prices that can be charged for the product candidates that we develop and may further limit our commercial opportunity.  There may be future changes that result in reductions in current coverage and reimbursement levels for our products, if commercialized, and we cannot predict the scope of any future changes or the impact that those changes would have on our operations.
 
Adoption of our product candidates by the medical community may be limited if doctors and hospitals do not receive full reimbursement for our products, if commercialized.  Cost control initiatives may decrease coverage and payment levels for our product candidates and, in turn, the price that we will be able to charge for any product.  We are impacted by efforts by public and private third-party payors to control costs.  We are unable to predict all changes to the coverage or reimbursement methodologies that will be applied by private or government payors to our product candidates.  Any denial of private or government payor coverage or inadequate reimbursement for procedures performed using our products, if commercialized, could harm our business and reduce our revenue.
 
We could be adversely affected if healthcare reform measures substantially change the market for medical care or healthcare coverage in the United States.  
 
The U.S. Congress recently adopted legislation regarding health insurance, which has been signed into law.  As a result of this new legislation, substantial changes could be made to the current system for paying for healthcare in the United States, including changes made in order to extend medical benefits to those who currently lack insurance coverage.  Extending coverage to a large population could substantially change the structure of the health insurance system and the methodology for reimbursing medical services, drugs and devices.  These structural changes could entail modifications to the existing system of private payors and government programs, such as Medicare, Medicaid and State Children’s Health Insurance Program, creation of a government-sponsored healthcare insurance source, or some combination of both, as well as other changes.  Restructuring the coverage of medical care in the United States could impact the reimbursement for prescribed drugs, biopharmaceuticals, medical devices, or our product candidates.  If reimbursement for our approved product candidates, if any, is substantially less that we expect in the future, or rebate obligations associated with them are substantially increased, our business could be materially and adversely impacted.
 
Extending medical benefits to those who currently lack coverage will likely result in substantial cost to the U.S. federal government, which may force significant changes to the healthcare system in the United States.  Much of the funding for expanded healthcare coverage may be sought through cost savings.  While some of these savings may come from realizing greater efficiencies in delivering care, improving the effectiveness of preventive care and enhancing the overall quality of care, much of the cost savings may come from reducing the cost of care.  Cost of care could be reduced by decreasing the level of reimbursement for medical services or products, or by restricting coverage and, thereby, utilization of medical services or products.  In either case, a reduction in the utilization of, or reimbursement for, any product for which we receive marketing approval in the future could have a materially adverse impact on our financial performance.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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There is substantial uncertainty regarding the exact meaning and interpretation of the provisions of healthcare reform that have been enacted.  This uncertainty limits our ability to forecast changes that may occur in the future and to manage our business accordingly.
 
We may face competition from companies and institutions that may develop products that make ours less attractive or obsolete through both new technologies that may be similar to ours, or more traditional pharmaceutical or medical device treatments.  
 
Many of our competitors have greater resources or capabilities than we have, or may already have or succeed in developing better products or in developing products more quickly than we do, and we may not compete successfully with them.
 
The medical device, pharmaceutical and biotechnology industries are highly competitive.  We compete for funding.  If our product candidates become available for commercial sale, we will compete in the marketplace.  For funding, we compete primarily with other companies that, like us, are focused on discovering and developing novel products or therapies for the treatment of human disease based on regenerative medicine technologies or other novel scientific principles.  In the marketplace, we may eventually compete with other companies and organizations that are marketing or developing therapies for our targeted disease indications, based on traditional pharmaceutical, medical device or other, non-cellular therapies and technologies.
 
We also face competition in the cell therapy field from academic institutions and governmental agencies.  Many of our current and potential competitors have greater financial and human resources than we have, including more experience in research and development and more established sales, marketing and distribution capabilities.
 
We anticipate that competition in our industry will increase.  In addition, the health care industry is characterized by rapid technological change, resulting in new product introductions and other technological advancements.  Our competitors may develop and market products that render our current product or any future product non-competitive or otherwise obsolete.
 
The use of our product candidates in human subjects may expose us to product liability claims, and we may not be able to obtain adequate insurance.  
 
We face an inherent risk of product liability claims.  Our clinical-stage product candidates are in early development and have not been used over an extended period of time in a large number of patients and, therefore, our long-term safety and efficacy data are limited.  Patients have experienced in the past and may experience in the future serious adverse events.  Our current product liability coverage is $5 million per occurrence and in the aggregate.  We will need to increase our insurance coverage if and when we begin commercializing any of our product candidates.  We may not be able to obtain or maintain product liability insurance on acceptable terms with adequate coverage.  If claims against us substantially exceed our coverage, then our business could be adversely impacted.  Regardless of whether we are ultimately successful in any product liability litigation, such litigation could consume substantial amounts of our financial and managerial resources and could result in, among others:
  
 
·
significant awards against us; 
 
 
·
substantial litigation costs; 
 
 
·
injury to our reputation and the reputation of our product candidates; and 
 
 
·
withdrawal of clinical trial participants; and adverse regulatory action.
 
 
Any of these results would substantially harm our business.
 
We have never marketed a product before, and if we are unable to establish an effective focused sales force and marketing infrastructure, we will not be able to commercialize our product candidates successfully.  
 
We intend to explore building the necessary marketing and sales infrastructure to market and sell our current product candidates, if they receive marketing approval.  We currently do not have internal sales, distribution and marketing capabilities.  The development of a sales and marketing infrastructure for our domestic operations will require substantial resources, will be expensive and time consuming and could negatively impact our commercialization efforts, including delay of any product launch.  These costs may be incurred in advance of any approval of our product candidates.  In addition, we may not be able to hire a focused sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that we intend to target, including surgery.  If we are unable to establish our focused sales force and marketing capability for our product candidates, we may not be able to generate any product revenue, may generate increased expenses and may never become profitable.
 
 
 
 
 
 
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If we are unable to establish development or marketing collaborations with third parties, we may not be able to develop, commercialize or distribute our products successfully.  
 
We may need to establish development or marketing collaborations with third parties in order to complete development of our product candidates or for the commercialization or distribution of our product candidates.  We expect to face competition in our efforts to identify appropriate collaborators or partners to help develop or commercialize our product candidates in our target commercial areas.  If we are unable to establish adequate collaborations, our ability to develop or market our product candidates could be adversely affected.  Further, to the extent third parties with whom we collaborate fail to perform, our ability to achieve our development or marketing goals may be adversely affected, and our business could suffer.
 
Risks Related to Intellectual Property
 
If we are unable to obtain and maintain protection for our intellectual property, the value of our technology and products will be adversely affected.  
 
Our success will depend in large part on our ability to obtain and maintain protection in the United States and other countries for the intellectual property covering or incorporated into our technology and products.  The patent situation in the field of biotechnology and pharmaceuticals generally is highly uncertain and involves complex legal, technical, scientific and factual questions.  We may not be able to obtain additional issued patents relating to our technology or products.  Even if issued, patents issued to us or our licensors may be challenged, narrowed, invalidated, held to be unenforceable or circumvented, or determined not to cover our product candidates or our competitors’ products, which could limit our ability to stop competitors from marketing identical or similar products or reduce the term of patent protection we may have for our product candidates.  Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.  The degree of future protection for our proprietary rights is uncertain, and we cannot ensure that:
 
 
·
we or our licensors were the first to make the inventions covered by each of our pending patent applications; 
 
 
·
we or our licensors were the first to file patent applications for these inventions; 
 
 
·
others will not independently develop similar or alternative technologies or duplicate any of our technologies; 
 
 
·
any patents issued to us or our licensors will provide a basis for commercially viable products, will provide us with any competitive advantages or will not be successfully challenged by third parties; 
 
 
·
we will continue developing additional proprietary technologies that are patentable; 
 
 
·
we will file patent applications for new proprietary technologies promptly or at all; 
 
 
·
our patents will not expire prior to or shortly after commencing commercialization of a product; 
 
 
·
our licensors will enforce the rights of the patents we license; or 
 
 
·
the patents of others will not have a negative effect on our ability to do business.
 
 
In addition, we cannot guarantee that any of our pending patent applications will result in issued patents.  If patents are not issued in respect of our pending patent applications, we may not be able to stop competitors from marketing products similar to ours.
 
Our patents also may not afford us protection against competitors with identical or similar technology.  
 
Because patent applications in the United States and many other jurisdictions are typically not published until 18 months after filing, or in some cases not at all, and because publications of discoveries in the scientific literature often lag behind the actual discoveries, neither we nor our licensors can be certain that we or they were the first to make the inventions claimed in our or their issued patents or pending patent applications, or that we or they were the first to file for protection of the inventions set forth in these patent applications.  If a third party has also filed a United States patent application covering our product candidates or a similar invention, we may have to participate in an adversarial proceeding, known as an interference, declared by the United States Patent and Trademark Office to determine priority of invention in the United States.  The costs of these proceedings could be substantial and it is possible that our efforts could be unsuccessful, resulting in a loss of our United States patent position.  If a third party believes we or our licensor were not entitled to the grant of one or more patents, such third party may challenge such patents in an interference or re-examination proceeding in the United States, or opposition or similar proceeding in another country. 
 
 
 
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If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that are important to our business.  
 
We are a party to license agreements with Children’s Hospital Boston and Wake Forest University Health Sciences pursuant to which we license certain intellectual property relating to our product candidates.  We may enter into additional licenses in the future.  Our existing licenses impose, and we expect that future licenses will impose, various diligence, milestone payment, royalty, insurance and other obligations on us.  If we fail to comply with these obligations, the licensor may have the right to terminate the license, in which event we might not be able to market any product that is covered by the licensed patents.
 
If we are unable to protect the confidentiality of our proprietary information, trade secrets and know-how, the value of our technology and product candidates could be adversely affected.  
 
Our proprietary information, trade secrets and know-how are important components of our intellectual property, particularly in connection with the manufacturing of our product candidates.  We seek to protect our proprietary information, trade secrets, know-how and confidential information, in part, by confidentiality agreements with our employees, corporate partners, outside scientific collaborators, sponsored researchers, consultants and other advisors.  We also have confidentiality and invention or patent assignment agreements with our employees and our consultants.  If our employees or consultants breach these agreements, we may not have adequate remedies for any of these breaches.  In addition, our proprietary information, trade secrets and know-how may otherwise become known to or be independently developed by others.  Enforcing a claim that a party illegally obtained and is using our proprietary information, trade secrets and know-how is difficult, expensive and time consuming, and the outcome is unpredictable.  In addition, courts outside the United States may be less willing to protect trade secrets.  Costly and time consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary information, trade secrets and know-how, and failure to obtain or maintain protection of proprietary information, trade secret and know-how could adversely affect our competitive business position.
 
If we infringe or are alleged to infringe the intellectual property rights of third parties, our business could suffer.  
 
Our research, development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be accused of infringing one or more claims of an issued patent or may fall within the scope of one or more claims in a published patent application that may subsequently issue and to which we do not hold a license or other rights.  Third parties may own or control these patents or patent applications in the United States and abroad.  These third parties could bring claims against us that would cause us to incur substantial expenses and, if successful against us, could cause us to pay substantial damages.  Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit.  No assurance can be given that patents do not exist, have not been filed, or could not be filed or issued, that contain claims covering our product candidates, technology, or methods.
 
In order to avoid or settle potential claims with respect to any of the patent rights described above or any other patent rights of third parties, we may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both.  These licenses may not be available on acceptable terms, or at all.  Even if we or our future collaborators were able to obtain a license, the rights may be non-exclusive, which could result in our competitors gaining access to the same intellectual property.  Ultimately, we could be prevented from commercializing one or more product candidates, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms.  This could harm our business significantly.
  
Others may sue us for infringing their patent or other intellectual property rights or file nullity, opposition, re-examination or interference proceedings against our patents, even if such claims or proceedings are without merit, which would similarly harm our business.  Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony.  Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business.
 
There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the pharmaceutical and biotechnology industries.  In addition to infringement claims against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the United States Patent and Trademark Office and opposition proceedings in the European Patent Office, regarding intellectual property rights with respect to our product candidates and technology.  Even if we prevail, the cost to us of any patent litigation or other proceeding could be substantial.
 
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.  In addition, any uncertainties resulting from any litigation could significantly limit our ability to continue our operations.  Patent litigation and other proceedings may also absorb significant management time.  Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors.  We try to ensure that our employees do not use the proprietary information, trade secrets or know-how of others in their work for us.  However, we may be subject to claims that we or these employees have inadvertently or otherwise used or disclosed intellectual property, trade secrets, know-how or other proprietary information of any such employee’s former employer.  Litigation may be necessary to defend against these claims and, even if we are successful in defending ourselves, could result in substantial costs to us or be distracting to our management.  If we fail to defend any such claims, in addition to paying monetary damages, we may jeopardize valuable intellectual property rights, disclose confidential information or lose personnel.
 
 
 
 
33

 
 
 
Risks Related to our Common Stock
 
Our common stock is currently quoted on the over-the-counter market, which may make it more difficult to resell shares of our common stock.
 
On September 6, 2012, our common stock ceased trading on the NASDAQ market and became quoted on the OTCQB, an over-the-counter market.  This market lacks the credibility of established stock markets and is characterized by a lack of liquidity, sporadic trading, and larger gaps between bid and ask prices. Compared to a seasoned issuer with stock traded on an established market, which typically results in a large and steady volume of trading activity, there may be periods when trading activity in our shares is minimal or nonexistent. In addition, our common stock is deemed to be “penny stock”, which means stock traded at a price less than $5 per share, which will make it unsuitable for some investors to purchase.  Furthermore, the SEC imposes additional rules on broker-dealers that recommend the purchase or sale of penny stock.  These additional burdens may discourage broker-dealers from effecting transactions in our common stock and may limit the number of stock brokers that are willing to act as market makers for our common stock. As a result, purchasers of our common stock may be unable to resell their shares.
  
The market price of the shares of our common stock is highly volatile, and purchasers of our common stock could incur substantial losses.
 
The market price of our common stock has fluctuated significantly since our initial public offering, and our stock price is likely to continue to be volatile.  The over-the-counter market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.  The market price for our common stock may be influenced by many factors, including:
 
 
·
setbacks or difficulties associated with our clinical trials; 
 
 
·
our ability to enroll patients in our clinical trials; 
 
 
·
results of clinical trials of our product candidates or those of our competitors; 
 
 
·
regulatory developments in the United States and foreign countries; 
 
 
·
variations in our financial results or those of companies that are perceived to be similar to us; 
 
 
·
changes in the structure of healthcare payment systems, especially in light of current reforms to the U.S. healthcare system;
 
 
·
announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments; 
 
 
·
market conditions in the pharmaceutical and biotechnology sectors and issuance of securities analysts’ reports or recommendations; 
 
 
·
sales of substantial amounts of our stock by existing stockholders; 
 
 
·
sales of our stock by insiders and 5% stockholders; 
 
 
·
general economic, industry and market conditions; 
 
 
·
additions or departures of key personnel; 
 
 
·
intellectual property, product liability or other litigation against us; 
 
 
·
expiration or termination of our relationships with our collaborators; and 
 
 
·
the other factors described in this “Risk Factors” section.
 
 
In addition, in the past, stockholders have initiated class action lawsuits against biotechnology and pharmaceutical companies following periods of volatility in the market prices of these companies’ stock.  Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.
 
 
 
 
34

 
 
 
The future sale of our common stock could negatively affect our stock price.
 
As of March 15, 2013, we had 3,119,718 shares of common stock outstanding, and notes and warrants that are convertible and exercisable respectively, into at least 100 million shares of common stock (subject to adjustment upward in accordance with the terms of such notes and warrants).  The currently outstanding shares can be freely sold in the public market and some of the shares subject to warrants, upon issuance, may also be freely sold in the public market, subject, in each case, to certain restrictions imposed by federal securities laws on the holders of our shares.  In addition, we may pay interest that accrues on our Convertible Notes with shares of common stock, which may be freely tradable.  As of March 15, 2013, we also had under our stock option and equity incentive plans 232,534 shares reserved for issuance related to equity awards granted to our officers, directors and employees and an additional 54,939 shares reserved for issuance, all of which, when issued, may be freely sold in the public market, subject to certain restrictions imposed by federal securities laws on our affiliates.   Sales of substantial amounts of our common stock in the public market, or the perception that these sales could occur, could cause the market price of our common stock to decline.  These sales could also make it more difficult for us to sell equity or equity-related securities in the future at times or prices that we deem appropriate.  
 
Concentration of ownership of our outstanding common stock among our executive officers, directors and their affiliates, as well as the concentration of our common stock on a fully-diluted basis among a small number of existing investors, may prevent new investors from influencing significant corporate decisions and may lead to substantial dilution to existing stockholders.
 
As of March 15, 2013, our executive officers, directors and their affiliates own, in the aggregate, approximately 25% of the 3,119,718 shares of our outstanding common stock.  In addition, as of March 15, 2013, our executive officers and directors hold options to purchase 191,068 shares of common stock upon exercising their options at a weighted-average exercise price of $9.59 per share.  Funds and entities affiliated with directors and board observers hold Convertible Notes and warrants, which are convertible and exercisable respectively, into at least 61 million shares of common stock (subject to adjustment upward in accordance with the terms of such notes and warrants).  Furthermore, a small number of existing investors hold Convertible Notes and warrants, which are convertible and exercisable respectively, into approximately 100 million shares of common stock (subject to adjustment upward in accordance with the terms of such notes and warrants).   The conversion of the convertible notes and exercise of the warrants could lead to substantial dilution to existing and new stockholders.  To the extent we pay interest on our Convertible Notes with shares of common stock, the percentage of our outstanding shares held by these investors will increase.  Furthermore, these persons, if acting together, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions.  The interests of this group of investors may not coincide with our interests or the interests of existing stockholders.
 
We will need to raise additional capital to fund our operations, which may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.  
 
We may seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements.  To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.  In addition, the Amended and Restated 2011 Warrants, 2012 Warrants, and Convertible Notes provide that the exercise price or conversion price, as applicable, of such warrants or convertible notes would be decreased in the event we subsequently issue stock at a price per share less than the current exercise price or conversion price per share of the warrants or convertible notes.  Furthermore, the Amended and Restated 2011 Warrants and 2012 Warrants contain provisions that would proportionately increase the number of shares for which such warrants are exercisable.  Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends.  If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that are not favorable to us. 
  
If we raise additional capital, certain holders of our 2012 Warrants and Convertible Notes have call options, which, if exercised, could require us to issue a significant number of shares, resulting in substantial dilution to our existing stockholders.
 
We entered into a securities purchase agreement in connection with the 2012 Financing, which gave the parties thereto the option to purchase up to an additional $20 million in securities on the same terms as the Convertible Notes and 2012 Warrants.  The conversion price of the convertible notes and exercise price of the warrants issued pursuant to the terms of this call option will be no greater than $0.75 and, may be lower if the conversion price on the Convertible Notes and the exercise price of the 2012 Warrants are adjusted pursuant to the terms of such instruments.  Therefore, we may be required to issue a significant number of shares, which could result in substantial dilution to our existing stockholders.
 
 
 
 
 
 
 
 
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Certain provisions of the Amended and Restated 2011 Warrants and securities issued in the 2012 Financing provide for preferential treatment to the holders of the securities and could impede a sale of the Company.
 
The Amended and Restated 2011 Warrants and the 2012 Warrants give each holder the option to receive a cash payment based on a Black-Scholes valuation of the warrant upon a change in control of the Company.  In the case of the Amended and Restated 2011 Warrants, the method of calculating the Black-Scholes value, includes the requirement to calculate the Black-Scholes value using the greater of volatility of 100% and average historical volatility for certain trading periods.  In the case of the 2012 Warrants, the Black-Scholes value must be calculated using an average historical volatility for certain trading day periods.  The cash payment could be greater than the consideration that our other equity holders would receive in a change in control transaction.  In addition, holders of the Amended and Restated 2011 Warrants, Convertible Notes and the 2012 Warrants have the option to require us to redeem these securities upon a change in control transaction.  The provisions of the Amended and Restated 2011 Warrants, 2012 Warrants and the Convertible Notes could make a change in control transaction more expensive for a potential acquirer and could negatively impact our ability to pursue and consummate such a transaction.

Certain provisions of Delaware law and of our charter documents contain provisions that could delay and discourage takeover attempts and any attempts to replace our current management by stockholders.
 
Certain provisions of our certificate of incorporation and bylaws, and applicable provisions of Delaware corporate law, may make it more difficult for or prevent a third party from acquiring control of us or changing our board of directors and management.  These provisions include:
 
 
·
the ability of our board of directors to issue preferred stock with voting or other rights or preferences; 
 
 
·
the inability of stockholders to act by written consent; 
 
 
·
a classified board of directors with staggered three-year terms; 
 
 
·
requirement that special meetings of our stockholders may only be called upon a resolution adopted by an affirmative vote of a majority of our board of directors; and 
 
 
·
requirements that our stockholders comply with advance notice procedures in order to nominate candidates for election to our board of directors or to place stockholders’ proposals on the agenda for consideration at meetings of stockholders. 
 
We are afforded the protections of Section 203 of the Delaware General Corporation Law, which prevents us from engaging in a business combination with a person who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless prior board or stockholder approval was obtained.
 
Any delay or prevention of a change of control transaction or changes in our board of directors or management could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares.
 
We do not expect to pay cash dividends on our common stock in the foreseeable future.
 
We do not anticipate paying cash dividends on our common stock in the foreseeable future.  Any payment of cash dividends will depend upon our financial condition, results of operations, capital requirements and other factors and will be at the discretion of our board of directors.  Accordingly, you will have to rely on capital appreciation, if any, to earn a return on your investment in our common stock.  Currently, we are subject to contractual restrictions on the payment of dividends under certain of our debt instruments.  Furthermore, we may become subject to additional contractual restrictions or prohibitions on the payment of dividends.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Item 1B.Unresolved Staff Comments

We have received no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of our 2011 fiscal year and that remain unresolved.

Item 2.    Properties

Our corporate headquarters are located in Winston-Salem, North Carolina, where we occupy approximately 38,400 square feet of office, laboratory and manufacturing space.  In May 2011, we exercised the first five-year renewal option under its lease.  The amended lease extends the lease term to October 2016 and provides for payments of average annual base rent of approximately $0.2 million effective October 2011.

We also currently lease a facility of 80,000 square feet in East Norriton, Pennsylvania.  This lease expires in February 2016.  We are currently subleasing 35,000 square feet, which is primarily warehouse space.  As a result of the restructuring announced in November 2011 to centralize our operations in our Winston-Salem facility, we are seeking to sublease or otherwise reduce the net rental obligation of the remaining 45,000 square feet of office and manufacturing space.
 
We believe our current leased facilities are adequate for our needs for the immediate future and that, should it be needed, additional space can be leased to accommodate any future growth.
 
Item 3.    Legal Proceedings
 
None
 
 
Item 4.    Mine Safety Disclosures
 
Not applicable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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PART II
 
 
Item 5.    Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Our common stock trades under the symbol “TNGN.”  Our stock traded on the NASDAQ Global Market from April 9, 2010 until April 3, 2012.  From April 4, 2012 until September 5, 2012, our stock traded on the NASDAQ Capital Market.  Since September 6, 2012, our common stock has been quoted on the OTCQB, which is operated by OTC Markets, Inc.
 
The following table provides, for the periods indicated, the high and low bid prices for our common stock.  These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.  The share prices have been adjusted to give effect to the 1-for-10 reverse stock split effective June 14, 2012.
 
Fiscal Year 2011
High
Low
First quarter
$62.40
$23.60
Second quarter
$28.20
$10.40
Third quarter
$16.00
$5.30
Fourth quarter
$6.00
$3.30
     
Fiscal Year 2012
High
Low
First quarter
$10.70
$4.50
Second quarter
$6.30
$2.50
Third quarter
$3.40
$1.01
Fourth quarter
$1.49
$0.88

Holders of Record
 
At December 31, 2012, the closing price per share of our common stock was $0.99 as reported on the OTCQB and there were approximately 122 holders of record.  Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
 
Dividends
 
We have never declared or paid any cash dividends on our common stock.
 
Item 6.    Selected Financial Data
 
Not required.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Forward-Looking Statements
 
Any statements herein or otherwise made in writing or orally by us with regard to our expectations as to financial results and other aspects of our business may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements relate to our future plans, objectives, expectations and intentions and may be identified by words like “believe,” “expect,” “designed,” “may,” “will,” “should,” “seek,” or “anticipate,” and similar expressions.  These forward looking statements may include, but are not limited to, statements concerning: (i) our plans to develop and commercialize our product candidates; (ii) our ongoing and planned preclinical studies and clinical trials; (iii) the timing of and our ability to obtain and maintain marketing approvals for our product candidates; (iv) the rate and degree of market acceptance and clinical utility of our products; (v) our plans to leverage our Organ Regeneration Platform to discover and develop product candidates; (vi) our ability to identify and develop product candidates; (vii) our commercialization, marketing and manufacturing capabilities and strategy; (viii) our intellectual property position; (ix) our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and (x) other risks and uncertainties, including those under the heading “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K, as well as in other documents filed by us with the SEC.
 
Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, the forward-looking statements contained in this document are neither promises nor guarantees.  Our business is subject to significant risks and uncertainties and there can be no assurance that our actual results will not differ materially from our expectations.  Factors that could cause actual results to differ materially from our expectations set forth in our forward-looking statements are set forth in the section entitled “Risk Factors” in Item 1A of Part I of this Annual Report on Form 10-K, as well as in other documents filed by us with the SEC and include, among others: (i) patients enrolled in our clinical trials may experience adverse events related to our product candidates, which could delay our clinical trials or cause us to terminate the development of a product candidate; (ii) we may have difficulty enrolling patients in our clinical trials, including our Phase I clinical trial for our Neo-Urinary Conduit; (iii) we may be unable to progress our product candidates that are undergoing preclinical testing into clinical trials; (iv) we will need to raise additional funds or enter into strategic collaborations necessary to execute our business plan beyond May 2013 and such financings or strategic collaborations may not be available to us or, if available, on terms acceptable to us and (v) we may not  be able to reduce the net rental obligation for our Pennsylvania facility prior to the expiration of the existing lease.
 
The forward-looking statements made in this document are made only as of the date hereof and we do not intend to update any of these factors or to publicly announce the results of any revisions to any of our forward-looking statements other than as required under the federal securities laws.
 
Overview
 
Tengion, Inc. is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ.  Using our Organ Regeneration Platform, we create these neo-organs using a patient’s own cells, or autologous cells.  We believe our proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues.  Our product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications.  In addition, our neo-organs are designed to replace the need to substitute other tissues of the body for a purpose to which they are poorly suited.  Building on our clinical and preclinical experience, we are initially leveraging our Organ Regeneration Platform to develop our Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and our Neo-Kidney Augment for patients with advanced chronic kidney disease.
 
To date, we have devoted substantially all of our resources to the development of our Organ Regeneration Platform and product candidates, as well as to our facilities that we employ to manufacture our neo-organs.  Since our inception in July 2003, we have had no revenue from product sales, and have funded our operations principally through the private and public sales of equity securities and debt financings.  We have never been profitable and, as of December 31, 2012, we had an accumulated deficit of $247.2 million, including $48.4 million of cumulative accretion on the Redeemable Convertible Preferred Stock through April 2010.  We expect to continue to incur significant operating losses for the foreseeable future as we advance our product candidates from discovery through preclinical studies and clinical trials and seek marketing approval and eventual commercialization.
 
 
 
 
 
 
 
 
 
 
 
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Cash, cash equivalents and short-term investments at December 31, 2012 were $7.5 million, representing 61% of total assets.  Based upon our current expected level of operating expenditures and debt repayment, and assuming we are not required to settle any outstanding warrants in cash or redeem, or pay cash interest on, any of our Convertible Notes, we expect to be able to fund operations through May 2013.   We will need to raise more funds to complete the Phase I clinical trial for our Neo-Urinary Conduit and continue preclinical research and development activities for our Neo-Kidney Augment.  There is no assurance that such financing will be available or, if available, on terms acceptable to us.
 
Financial Operations Overview
 
Research and Development Expense
 
Our research and development expense consists of expenses incurred in developing and testing our product candidates and are expensed as incurred.  Research and development expense consists of:
 
 
·
personnel-related expenses, including salaries, benefits, stock-based compensation, travel, and other related expenses;
 
 
·
payments made to third-party contract research organizations for preclinical studies, investigative sites for clinical trials and consultants;
 
 
·
costs associated with regulatory filings and the advancement of our product candidates through preclinical studies and clinical trials;
 
 
·
laboratory and other supplies;
 
 
·
manufacturing development costs; and
 
 
·
facility maintenance.
 
Preclinical study and clinical trial costs for our product candidates are a significant component of our current research and development expenses.  We track and record information regarding external research and development expenses on a per study basis.  Preclinical studies are currently coordinated with third-party contract research organizations and expense is recognized based on the percentage completed by study at the end of each reporting period.  Clinical trials are currently coordinated through a number of contracted sites and expense is recognized based on a number of factors, including actual and estimated patient enrollment and visits, direct pass-through costs and other clinical site fees.  We utilize employees, resources and facilities across multiple product candidates.  We do not allocate internal research and development expenses among product candidates.
 
The following table summarizes our research and development expense for the years ended December 31, 2011 and 2012.
 
 
Year Ended December 31,
 
2011
   
2012
Third-party direct program expenses:
 
(in thousands)
Urologic                                                                                          
$
707
   
$
681
 
Renal                                                                                          
 
2,314
     
1,856
 
Total third-party direct program expenses                                                                                               
 
3,021
     
2,537
 
Other research and development expense                                                                                          
 
10,272
     
7,566
 
Total research and development expense                                                                                               
$
13,293
   
$
10,103
 
               
 
 
 
 
 
 
 
 
 
 
 
 
 
40

 

 
From our inception in July 2003 through December 31, 2012, we have incurred research and development expense of $128.0 million.  We expect that a large percentage of our research and development expense in the future will be incurred in support of our current and future preclinical and clinical development programs.  These expenditures are subject to numerous uncertainties in timing and cost to completion.  We expect to continue to test our product candidates in preclinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials for each product candidate.  If we are not able to engage a partner prior to the commencement of later stage clinical trials, we may fund these trials ourselves.  As we obtain results from clinical trials, we may elect to discontinue or delay clinical trials for certain product candidates or programs in order to focus our resources on more promising product candidates or programs.  Completion of clinical trials by us or our future collaborators may take several years or more, but the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.  The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:
 
 
·
the number of sites included in the trials;
 
 
·
the length of time required to enroll suitable patients;
 
 
·
the number of patients that participate in the trials;
 
 
·
the duration of patient follow-up;
 
 
·
the development stage of the product candidate; and
 
 
·
the efficacy and safety profile of the product candidate.
 
None of our product candidates has received U.S. Food and Drug Administration (FDA) or foreign regulatory marketing approval.  In order to grant marketing approval, the FDA or foreign regulatory agencies must conclude that clinical data establish the safety and efficacy of our product candidates.  Furthermore, our strategy includes entering into collaborations with third parties to participate in the development and commercialization of our product candidates.  In the event that third parties have control over the clinical trial process for a product candidate, the estimated completion date would largely be under control of that third party rather than under our control.  We cannot forecast with any degree of certainty which of our product candidates will be subject to future collaborations or how such arrangements would affect our development plan or capital requirements.
 
As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will receive cash inflows from the commercialization and sale of an approved product candidate.
 
General and Administrative Expense
 
General and administrative expense consists primarily of salaries, benefits and other related costs, including stock-based compensation, for persons serving in our executive, finance, legal, marketing planning and human resource functions.  Our general and administrative expense includes facility-related costs not otherwise included in research and development expense, professional fees for legal services, including patent-related expense, tax and accounting services, and other consulting services and general corporate expenses applicable to public companies.  We expect that our general and administrative expenses will increase with the development and potential commercialization of our product candidates.
 
Depreciation Expense
 
Depreciation expense is the amortization of capitalized property and equipment that is recognized over the estimated useful lives of the assets using the straight-line method.  We use a life of three years for computer equipment; five years for laboratory, office and warehouse equipment; seven years for furniture and fixtures; and the lesser of the useful life of the asset or the remaining life of the underlying facility lease for leasehold improvements.  Expenditures for maintenance, repairs, and betterments that do not prolong the useful life of the asset are charged to expense as incurred.
 
 
 
 
 
 
 
 
 
 
 
 
 
41

 
 
 
Interest Income and Interest Expense  
 
Interest income consists of interest earned on our cash and cash equivalents and short-term investments.  Interest expense consists primarily of cash and non-cash interest costs related to our outstanding debt.
 
Net Operating Losses and Tax Loss Carryforwards
 
As of December 31, 2012, we had net operating loss carryforwards available to offset future federal and state taxable income of $150.9 million and $167.4 million, respectively, as well as $5.6 million of research and development tax credits.  The net operating loss carryforwards and credits expire at various dates through 2032.  The Tax Reform Act of 1986 (the Act) provides for a limitation on the annual use of net operating loss and research and development tax credit carryforwards following certain ownership changes (as defined by the Act) that could limit our ability to utilize these carryforwards.  We have not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since our formation, due to the significant costs and complexities associated with a study.  We may have experienced various ownership changes, as defined by the Act, as a result of past financings.  Accordingly, our ability to utilize the aforementioned carryforwards may be limited.  Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes; therefore, we may not be able to take full advantage of these carryforwards for federal or state income tax purposes.
 
Critical Accounting Policies and Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Management bases these significant judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available.  Actual results could differ from those estimates under different assumptions, judgments or conditions.
 
All of our significant accounting policies are discussed in Note 3, Summary of Significant Accounting Policies, to our financial statements, included elsewhere in this Annual Report on Form 10-K.  We have identified the following as our critical accounting policies and estimates, which are defined as those that are reflective of significant judgments and uncertainties, are the most pervasive and important to the presentation of our financial condition and results of operations and could potentially result in materially different results under different assumptions, judgments or conditions.  Management has reviewed these critical accounting policies and estimates with the Audit Committee of our board of directors.
 
Impairment of Long-lived Assets
 
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Conditions that would necessitate an impairment assessment include a significant change in the planned use of the acquired asset, a decline in the observable market value of an asset, or a significant adverse change in the business such as the occurrence of a negative clinical regulatory matter that would prohibit us from obtaining the approval for commercializing a product candidate.  Upon identification of an indicator of impairment, recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, then an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.
 
The evaluation of the recoverability of long-lived assets, and the determination of their fair value should such fair values need to be estimated, requires us to make significant estimates and assumptions.  These estimates and assumptions include, but are not limited to, the estimation of future cash flows, discount rates and costs to sell.  Due to the inherent uncertainty involved in making these estimates, actual results could differ from those estimates.  Such a change in assumptions could have a significant impact on the conclusion that an asset’s carrying value is recoverable, or the determination of any impairment charge if it was determined that the asset values were indeed impaired.
 
 
 
 
 
 
 
 
 
 
 
 
42

 
 
 
During the year ended December 31, 2011, we recorded a non-cash property and equipment impairment charge of $7.4 million in connection with the restructuring plan announced in November 2011.  Under the restructuring plan, we eliminated plans to use its facility in East Norriton, Pennsylvania as a manufacturing center and centralized our research and development operations in our leased facility in Winston-Salem, North Carolina.
 
Preclinical and Clinical Trial Costs
 
A substantial portion of our ongoing research and development activities are performed under agreements we enter into with external service providers who conduct many of our research and development activities.  Estimates of incurred costs are made to determine the accrued balance in any accounting period.  The estimates incurred under the contracts are based on factors such as work performed, milestones achieved, patient enrollment and costs historically incurred for similar contracts.  As actual costs become known, we adjust our estimates.  To date, our estimates have been within management’s expectations, and no material adjustments to research and development expense have been recognized.  For the year ended December 31, 2012, a 10% increase or decrease in our estimate of research and development expense incurred under such contracts would result in an increase or decrease in research and development expense of approximately $9,000.  We may expand the level of research and development activity to be performed by external service providers in which case our estimates would be more material to our future operations.  Subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our future results of operations.
 
Embedded Derivative and Derivative Liability  
 
We account for the Demand Note Exchange Right and the conversion feature embedded in the Convertible Notes (the Conversion Option) in accordance with ASC 815, Derivatives and Hedging (ASC 815). Under this accounting guidance, the Company is required to bifurcate the embedded derivative from the host instrument and account for it as a free-standing derivative financial instrument.  We also account for the Call Option issued in connection with the 2012 Financing in accordance with ASC 815, as this instrument is considered a free-standing financial instrument that meets the criteria of a derivative under the guidance. We classify this Call Option on the balance sheet as a current liability.  The changes in fair value of the embedded derivative or derivative liability are remeasured at each balance sheet date and recorded in current period earnings.
 
The fair value of the Demand Note Exchange Right as of the date of issuance, as well as the fair value of the Conversion Option and Call Option as of the date of issuance and as of December 31, 2012, was determined using a risk-neutral framework within a Monte Carlo analysis.  The valuation of the Demand Note Exchange Right, Conversion Option, and Call Option is subjective and is affected by changes in inputs to the valuation model including the assumptions regarding the aggregate value of the Company’s debt and equity instruments; assumptions regarding the expected amounts and dates of future debt and equity financing activities; assumptions regarding the likelihood and timing of Fundamental Transactions or Major Transactions (as such terms are used in the relevant financing agreements); the historical and prospective volatility in the value of the company’s debt and equity instruments; risk-free rates based on U.S. Treasury security yields; and the Company’s dividend yield.  Changes in these assumptions can materially affect the fair value estimate.
 
Warrant Liability
 
We account for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement.  Stock warrants that allow for cash settlement or provide for modification of the warrant exercise price are accounted for as derivative liabilities.  We classify derivative warrant liabilities on the balance sheet as a current liability. The changes in fair value of the warrant liabilities are remeasured at each balance sheet date and recorded in current period earnings.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43

 
 
 
The fair value of the derivative warrant liabilities as of December 31, 2012 was determined using a risk-neutral framework within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or a Major Transaction into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company’s common stock; assumptions regarding the expected amounts and dates of future debt and equity financing activities; assumptions regarding the likelihood and timing of Fundamental Transactions and, the historical volatility of the stock prices of the Company’s common stock; risk-free rates based on U.S. Treasury security yields; and the Company’s dividend yield.  Changes in these assumptions can materially affect the fair value estimate.
 
Stock-Based Compensation
 
Effective January 1, 2006, we adopted the revised accounting standards for stock-based compensation guidance which was adopted prospectively to new awards and to awards modified, repurchased, or canceled after December 31, 2005.  This current guidance requires companies to measure and recognize compensation expense for all employee stock-based payments at fair value, net of estimated forfeitures, over the vesting period of the underlying stock-based awards.  In addition, we account for stock-based compensation to nonemployees in accordance with the accounting guidance for equity instruments that are issued to other than employees.
 
We use the Black-Scholes option-pricing model to value our stock option awards.  The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility.  Since we do not have sufficient historical volatility of our stock as a public company for the expected term of the options, we use comparable public companies as a basis for our expected volatility to calculate the fair value of option grants.  We intend to continue to consistently apply this process using comparable companies until a sufficient amount of historical information regarding the volatility of our own share price becomes available.  The expected term is based on the simplified method provided by SEC guidance.  The risk-free interest rate is based on the U.S. Treasury yield curve with a remaining term equal to the expected life assumed at grant.  The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimate and involve inherent uncertainties and the application of management’s judgment.  As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different in the future.
 
The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period in which estimates are revised.  We consider many factors when estimating expected forfeitures, including types of awards, employee class and an analysis of our historical and known forfeitures on existing awards.  Under the true-up provisions of the stock based compensation guidance, we record additional expense if the actual forfeiture rate is lower than estimated, and a recovery of expense if the actual forfeiture rate is higher than estimated, during the period in which the options vest.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44

 
 
 
Results of Operations
 
Year Ended December 31, 2011 compared to Year Ended December 31, 2012
 
Research and Development Expense.  Research and development expense for the years ended December 31, 2011 and 2012 was comprised of the following:
 
 
     
Year Ended
December 31,
 
  Increase
(Decrease)
     
2011
     
2012
     
$
     
%
 
     
($ in thousands)
       
Compensation and related expense
  $ 7,085     $ 4,306     $ (2,779 )     (39 ) % 
External services – direct third parties
    3,021       2,537       (484 )     (16 ) % 
External services – other
    511       556       45       9
Research materials and related expense
    948       1,289       341       36
Facilities and related expense
    1,728       1,415       (313 )     (18 ) % 
Total research and development expense
  $ 13,293     $ 10,103     $ (3,190 )     (24 ) % 

Research and development expense decreased primarily due to reduction in compensation and related expenses resulting from fewer employees as compared to year ended December 31, 2011, as well as a reduction in facilities and related expense due to a change effective March 2011 in the classification of rent expense for our East Norriton, Pennsylvania facility, which is no longer used for research and development operations.  The rent expense for this facility is now recorded in the other expense line on Company’s Statement of Operations.  In addition, expenses incurred for external services – direct third parties decreased due to the termination of the sponsored research agreement with Wake Forest University at the end of 2011, while expenses incurred for research materials and related expense increased due to significant work performed in conjunction with Neo-Kidney Augment GLP studies during 2012.

General and Administrative Expense. General and administrative expense for the years ended December 31, 2011 and 2012 was comprised of the following:
 
 
                                 
     
Year Ended
December 31,
     
Increase
(Decrease)
 
     
2011
     
2012
     
$
     
%
 
     
($ in thousands)
         
Compensation and related expense
  $ 4,367     $ 1,929     $ (2,438 )     (56 ) % 
Professional fees
    1,953       2,468       515       26
Facilities and related expense
    315       515       200       63
Insurance, travel, and other expenses
    556       584       28       5
Total general and administrative expense
  $ 7,191     $ 5,496     $ (1,695 )     (24 ) % 
 
General and administrative expense decreased primarily due to due to a reduction in compensation and related expenses resulting from fewer employees as compared to the year ended December 31, 2011.  This decrease was offset in part by an increased professional fees resulting from increased use of external legal and marketing consultants and increased facilities and related expenses resulting from increased use of external facility maintenance support and computer network support.

Depreciation Expense.  Depreciation expense decreased by $2.6 million, or 85%, from $3.1 million in 2011 to $0.5 million in 2012 due to the recording during the fourth quarter of 2011 of an impairment charge, which reduced the carrying value of assets at our East Norriton, Pennsylvania facility. The decrease was also due to a change during the second quarter of 2011 in the estimated useful life of leasehold improvements associated with leased laboratory space in Winston-Salem, North Carolina upon the extension of that lease.
 
 
 
 
 
 
 
 
45

 
 
 
Impairment of Property and Equipment.  During the year ended December 31, 2011, we recorded a non-cash property and equipment impairment charge of $7.4 million in connection with the restructuring plan announced in November 2011.  Under the restructuring plan, we eliminated plans to use its facility in East Norriton, Pennsylvania as a manufacturing center and centralized its research and development operations in its leased facility in Winston-Salem, North Carolina.
 
Other Expense.  Other expense was $1.7 million and $0.2 million for the years ended December 31, 2011 and 2012, respectively. During the first and fourth quarters of 2011, we recorded non-cash charges totaling $1.6 million in connection with the lease liabilities.  The first quarter charge of $0.9 million resulted from a lease that became effective in March 2011 for additional warehouse space that will not be utilized over the lease term.  The fourth quarter charge of $0.7 million resulted from a restructuring that changed our operating plan, such that office and manufacturing space will not be utilized for our original planned use during the remaining years of the current lease term.
 
Interest Income (Expense).  Interest income was $53,000 and $277,000 for 2011 and 2012, respectively.  The decrease was primarily due to decreased average cash balances.  Interest expense was $0.8 million and $3.0 million for 2011 and 2012, respectively.  The increase was primarily due to non-cash interest expense associated with the Convertible Notes and associated derivatives issued in the fourth quarter of 2012.
 
Change in Fair Value of Derivative Liability.  During the year ended December 31, 2012, we recorded a non-cash credit of $0.9 million on our statements of operations due to a change in the fair value of the derivative liability for the Conversion Option and the Call Option.
 
Change in Fair Value of Warrant Liability.  During the year ended December 31, 2012, we recorded a non-cash credit of $1.3 million on our statements of operations due a change in the fair value of the warrant liability for warrants to purchase common stock that were issued in March 2011 and October 2012.  The decrease in fair value is due to the passage of time and the change in our assumption of the amount raised by us in potential future financings following the execution in the first quarter of 2013 of an amendment to the October 2012 financing documents that, among other things, permits us to complete a financing during 2013 with greater gross proceeds than allowed under the original financing documents. During 2011, we recorded a non-cash credit of $14.4 million on our statement of operations due to a decrease in the fair value of the warrant liability for warrants to purchase common stock that were issued in March 2011.  The decrease in fair value was primarily due to a decrease in the price per share of our common stock between the date of issuance of the warrants (March 4, 2011) and December 31, 2011.
 
Liquidity and Capital Resources
 
Sources of Liquidity
 
We have incurred losses since our incorporation in 2003 as a result of our significant research and development expenditures and the lack of any approved products to generate product sales.  We have a deficit accumulated during the development stage of $247.2 million as of December 31, 2012, including $48.4 million of cumulative accretion on Redeemable Convertible Preferred Stock through April 2010.  We anticipate that we will continue to incur additional losses until such time that we can generate significant sales of our product candidates currently in development or we enter into cash flow positive business transactions.  We have funded our operations principally with proceeds from equity offerings.  The following table summarizes our equity funding sources as of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46

 
 
 
Issue
 
Year
   
Number of
Shares
     
Net Proceeds
(in thousands)(2)
 
Series A Redeemable Convertible Preferred Stock
    2004, 2005       166,832 (1 )   $ 38,910  
Series B Redeemable Convertible Preferred Stock
    2006       190,601 (1 )     50,040  
Series C Redeemable Convertible Preferred Stock
    2007, 2008       207,764 (1 )     54,571  
Initial Public Offering
    2010       600,000         25,721  
Private Placement
    2011       1,107,939         28,941  
              2,273,136       $ 198,183  
________________________________
(1)
Number of shares represents the number of shares of common stock into which each series of preferred stock converted at the time of our initial public offering.
 
(2)
Net proceeds represent gross proceeds received net of transaction costs associated with each equity offering.
 
We have also funded our operations through the use of proceeds received from our long-term debt totaling $53.7 million through December 31, 2012, net of issuance costs.  As of December 31, 2012, we had senior secured convertible notes outstanding with an aggregate principal balance of $15.0 million and a working capital note with an outstanding principal balance of $3.7 million.
 
The lease agreement for our facility in East Norriton, Pennsylvania requires us to provide security and restoration deposits totaling $2.2 million to the landlord.  We have deposited $1.0 million with the landlord as a security deposit, which amount was recorded as a non-current other asset on our balance sheet as of December 31, 2012.  As of December 31, 2011, an outstanding letter of credit was satisfying the remaining restoration deposit obligation of $1.2 million.  At the end of the lease term, the landlord has the right to require us to utilize the funds collateralizing this letter of credit to restore the facility to its original condition. The letter of credit was collateralized by an account held at the bank.  The letter of credit expired on December 2, 2012. As a result, we have deposited an additional $1.2 million in an account held by the landlord to satisfy our deposit obligation.
 
Cash, cash equivalents and short-term investments at December 31, 2012 were $7.5 million, representing 61% of total assets.
 
Based upon our current expected level of operating expenditures and debt repayment, and assuming we are not required to settle any outstanding warrants in cash or redeem, or pay cash interest on, any of our Convertible Notes, we expect to be able to fund operations through May 2013.   This period could be shortened if there are any significant increases in planned spending on development programs than anticipated or other unforeseen events.  We will need to raise additional funds through collaborative arrangements, public or private sales of debt or equity securities, commercial loan facilities, or some combination thereof.  There is no assurance that other financing will be available when needed to allow us to continue our operations or if available, on terms acceptable to us.
 
Equity and Debt Financings
 
On September 7, 2012, we issued Demand Notes in the aggregate amount of $1.0 million to certain new and existing investors.  The Demand Notes bore interest at a rate of 10% per year and were secured by a lien on substantially all of the Company’s assets, other than its intellectual property assets.  The outstanding principal balance, with any accrued interest, was payable on demand at any time on or after October 7, 2012.  Each holder of a Demand Note, in its sole discretion, could exchange the principal balance of its Demand Note, together with accrued interest, for the first tranche of debt securities and warrants issued by the Company after September 7, 2012.
 
On October 2, 2012, we conducted the 2012 Financing of the Convertible Notes and the 2012 Warrants, in which we raised approximately $15 million in gross proceeds, which included the value of the principal balance and accrued interest of the Demand Notes that were exchanged into Convertible Notes.  The Convertible Notes bear interest at 10% per annum, which is payable quarterly.  The Convertible Notes are convertible into shares of common stock at a current conversion price of $0.75 per share. We may, at our option and subject to certain limitations, pay interest by the issuance of freely tradable shares of common stock.
 
 
 
 
 
 
 
 
 
 
 
47

 
 
 
The 2012 Warrants are exercisable at an exercise price of $0.75 per share.  The 2012 Warrants include (i) five-year warrants to purchase up to 16,672,145 shares of common stock, (ii) ten-year warrants to purchase up to 33,344,293 shares of common stock and (iii) two-year warrants, issued only to holders of the Demand Notes, to purchase up to 1,118,722 shares of common stock.
 
In addition, we issued Horizon, ten-year warrants to purchase 1,138,785 shares of common stock and five-year warrants to purchase 569,392 shares of common stock in connection with the Loan Amendment.
 
In March 2011, we closed a private placement transaction pursuant to which we sold securities consisting of 1,107,939 shares of common stock and warrants to purchase 1,046,102 shares of common stock.  The purchase price per security was $28.30.  The warrants have a term of five years.  We received net proceeds of approximately $28.9 million. On December 31, 2012, the Company commenced an offer to the holders of 2011 Warrants to amend and restate the 2011 Warrants.  All holders of the 2011 Warrants agreed to surrender their warrants and accept 2011 Amended and Restated Warrants that provide for the following amendments:
 
· 
an adjusted exercise price of $1.10, and a proportionate adjustment in the number of shares underlying the 2011 Warrants, which takes into account all adjustments under the 2011 warrants as a result of the 2012 Financing;
· 
certain edits to remove a Delisting (as defined in the 2011 Warrants) from qualifying as a fundamental transaction;
· 
a Black-Scholes calculation used to determine the cash value received by a holder from the Company in connection with a repurchase of the unexercised portion of a warrant after the occurrence of a fundamental transaction that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company’s common stock, immediately prior to the closing of a fundamental transaction;
· 
a Black-Scholes calculation for purposes of determining the value of options issued in connection with the sale of other securities that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company’s common stock on the date the options are publicly announced, and if not announced, on the date they are issued; and
· 
excluding the 2012 Financing and exercise of the call option provided under its terms as a trigger for adjustments to the exercise price of the warrants except that adjustments to the exercise price, conversion price or purchase price of the 2012 Financing securities (i) resulting from registration of such securities with the Securities Exchange Commission or the commencements of the Rule 144 Period, as contemplated by the 2012 Financing documents, will result in a proportional adjustment to the exercise price of the warrants and (ii) resulting from additional financings or other events will result in adjustments of the exercise price of the warrants pursuant to the terms of the 2011 amended and restated warrant.
 
The holders of the 2011 Amended and Restated warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10. 
 
 
 
 
 
 
 
 
 
 
 
 
 
48

 

 
Cash Flows
 
The following table summarizes our cash flows from operating, investing and financing activities for each of the past two years ended (in thousands):
 
 
Year Ended December 31,
 
2011
 
2012
Statement of Cash Flows Data:
             
Total cash provided by (used in):
             
Operating activities                                                                                      
$
(21,888
)
 
$
(19,461
)
Investing activities                                                                                      
 
(6,147
)
   
5,018
 
Financing activities                                                                                      
 
25,307
     
12,735
 
Decrease in cash and cash equivalents                                                                                          
$
(2,728
)
 
$
(1,708
)

Operating Activities
 
Cash used in operating activities decreased $2.4 million for the year ended December 31, 2012, compared to the year ended December 31, 2011, primarily due to lower research & development and general and administrative expenses associated with a reduction in compensation and related expenses resulting from fewer employees.  The decrease was partially offset by higher severance payments in 2012. 
 
Investing Activities
 
Cash provided by investing activities increased $11.2 million for the year ended December 31, 2012, compared to the year ended December 31, 2011, primarily due to the reduction in purchases of short-term investments. 
 
Financing Activities
 
Cash provided by financing activities decreased $12.6 million for the year ended December 31, 2012, compared to the year ended December 31, 2011.  The 2012 period included $14.2 million of debt proceeds received from our October 2012 debt financing as compared to the 2011 period, which included net proceeds received from our March 2011 equity financing of $29.0 million as well as $4.9 million in proceeds from long-term debt due to new borrowings under our working capital facility in March 2011.  The decrease was partially offset by a decrease in payments on long-term debt of $7.2 million primarily resulting from the March 2011 refinancing of our working capital facility in which we paid in full the $4.5 million balance of the previous facility.
 
Potential Future Milestone Payments
 
In 2003, we executed a license agreement with Children’s Medical Center Corporation (CMCC), whereby CMCC granted to us the utilization of certain patent rights.  We are obligated to make payments to CMCC upon the occurrence of various clinical milestones.  During the fourth quarter of 2006, we achieved two of our clinical milestones for the first licensed product launched, as defined in the agreement, and paid $350,000, which was recorded as research and development expense for the year ended December 31, 2006.  No further milestones payments have been made since 2006.  Upon the successful completion of certain milestones, we will be obligated, under our current agreement, to make future milestone payments for the first licensed product.  As of December 31, 2012, we had no payment obligations to CMCC under this agreement.  In addition, upon commercialization of the licensed product, we will pay CMCC royalties based on net sales of products covered by the license by us, our affiliates and our sublicensees in all countries, except for those for which there is no valid patent claim, until the later of the expiration, on a country-by-country basis, of the last patent right and October 2018.
 
Off-Balance Sheet Arrangements
 
We do not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities.
 
 
 
 
 
 
 
 
 
49

 
 
 
Contractual Obligations
 
The following table summarizes our contractual obligations as of December 31, 2012 (in thousands):
 
Contractual Obligations (1)(2)
 
Total
 
2013
 
2014 and
2015
 
2016 and
2017
         
  
     
  
     
  
     
Debt obligations
 
$
18,665
  
 
$
1,942
  
 
$
16,723
  
 
$
  
Interest payments on debt
   
4,982
     
1,925
     
3,057
     
 
Operating lease obligations
   
3,360
  
   
948
  
   
2,134
  
   
278
 
Total
 
$
27,007
   
$
4,815
   
$
21,914
   
$
278
 
                                 

 
(1)
This table does not include any milestone payments that may become payable to third parties under license agreements, including milestones that may be payable to CMCC, as the timing and likelihood of such payments are not known.  We will be required to pay CMCC development milestones aggregating approximately $6.9 million, which includes $350,000 we have paid to date, if we develop and obtain regulatory approval of a licensed product in each of the four subfields covered by our license agreement.  Also, if cumulative net sales of all licensed products reach a certain level, we will be required to make a one-time sales milestone payment of $2.0 million.  A portion of milestone payments we make will be credited against our future royalty payments.
 
 
(2)
This table does not include any license maintenance fees that may become payable to Wake Forest University Health Sciences (WFUHS), as the timing and likelihood of such payments are not known.  We will be required to pay certain license maintenance fees with respect to each product covered by new development patents under our license with WFUHS, commencing two years after we initiate the first animal study conducted under cGLP, with respect to such product.  These license maintenance fees, which are in the low six figure range with respect to each product, will be creditable against royalties we are obligated to pay to WFUHS for such product.
 
Convertible Notes
 
On October 2, 2012, we conducted the 2012 Financing of the Convertible Notes and the 2012 Warrants, in which we raised approximately $15 million in gross proceeds, which included the $1 million value of the principal balance and accrued interest of previously issued demand notes that were exchanged into Convertible Notes.  The Convertible Notes bear interest at 10% per annum, which is payable quarterly.  The Convertible Notes are convertible into shares of common stock at a current conversion price of $0.75 per share. We may, at our option and subject to certain limitations, pay interest by the issuance of shares of common stock or, if such issuance would result in a holder owning more than 9.985% of the total number of outstanding shares of the Company, by the issuance of warrants to purchase common stock for nominal consideration that would become exercisable only to the extent that an exercise would not result in an investor’s ownership exceeding the aforementioned 9.985% ownership limitation.  The Convertible Notes are secured by all of the Company’s assets, except for permitted liens that have priority, including liens on certain equipment acquired to secure the purchase price or lease obligation.
 
Working Capital Note
 
In March 2011, we refinanced the outstanding debt owed to one of our lenders.  Pursuant to the terms of the refinancing, we simultaneously borrowed $5.0 million from the lender and repaid the then outstanding principal amount of $4.5 million.  As a result of the amendment, this refinancing was treated as a modification for accounting purposes.  The fees paid to the lender were amortized over the remaining term of the debt and any third party fees paid were expensed immediately.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50

 
 

 
As of December 31, 2011, the outstanding balance of this loan was $5.0 million.  We were obligated to make interest-only payments through January 2012, followed by 24 monthly payments of principal and interest at an interest rate of 11.75% per annum.

In connection with the 2012 Financing, in October 2012, we amended the terms of the working capital note.  Effective September 1, 2012, the maturity date for the working capital note was extended from January 1, 2014 until May 1, 2014.  The Company is required to make monthly interest payments of $39,654.12 through June 1, 2013 and monthly interest and principal payments of $0.4 million from July 1, 2013 through and including May 1, 2014.   Effective September 1, 2012, the interest rate on the Horizon Loan was increased from 11.75% to 13.0% per annum.  As a result of the amendment, this refinancing was treated as a modification for accounting purposes.  The fees paid to the lender were amortized over the remaining term of the debt and any third party fees paid were expensed immediately.  In addition, the Company issued the lender ten-year warrants to purchase 1,138,785 shares of common stock and five-year warrants to purchase 569,392 shares of common stock.

Borrowings under the working capital note are secured by all of the Company’s assets, except for permitted liens that have priority, including liens on certain equipment acquired to secure the purchase price or lease obligation, as defined in the loan agreement.  In October 2012, the security was extended to include a lien on the Company’s intellectual property.
 
Operating Leases
 
In 2006, we entered into a ten-year, non-cancelable lease agreement for space for our corporate offices and full-scale manufacturing facility located in East Norriton, Pennsylvania.  Under the lease agreement, we began leasing additional space in the same building in March 2011.  We are currently subleasing this additional warehouse space to a third party.  The lease will expire by its terms in February 2016.  Effective March 2011, the lease agreement for the Company’s facility in East Norriton, Pennsylvania required the Company to provide security and restoration deposits totaling $2.2 million to the landlord, an increase from the prior amount of $1.7 million. Until January 2011, the Company obtained letters of credit from a bank in favor of the landlord to satisfy the obligations.  In January 2011, the Company deposited $1.0 million with the landlord as a security deposit, which amount is recorded as a non-current other asset on the Company’s balance sheet as of December 31, 2011.  As of December 31, 2011, an outstanding letter of credit was satisfying the remaining restoration deposit obligation of $1.2 million.  At the end of the lease term, the landlord has the right to require us to utilize the funds collateralizing this letter of credit to restore the facility to its original condition. The letter of credit was collateralized by an account held at the bank.  The letter of credit expired in December 2012. As a result, the Company has deposited an additional $1.2 million in an account held by the landlord to satisfy its deposit obligation.

In June 2005, we entered into a six-year, non-cancelable lease agreement for laboratory space for our research and development projects in Winston-Salem, North Carolina.  The lease agreement includes the right to lease additional contiguous space, which we executed in February 2007.  The initial term for the lease for this facility expired in September 2011.  In May 2011, we exercised the first five-year renewal option under the lease.  The amended lease extends the lease term to October 2016 and provides for payments of average annual base rent of approximately $0.2 million commencing in October 2011.
 
Other Contractual Obligations
 
In January 2006, we entered into a research agreement with WFUHS that was amended in September 2006 and extended in September 2010 for an additional three-year period.  Under the research agreement, WFUHS agreed to perform sponsored research in return for quarterly payments.  Under the extended agreement, we made payments of $800,000 for 2011 research activities of WFUHS.  We terminated the research agreement with WFUHS effective as of December 31, 2011.
 
We have entered into agreements with consultants and clinical research organizations that are partially responsible for conducting and monitoring our clinical trials for our product candidates.  We have also entered into agreements with consultants and clinical research organizations that are responsible for work in our preclinical studies, public relations and other areas in the ordinary course of our business.  These contractual obligations have been excluded from the contractual obligations table elsewhere in this section, because we may terminate these at any time without penalty.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51

 
 
 
Item 7A.Quantitative and Qualitative Disclosures about Market Risk
 
The primary objective of our investment activities is to preserve our capital to fund operations.  We also seek to maximize income from our investments without assuming significant risk.  To achieve our objectives, we maintain a portfolio of cash equivalents and investments in a variety of securities of high credit quality.  Due to the nature of these investments, we believe that we are not subject to any material market risk exposure.  As of December 31, 2012, we had cash and cash equivalents of $7.5 million.
 
 
Item 8.    Financial Statements and Supplementary Data
 
This information required by this Item is included in our Financial Statements and Supplementary Data listed in Item 15 (a) (1) of Part IV of this Annual Report on Form 10-K.
 
 
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
None.
 
 
Item 9A.Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting
 
In the preparation of this Annual Report, we identified a material weakness in our internal control over financial reporting with respect to the misapplication of U.S. Generally Accepted Accounting Principles for the classification of debt financing costs.  This material weakness was the result of limited accounting and reporting resources and a lack of accounting expertise related to the initial classification of debt financing costs incurred for convertible debt issuances that include issuance of derivatives such as warrants and call options.  This material weakness did not have any impact on our financial statements for the year ended December 31, 2012 as we have made the appropriate correcting journal entries.  Management is in the process of developing supplemental internal control procedures to properly evaluate the accounting implications of convertible debt issuances that include issuance of derivatives and plans to implement such procedures by May 15, 2013.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report.  Based on that evaluation, and as a result of the material weakness described above, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. 
 
Other than as described above, there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Management’s Annual Report on Internal Control over Financial Reporting and Attestation Report of the Registered Accounting Firm
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
 
 
 
 
 
 
 
 
 
 
 
 
52

 
 
 
Our internal control over financial reporting includes those policies and procedures that:
 

 
 
·
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;
 
 
·
provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States and that our receipts and expenditures are being made only in accordance with authorization of our management and our directors; and
 
 
·
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
 
Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of such controls in future periods are subject to the risk that the controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may deteriorate.
 
Our management conducted an assessment of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, and as a result of the material weakness described above, our management concluded that, as of December 31, 2012, our internal control over financial reporting was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
 
This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting as required by Section 404(c) of the Sarbanes Oxley Act of 2002. Management’s report was not subject to attestation by our registered public accounting firm pursuant to Section 989G(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits us to provide only management’s report in this Annual Report on Form 10-K.
 
Item 9B.Other Information
 
None
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53

 
 
 
PART III
 
Item 10.        Directors, Executive Officers and Corporate Governance
 
Executive Officers and Directors
 
The following table sets forth certain information about our executive officers and directors as of the date of this annual report.
 
Name
 
Age
 
Position(s)
Executive Officers
       
John L. Miclot
 
54
 
President and Chief Executive Officer, Director
Timothy Bertram, DVM, PhD.
 
57
 
President, Research and Development and Chief Scientific Officer
A. Brian Davis
 
46
 
Chief Financial Officer and Vice President, Finance
         
Directors
       
David I. Scheer(1)(2)(3)
 
60
 
Chairman of the Board of Directors
Carl-Johan Dalsgaard, MD, PhD(2)(4)
 
56
 
Director
Diane K. Jorkasky, MD(2)(4)
 
61
 
Director
Richard E. Kuntz, MD, M.Sc.(1)(4)
 
55
 
Director
Lorin J. Randall (1)(3)
 
69
 
Director
___________________________
(1)           Member of the Compensation Committee.
(2)           Member of the Nominating and Corporate Governance Committee.
(3)           Member of the Audit Committee.
(4)           Member of the Technology Committee.
 
John L. Miclot has served as a director of our Company and as our President and Chief Executive Officer since December 2011.  Prior to joining our Company, Mr. Miclot was an Executive-in-Residence at Warburg Pincus from March 2010 to March 2011.  He was President and Chief Executive Officer of CCS Medical, Inc., a company owned by Warburg Pincus and a provider of products and services for patients with chronic diseases, from November 2008 until completion of a financial restructuring of the Company in March 2010.  From 2003 to 2008, Mr. Miclot served as President and Chief Executive Officer of Respironics, Inc. until the sale of the Respironics to Royal Philips.  Mr. Miclot served as Chief Executive Officer of Philips Home Healthcare Solutions following the acquisition of Respironics, Inc. by Royal Philips.  Mr. Miclot spent 10 years in senior roles at Respironics, ultimately serving as President and Chief Executive Officer from 2003 to 2008.  Mr. Miclot joined Respironics in 1998 when it acquired Healthdyne Technologies, Inc., a medical device Company.  Mr. Miclot served as the Senior Vice President of Sales and Marketing Healthdyne from 1995 to 1998. Earlier in his career, he held sales and marketing roles at Medex, Ohmeda, Baxter Edwards, and DeRoyal Industries.  Mr. Miclot is a director of Wright Medical Group, Inc., Dentsply International Inc., and Body Media and serves as Chairman of the Board of Directors of Breathe Technologies, Inc.  He is also a director of the Pittsburgh Zoo & PPG Aquarium and Burger King Cancer Caring Center. He earned his B.B.A. in marketing from the University of Iowa.
 
Timothy Bertram, D.V.M., Ph.D., has served as our Chief Scientific Officer and President, Research and Development since November 2011 and previously served as our Chief Scientific Officer and Executive Vice President, Science and Technology from October 2010 to November 2011 and our Senior Vice President, Science and Technology from August 2004 to October 2010.  Dr. Bertram is responsible for leading our research and development efforts.  Prior to joining us, Dr. Bertram served as a senior scientific executive at Pfizer, a large multi-national pharmaceutical Company, from 1999 to 2004, and held a similar position at SmithKline Beecham Pharmaceuticals, a large multi-national pharmaceutical and healthcare Company, from 1996 to 1999, and Procter & Gamble Co., a large multi-national Company that manufactures consumer goods, from 1989 to 1996.  He was a faculty member at the University of Illinois from 1984 to 1987 and was a visiting scientist to the National Institutes of Health from 1987 to 1989.  Dr. Bertram received a D.V.M. and Ph.D. from Iowa State University and completed post-doctoral studies in cell signaling pathways.
 
A. Brian Davis has served as our Chief Financial Officer and Vice President, Finance since August 2010.  From April 2009 to July 2010, Mr. Davis served in a consulting capacity as Chief Financial Officer of Neose Technologies, Inc.  From 1994 to April 2009, Mr. Davis was employed by Neose Technologies, Inc., a biopharmaceutical company focused on the development of next-generation therapeutic proteins, where he served most recently as Senior Vice President and Chief Financial Officer.  From 1991 to 1994, Mr. Davis was employed by MICRO HealthSystems, Inc., a provider of healthcare information systems, where he served most recently as Corporate Controller.  Mr. Davis is licensed as a Certified Public Accountant, received his B.S. in accounting from Trenton State College and his MBA from the Wharton School of the University of Pennsylvania.
 
 
 
54

 
 
 
David I. Scheer is one of our co-founders and has served as a director of our Company and as Chairman of our Board of Directors since July 2003.  Since 1981, Mr. Scheer has served as President of Scheer & Company, Inc., a Company that provides venture capital, corporate strategy, and transactional advisory services focused on the life sciences.  Mr. Scheer was involved in the founding and had been a member of the Boards of Directors of ViroPharma, Inc., OraPharma, Inc. (acquired by Johnson and Johnson in 2003), and Esperion Therapeutics, Inc. (acquired by Pfizer in 2004).  He currently serves as the chairman of the Board of Directors of Achillion Pharmaceuticals, Inc. and Aegerion Pharmaceuticals, Inc., both publicly traded biotechnology companies.  From 1991 through 1999, he was affiliated with the health care investing team at Oak Investment Partners.  Mr. Scheer has also led or played a significant role in a series of transactions involving corporate alliances, licensing arrangements, divestments, acquisitions and mergers in the life sciences.  He has served as a member of the Leadership Council of the Harvard School of Public Health, and as a member of the Advisory Committee to the Harvard Malaria Initiative.  He has helped to launch, and currently serves as Chair of “The Unfinished Agenda in Infectious Diseases,” an initiative at the Harvard School of Public Health focusing on neglected diseases.  He has also been a member of the Board of Trustees, and most recently Vice-Chair for the Long Wharf Theatre, in New Haven, Connecticut.  In 2007, he was awarded the Atlas Award for Venture Capital from the Connecticut Union for Research Excellence (CURE, of which he also serves as a member of the Board), and in 2009, he received the Venture Capital Leadership Award from the Connecticut Venture Group.  He received his A.B. cum laude from Harvard College, and an M.S. from Yale University.  Because of his strong background of service on the boards of numerous life sciences industry companies and his involvement in capital raising and strategic transactions in our industry, we believe that Mr. Scheer provides a unique perspective and useful insight to our Board of Directors as we review our growth strategy and strategic initiatives.
 
Carl-Johan Dalsgaard, M.D., Ph.D. has served as a director of our Company since August 2004. Dr. Dalsgaard has also been a member of HealthCap IV GP SA, L.L.C. (HCSA) and HealthCap IV GP AB, L.L.C. (HCAB and, collectively with HCSA, HealthCap), a venture capital fund that invests globally in pharmaceutical, biotechnology and medical technology companies from June 2000 to the present and serves as Chief Executive Officer of certain companies in which HealthCap has invested.  He received an M.D. from the Karolinska Institute in Sweden, and a Ph.D. in neurobiology and post-doctoral experience from Harvard Medical School.  Dr. Dalsgaard has fulfilled specialist training for a board certificate in plastic and reconstructive surgery at Karolinska Hospital.  Dr. Dalsgaard brings to the board significant experience as an executive of a financial services Company that focuses on our industry.
 
Diane K. Jorkasky, M.D. has served as a director of our Company since August 10, 2011.  Dr. Jorkasky has been an independent consultant since February 2012.  From August 2011 to February 2012, she served as the enterprise-wide Chief Medical Officer of Endo Pharmaceuticals, Inc., or Endo, and a member of Endo’s senior R&D management team.  Prior to joining Endo, Dr. Jorkasky served as an independent consultant from January 2011 to August 2011, and was the Senior Vice President, Chief Development and Medical Officer at Aileron Therapeutics, Inc. from September 2009 to January 2011.  Dr. Jorkasky also held a variety of vice president level positions from October 2000 to January 2009 with Pfizer, Inc. where she led global clinical research science and operational groups, most recently as Vice President, Worldwide Clinical Research Operations.  Dr. Jorkasky brings to our Board of Directors substantial experience in our industry having served in a variety of capacities in both large pharmaceutical companies and smaller biotechnology companies.
 
Richard E. Kuntz, M.D., M.Sc. has served as a director of our Company since October 2010.  Dr. Kuntz has served as the Senior Vice President and Chief Scientific, Clinical and Regulatory Officer of Medtronic, Inc. since August 2009, prior to which time he served as the Senior Vice President and President, Neuromodulation from October 2005 to August 2009.  In his current role, role Dr. Kuntz oversees Medtronic’s global regulatory affairs, health policy and reimbursement, clinical research activities, ventures and new therapies, strategy and innovation, corporate development, and acquisitions, integrations and divestitures functions.  Dr. Kuntz brings a broad background and expertise in many different areas of healthcare.  Prior to Medtronic, he was the Founder and Chief Scientific Officer of the Harvard Clinical Research Institute (HCRI), a university-based contract research organization which coordinates National Institutes of Health (NIH) and industry clinical trials with the United States Food and Drug Administration (FDA).  Dr. Kuntz has directed over 100 multicenter clinical trials and has authored more than 200 original publications.  Dr. Kuntz also served as Associate Professor of Medicine at Harvard Medical School, Chief of the Division of Clinical Biometrics, and an interventional cardiologist in the division of cardiovascular diseases at the Brigham and Women’s Hospital in Boston, MA.  Dr. Kuntz graduated from Miami University and received his medical degree from Case Western Reserve University School of Medicine.  He completed his residency in internal medicine at the University of Texas Southwestern Medical School, and then completed fellowships in cardiovascular diseases and interventional cardiology at the Beth Israel Hospital and Harvard Medical School, Boston.  Dr. Kuntz received his master’s of science in biostatistics from the Harvard School of Public Health.  Dr. Kuntz brings to our Board of Directors substantial experience in our industry having served in an executive capacity with a large multinational medical device company.
 
 
 
55

 
 
 
Lorin J. Randall has served as a director of our Company since February 2008. Mr. Randall has been an independent financial consultant since May 2006.  Previously, Mr. Randall was Senior Vice President and Chief Financial Officer of Eximias Pharmaceutical Corporation, a development-stage drug development company, from December 2004 to May 2006.  From 2002 to 2004, Mr. Randall served as the Senior Vice President and Chief Financial Officer of i-STAT Corporation, a publicly-traded manufacturer of medical diagnostic devices that was acquired by Abbott Laboratories in 2004.  He currently serves on the boards of directors of Nanosphere, Inc., Athersys, Inc. and Acorda Therapeutics, Inc. Mr. Randall served on the board of directors of Opexa Therapeutics, Inc., a publicly-traded cellular therapy company, from 2007 to 2009.  Mr. Randall received a BS in accounting from The Pennsylvania State University and an MBA from Northeastern University.  Because of his strong background in the life sciences industry and his prior experience as Chief Financial Officer of i-STAT Corporation and four other public and privately-held companies, we believe that Mr. Randall is able to provide valuable input into our strategic and financial affairs, as well as other matters.  In addition, Mr. Randall’s public CFO assignments at CFM Technologies, Inc. and Greenwich Pharmaceuticals Corporation benefit our Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the Exchange Act) requires our directors, executive officers, and holders of more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock.  Based solely on our review of copies of Section 16(a) reports furnished to us and representations made to us, we believe that during fiscal 2012 our officers, directors, and holders of more than 10% of our common stock complied with all Section 16(a) filing requirements.
 
Code of Ethics

We have adopted a code of business conduct and ethics, referred to as our Ethics and Integrity Standard, which applies to all of our employees, officers and directors, including those officers responsible for financial reporting.  The code of business conduct and ethics is available on our website at www.tengion.com.  Any amendments to the code, or waivers of its requirements, will be disclosed on our website.
 
Audit Committee

Our Board of Directors has a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act.  Our audit committee consists of Lorin J. Randall, who is the chair of the committee, and David I. Scheer.  All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NASDAQ. Our board has determined that Mr. Randall is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of NASDAQ. Messrs. Randall and Scheer are independent directors as defined under the applicable rules and regulations of the SEC and NASDAQ.

Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the Audit Committee:
 
·  
evaluates the independent auditors’ qualifications, independence and performance;
 
 
 
56

 
 
 
·  
determines the engagement of the independent auditors; reviews and approves the scope of the annual audit and the audit fee;
 
·  
discusses with management and the independent auditors the results of the annual audit and the review of our quarterly financial statements;
 
·  
approves the retention of the independent auditors to perform any proposed permissible non-audit services;
 
·  
monitors the rotation of partners of the independent auditors on our engagement team as required by law;
 
·  
reviews our critical accounting policies and estimates;
 
·  
oversees our internal audit function; and
 
·  
annually reviews the audit committee charter and the audit committee’s performance.
 
 
 
 
 
 
 
 
57

 
 
 
Item 11.        Executive Compensation

Objectives and Philosophy of Executive Compensation
 
We are a performance-based company.  We have designed a compensation program that allows us to attract, retain, and reward motivated, knowledgeable, and results-oriented associates focused on achieving the strategic goals of the Company.  The program provides for payment of base salaries combined with significant potential upside from variable incentives based on achievement of annual and strategic goals.  Our compensation program is structured to reward both annual and long-term results.  The program is based on industry benchmarks and links incentives to achievement of objectives approved by the Board of Directors.
 
The Compensation Committee of our Board of Directors oversees our compensation philosophy, policies and practices. The Compensation Committee also:
 
 
·
reviews and recommends policies relating to compensation and benefits of our employees;
 
 
·
evaluates the performance of the chief executive officer in light of Company and individual objectives that have been approved by the Board of Directors;
 
 
·
recommends the compensation of the chief executive officer to the Board of Directors based upon such evaluation;
 
 
·
reviews and approves individual goals and objectives relevant to compensation of our executive officers, other than the chief executive officer;
 
 
·
evaluates the performance of these executive officers in light of those goals and objectives and sets their compensation based on such evaluations; and
 
 
·
administers the issuance of stock options and other awards under our stock plans.
 
As a smaller reporting company, we are not required and therefore did not seek stockholder approval of the compensation of our named executive officers at the annual meeting held in 2012.  For purposes of this Compensation Discussion & Analysis and the compensation tables that follow, share and per share information have been adjusted to reflect the 1-for-10 reverse stock split effective June 14, 2012.
 
Corporate Objectives

Corporate objectives for each fiscal year are established during the fourth quarter of the preceding year or the first quarter of the year and are the basis for determining corporate performance for the year.  The key strategic corporate, financial and operational goals that are established by our Compensation Committee include clinical trial progress; preclinical product candidate development; and implementation of appropriate financing and business development strategies.
 
Individual Objectives
 
Individual objectives also are established for each executive officer, other than the chief executive officer, by the chief executive officer at approximately the same time as the corporate objectives are established.  Our chief executive officer does not have separate individual performance objectives.  Rather, our chief executive officer’s objectives are generally the same as the corporate objectives, with strong consideration given to how, within the opinion of the Compensation Committee and the Board of Directors, his leadership impacts our ability to achieve our objectives.  These objectives represent significant milestones to be met by each executive, along with, in certain circumstances, dates for achieving those milestones.  Factors are identified and specified that will be used to measure success in reaching the goal or objective.  Objectives are established based on the executive’s principal areas of responsibility.  For example, our scientific executives have measurable objectives established for areas such as key research or scientific milestones and our clinical executives will be measured by clinical trial progress.  Our Compensation Committee also retains the discretion to consider an executive’s accomplishments other than enumerated objectives when evaluating an executive’s performance.
 
Evaluations
 
Toward the end of each fiscal year, the Compensation Committee begins its assessment of individual and corporate performance against stated goals for the year.  When discussing performance evaluations and setting new compensation levels, the Compensation Committee considers recommendations from our chief executive officer regarding the compensation for executive officers other than himself.  Our chief executive officer does not participate in determining the amount of his own compensation.  With the exception of our chief executive officer, the Compensation Committee has the final authority regarding the overall compensation structure for the executive officers.  In the case of our chief executive officer, the Compensation Committee evaluates our chief executive officer’s performance, with significant input and recommendations from the chairman of the Board of Directors, and recommends compensation levels to the Board of Directors.
 
 
 
 
58

 
 
 
The Compensation Committee evaluates individual executive performance with the goal of setting target compensation at levels the committee believes are competitive and in a range determined using data from companies of similar size and stage of development operating in the biotechnology industry, taking into account the executive’s prior experience, our relative performance and our own strategic goals.  In order to ensure that we continue to remunerate our executives appropriately and consistently with market information, we participate in, and review data from, certain compensation surveys, and may confer with outside compensation consultants.
 
Elements of Executive Compensation
 
Executive compensation consists of the following elements:
 
Base Salary.  Base salaries of our employees are primarily tied to benchmarking at the 50th percentile and are tied to annual company and individual objectives.  Base salaries may be adjusted from time to time during the year in connection with promotions that may occur or in order to adjust a named executive officer’s salary in light of market conditions.
 
Our peer group, which we identified in March 2010, is composed of the U.S.-based, publicly-traded companies in the pharmaceutical, biotechnology and life sciences industries listed below.  At the time of selecting this peer group, these companies had little to no revenue, an average market capitalization of $100.7 million, fewer than 150 employees, and product candidates in Phase I or Phase II clinical trials.  The companies in this peer group are:
 
  
Achillion Pharmaceuticals, Inc.
AVI BioPharma, Inc.
EntreMed, Inc.
Neurocrine Biosciences, Inc.
Anadys Pharmaceuticals, Inc.
Capstone Therapeutics Corp.
Icagen, Inc.
OncoGenex Pharmaceuticals, Inc.
ArQule, Inc.
Celldex Therapeutics, Inc.
Insmed Incorporated
Peregrine Pharmaceuticals, Inc.
Arrowhead Research Corporation
Cytokinetics, Incorporated
Keryx Biopharmaceuticals, Inc.
SuperGen, Inc.
Athersys, Inc.
CytRx Corporation
Molecular Insight Pharmaceuticals, Inc.
 

In February 2012, the Compensation Committee reviewed the list of companies in its peer group and revised the list to better reflect the Company’s peers.  The new peer group includes companies that are publicly traded, U.S.-based biotechnology companies that have product candidates in Phase II or Phase III clinical trials, fewer than sixty employees, and a market value of less than $200 million.  The companies in the new peer group are:
 
Adeona Pharmaceuticals, Inc.
Capstone Therapeutics Corp.
CytRx Corporation
MediciNova, Inc.
Advaxis, Inc.
Cardium Therapeutics, Inc.
EntreMed, Inc.
OncoGenex Pharmaceuticals, Inc.
Astex Pharmaceuticals, Inc. (Formerly SuperGen)
Celldex Therapeutics, Inc.
GenVec, Inc.
OXiGENE, Inc.
Athersys, Inc.
Cortex Pharmaceuticals, Inc.
Hemispherx Biopharma, Inc.
Peregrine Pharmaceuticals, Inc.
AVI BioPharma
Cyclacel Pharmaceuticals, Inc.
Insmed Incorporated
Rexahn Pharmaceuticals, Inc.
Bionovo, Inc.
Cytokinetics, Incorporated
Keryx Biopharmaceuticals, Inc.
Soligenix, Inc.

In general, base salaries are reviewed annually and adjusted based on market levels and individual performance, generally increasing between zero and seven percent each year.  Accordingly, the Compensation Committee approved the base salary increases for our named executive officers as set forth in the following table:
 
Named Executive Officer
 
2012 Actual
Base Salary
   
2013 Approved
Base Salary(2)
   
2013 Percentage
Increase
 
John L. Miclot (1) 
 
$
450,000
   
$
463,500
     
3%
 
Timothy Bertram, D.V.M., Ph.D.
 
$
370,625
   
$
381,744
     
3%
 
A. Brian Davis
 
$
318,848
   
$
328,413
     
3%
 
_______________________________
(1)            Mr. Miclot joined the Company in December 2011.
(2)            We set our annual salary increases effective as of February 1 of each year.
 
 
 
59

 
 
 
Annual Performance Bonus.  The Compensation Committee has the authority to award annual performance bonuses to our executive officers.  Annual bonuses are designed to provide incentives based on the achievement of annual company and individual objectives.  The target bonus percentage of our employees are benchmarked at the 50-75th percentile and are tied to the achievement of annual Company and individual objectives, which consist of the critical success factors for achievement of the company objectives.  As the Company demonstrates progress on achieving Company objectives, or for transformational hires or for key employees who are instrumental in transformational events, it is anticipated the target bonus percentage will be benchmarked increasingly closer to the 75th percentile.  If the Company or the employee exceeds the objectives, then the bonus payable to the employee could exceed the targeted percentages of base salary.  Each of our executive officers is eligible to receive an annual performance bonus based upon a targeted percentage of base salary.  The targeted bonus level for a particular executive is determined by the executive officer’s title, with each level differentiated as follows:
 
Name and Title
 
2012 Target Bonus as a
Percentage of Base Salary
 
2013 Target Bonus as a
Percentage of Base Salary
John L. Miclot, President and Chief Executive Officer
 
50%
 
50%
Timothy Bertram, D.V.M., Ph.D.
President, Research and Development and Chief  Scientific Officer
 
40%
 
40%
A. Brian Davis, Chief Financial Officer and Vice President, Finance
 
35%
 
35%
_______________________________

 
The performance objectives are generally objectively determinable and measurable and their outcomes are substantially uncertain at the time established.  When we set the 2012 goals, we considered them to be ambitious, but attainable and designed to cause bonus payments to reflect meaningful performance requirements.
 
In March 2012, the following Company objectives for 2012 were established:
 
 
·
define the surgical procedure for implanting the Neo-Urinary Conduit in the ongoing Phase I clinical trial and, data permitting, implant up to seven patients during 2012;
 
 
·
submit a pre-IND filing with the U.S. FDA for the Neo-Kidney Augment development program during the first half of 2012;
 
 
·
evaluate alternative regulatory pathways for Neo-Kidney Augment development program and recommend strategy for execution; and
 
 
·
achieve the foregoing objectives within the Company approved budget.  
 
In January 2013, the Compensation Committee determined the Company had achieved 90% of the 2012 Company objectives.  In making its determination, the Compensation Committee considered the fact that the Company objective to implant up to seven patients in the ongoing Neo-Urinary Conduit trial during 2012 was not fully met.  
 
Because the 2012 individual performance objectives for each of our named executive officers were identical to the Company objectives, each named executive officer received a bonus payout equal to 90% of his target bonus payout.  We believe that the 2012 bonus payouts for the executive officers accurately reflect and properly reward such executives for the progress and accomplishments of the Company, including achievement of the 2012 annual objectives.  Mr. Miclot, Dr. Bertram, and Mr. Davis received 2012 bonus payouts of $202,500, $133,425, and $100,437, respectively.
 
 
 
 
60

 
 
 In January 2013, the following Company objectives for 2013 were established:
 
 
·
Neo-Kidney Augment Program:
 
 
·
Submit a Clinical Trial Application to the Swedish Medicinal Products Agency and submit an IND filing to the U.S. FDA
 
 
·
Commence initial clinical trials in Sweden and in the U.S.
 
 
·
Neo-Urinary Conduit Program:
 
 
·
Complete patient implants in Phase I trial and interact with regulatory agencies for planning subsequent clinical trials;
 
 
·
Establish partnership or alternative funding source for continued development of Neo-Urinary Conduit; and
 
 
·
Achieve the foregoing objectives within the Company approved budget.
 
The 2013 individual performance objectives for each of our named executive officers are identical to the Company objectives.
 
Long-Term Incentive Program.  We believe that long-term performance will be enhanced by providing incentives that reward our employees for maximizing stockholder value over time and that align the interests of our employees and management with those of stakeholders.  The Compensation Committee is considering a plan that would not use stock options or restricted stock, but would otherwise provide incentives aligned with the Company’s stakeholders.
 
Stock Options and Restricted Common Stock Our 2010 Stock Option and Incentive Plan, or the Plan, authorizes us to grant options to purchase shares of common stock to our employees, directors and consultants.  Our Board of Directors has delegated oversight of the administration of our stock option plans to our Compensation Committee.  The Compensation Committee has adopted policies and procedures regarding the granting of options.
 
Stock option grants have been made at the commencement of employment and typically annually in connection with the achievement of corporate and personal objectives.  Additionally, stock option grants may be made in connection with special recognition of a particularly important corporate accomplishment in which the executive played an important role and following a significant change in job responsibilities or to meet other special retention objectives.  Our Compensation Committee considers and approves stock option awards to executive officers based upon a review of competitive compensation data, its assessment of individual performance, a review of each executive’s existing long-term incentives, and retention considerations.
 
The exercise price of options is the fair market value of our common stock as determined by our Compensation Committee on the date of grant.  Our stock options typically vest over a four-year period with 25% vesting 12 months after the vesting commencement date and the remainder vesting ratably each quarter thereafter over a three-year period, subject to continued employment or association with us.  Our stock options generally expire ten years after the date of grant.  Incentive stock options also include certain other terms necessary to assure compliance with the applicable provision of the Internal Revenue Code.
 
In 2012, our Compensation Committee made certain stock option and restricted stock awards to our current named executive officers.  One quarter of the option grant vest on the first anniversary of the date of grants and the balance of the shares vest in 12 successive equal quarterly installments over the 36-month period measured from the one year anniversary.  For Mr. Miclot, one quarter of the shares under the restricted common stock award vest on each of January 3, 2013, 2014, 2015, and 2016.  For Dr. Bertram and Mr. Davis, one quarter of the shares under the restricted common stock award vest on each of February 1, 2013, 2014, 2015, and 2016.
 



 
61

 
 
 
Our executive officers may to enter into 10b5-1 trading plans to permit each of them to sell on each of the vesting dates a sufficient number of shares of common stock to cover the tax liability associated with such vesting.
 
Name and Title
 
Date of
Grant
 
Number of Shares under
Option Grant
 
Exercise
Price
 
Restricted Stock
Awards
                 
John L. Miclot, President and Chief Executive Officer
 
 
1/3/12
 
39,375
 
$5.70
 
39,375
Timothy Bertram, President, Research and Development and Chief Scientific Officer
 
 
2/16/12
 
17,001
 
$6.42
 
15,000
A. Brian Davis, Chief Financial Officer and Vice President, Finance
 
2/16/12
 
8,001
 
$6.42
 
6,834

Severance and Change in Control Benefits.  As more fully described in the section entitled “Potential Payments Upon Termination or Change in Control,” we have entered into offer letters with our named executive officers that provide for certain payments and benefits upon a qualifying termination of employment or a change in control, including salary and benefits continuation, payment of pro-rata bonuses and acceleration of certain unvested equity awards.  Consistent with our compensation philosophy, we may explore other benefits related to potential change-in-control or termination events to ensure the interests of our executive officers are aligned with the interests of our stockholders.
 
In May 2011, our Board of Directors approved, based upon the recommendation of our Compensation Committee, the implementation of a Change in Control Payment Plan and a Management Severance Plan.  In March 2012, our Board of Directors approved an Amended and Restated Management Severance Plan.
 
Under the terms of the Change in Control Payment Plan, our executive officers would receive promptly after the effective date of a change in control of the Company two times his or her then current annual base salary plus target bonus, assuming a 100% payout of such bonus.  The amounts payable to each of the executive officers under the plan would be offset by an amount equal to 50% of aggregate value to be received by each executive officer by virtue of his or her stock and stock option ownership, net of any exercise price.  Pursuant to the plan, in the event the consideration received by our stockholders is less than $25 million, the amounts payable under the plan can be reduced by an amount proportionate to the extent to which $25 million exceeds the actual amount of stockholder consideration.  The Change in Control Payment Plan terminated on September 30, 2012.
 
Under the terms of the Amended and Restated Management Severance Plan, in the event any of our executive officers’ employment is terminated by us without cause or he or she resigns under certain specified conditions including any material adverse change in his or her duties, authority or responsibilities without his or her agreement, a move of our principal office more than 50 miles from the current office, our failure to pay such executive officer’s salary and other benefits when due (other than pursuant to an across the board reduction in the compensation of all senior management), such executive officer will, subject to his or her signing of a form of Release and Non-disparagement Agreement, be entitled to receive the following benefits.  Our chief executive officer is entitled to a payment equal to (1) 12 months of his then current base salary, (2) an amount equal to his annual target bonus (assuming 100% payout threshold), and (3) an amount equal to his annual target bonus (assuming 100% payout threshold) prorated through the date of termination.  Such payment shall be made at the discretion of the Company (1) in one lump sum payment or (2) fifty percent (50)% in a lump sum payment and fifty percent (50%) over the ensuing 12 month period.  Our chief executive officer is entitled to continuation of his benefits for 12 months.  Our other executive officers are entitled to a payment equal to (1) 10 months of his then current base salary, (2) an amount equal to his annual target bonus (assuming 100% payout threshold) and (3) an amount equal to his annual target bonus (assuming 100% payout threshold) prorated through the date of termination.  Such payment shall be made at the discretion of the Company (1) in one lump sum payment or (2) fifty percent (50%) in a lump sum payment and fifty percent (50%) over the ensuing 10 month period.  These executives are entitled to continuation of their benefits for 10 months.
 
Other Compensation.  We maintain broad-based benefits and perquisites that are available to all eligible employees, including health insurance, life and disability insurance, dental insurance, vision insurance, flexible spending accounts and a 401(k) plan.  Additionally, under certain circumstances, we will use cash sign-on bonuses as an incentive for individuals to join our team.  These bonuses are awarded on a case-by-case basis and are typically offered to offset compensation that was forfeited upon termination of prior employment, to assist with relocation expenses or to offset a variance in total compensation from the individual’s employment prior to joining us.  Consistent with our compensation philosophy, we intend to continue to maintain these benefits for our executive officers; however, our Compensation Committee in its discretion may revise, amend or add to the officer’s benefits if it deems it advisable.
 
Relationship of Elements of Compensation.   Our compensation structure is primarily weighted toward three of the elements discussed: base salary, annual performance bonus and long-term incentives.   Our mix of cash and non-cash compensation balances our need to limit cash expenditures with the expectations of those we hope to recruit and retain as employees.  In the future, we may adjust the mix of cash and non-cash compensation if required by competitive market conditions for attracting and retaining skilled personnel.
 
 
 
62

 
 
 
We manage the expected impact of salary increases and performance bonuses by requiring that the size of such salary increases and bonuses be tied to the attainment of corporate and individual objectives.  In the case of our named executive officers, the size of each executive’s bonus is determined solely by whether we have met corporate objectives.
 
We view the long-term incentives as a long-term retention benefit.  The Compensation Committee is considering a plan that would not use stock options or restricted stock, but would otherwise provide incentives aligned with the Company’s stakeholders.
 
Tax Considerations
 
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction for compensation in excess of $1 million paid to our chief executive officer and our four other most highly paid executive officers.  Qualifying performance-based compensation is not subject to the deduction limitation if specified requirements are met.  We generally intend to structure the performance-based portion of our executive compensation, when feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us.  However, our Board of Directors may authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believes such payments are appropriate to attract and retain executive talent.
 
 
 
 
 
 
 
 
 
 
63

 
 
 
 
SUMMARY COMPENSATION TABLE
 
The following table shows the total compensation accrued for fiscal years 2012 and 2011 for our named executive officers.
 
Name and Principal Position
 
Fiscal
Year
 
Salary
   
Bonus
   
Option
Awards(1)
   
Stock
Awards(1)
   
Non-Equity
Incentive Plan
Compensation (2)
   
All Other
Compensation
   
Total
 
                                                             
John L. Miclot (3)
President and Chief Executive Officer
 
2012
 
 450,000
   
 —
   
 159,933
     
 224,438
   
 202,500
   
 
100,631(4
 
 1,137,502
 
   
2011
 
$
34,091
   
$
   
$
224,036
     
   
$
     
   
$
258,127
 
                                                             
                                                             
Timothy Bertram, D.V.M., Ph.D.
 
2012
 
$
373,474
   
$
   
$
77,763
     
92,240
   
$
133,425
   
$
   
$
626,908
 
President, Research
 
2011
 
$
316,156
   
$
   
$
98,475
   
$
96,800
   
$
79,538
   
$
1,309(5
 
$
592,278
 
and Development and Chief Scientific Officer
                                                           
                                                             
                                                             
A. Brian Davis
 
2012
 
$
319,480
   
$
   
$
36,597
     
43,847
   
$
100,437
   
$
   
$
554,355
 
Chief Financial
 
2011
 
$
292,838
   
$
   
$
57,050
   
$
56,466
   
$
72,256
   
$
297(5
 
$
478,907
 
Officer and Vice President, Finance
                                                           
                                                             
_________________________________
(1)
Calculated in accordance with current accounting standards for stock-based compensation without consideration of forfeitures.  Valuation assumptions used to determine the fair value of the stock awards are described in Note 14 to our audited financial statements for fiscal year 2011, included in this annual report.
(2)
Amounts shown in “Non-Equity Incentive Compensation” column reflect the annual incentive award granted and earned during fiscal year 2010 and 2011 which were paid in fiscal year 2011 and 2012, respectively.  These annual awards are described in further detail under “Compensation Discussion and Analysis”.
(3)
Mr. Miclot joined the Company in December 2011. 
(4)
Amounts shown reflect reimbursement for furnished apartment in Winston-Salem area and the associated utility expenses, the cost of an automobile lease in Winston-Salem and the associated insurance coverage and cost of weekly commuting expenses (and the associated taxes for these benefits).
(5)
All other compensation consists of tax reimbursements.
 
 
 

 
64

 
 
 
Grants Of Plan-Based Awards in 2012
 
The following table sets forth information regarding each grant of an award made to each named executive officer during fiscal year 2012 under any plan, contract, authorization, or arrangement pursuant to which cash, securities, similar instruments, or other property may be received.  This table reflects the 1-for-10 reverse stock split effective June 14, 2012.
 
 
Name and Principal Position
 
Approval Date
 
Grant
Date
 
Estimated
Future
Payouts
Under Non-
Equity
Incentive
 Plan
Awards
Target (1)
   
All Other
Option
Awards:
Number of
Securities
Underlying
Options (2)
   
All Other
Stock
Awards:
Number of
Securities
Underlying
Stock
 Awards(3)
   
Exercise
or
Base
Price of
Option &
Stock
Awards
   
Grant Date
Fair Value
of Stock &
Option
Awards (4)
 
                                       
John L. Miclot
     
1/3/2012
 
$
202,500
     
39,375
     
   
$
5.70
   
$
159,933
 
President and Chief Executive Officer
     
1/3/2012
   
     
     
39,375
     
5.70
   
$
 224,438
 
                                                 
                                                 
Timothy Bertram, D.V.M., Ph.D.
     
2/16/2012
 
$
133,425
     
17,001
     
   
$
6.42
   
$
77,763
 
President, Research and Development
     
2/16/2012
 
$
     
     
15,000
   
$
6.42
   
$
96,240
 
and Chief Scientific Officer
                                               
                                                 
A. Brian Davis
     
2/16/2012
 
$
100,437
     
8,001
     
   
$
6.42
   
$
36,596
 
Chief Financial Officer and Vice
President, Finance
     
2/16/2012
 
$
     
     
6,834
   
$
6.42
   
$
43,738
 
                                                 
                                                 
________________________________
 
(1) 
Reflects target 2012 annual performance bonuses, which amounts, if any, were paid in the first quarter of 2013.  Target 2011 annual performance bonuses are calculated based upon a percentage of the named executive officer’s 2011 base salary.
 
(2) 
The options have a term of ten years and vest in accordance with the following schedule: 25% of the total number of shares vest on the first anniversary of the grant date and 1/16th of the total number of shares vest on the first day of each quarter following the grant date.
 
(3) 
The restricted stock awards vest in accordance with the following schedule: 25% of the total number of shares vests on the first February after the grant date and on each February 1 thereafter for three years.
 
(4)
The amounts reported in this column represent the entire grant date fair value for the aggregate number of options granted to each named executive officer.  There can be no assurance that these amounts will ever be realized.  The assumptions we used to calculate these amounts are included in Note 14 to our audited financial statements for fiscal year 2011, included in this annual report.
 
 
 
65

 
 
Outstanding Equity Awards At Fiscal Year-End
 
The following table sets forth information concerning stock options held on December 31, 2012, the last day of our 2012 fiscal year, for each named executive officer. 
 
   
Number of Securities Underlying
Unexercised Options (#)
   
 
  Option
Exercise
Price ($)(1)
 
 
Option
Expiration
Date (2)
Name and Principal Position
 
Exercisable
   
Unexercisable
     
                     
John L. Miclot
President and Chief Executive Officer
    19,964       59,801       4.00  
12/5/2021
            39,375       5.70  
1/3/2022
                           
                           
Timothy Bertram, D.V.M., Ph.D.
    64             4.40  
2/15/2015
President, Research and Development and Chief Scientific Officer
    271             4.40  
2/27/2016
    332             4.40  
6/23/2016
    103             4.40  
11/1/2016
    552             4.40  
2/27/2017
    69             4.40  
10/25/2017
      1,656             4.40  
12/19/2017
      587             4.40  
2/7/2018
      3,840       886       4.40  
9/28/2019
      4,064       2,436       50.00  
4/9/2020
      1,502       1,499       29.40  
10/18/2020
      2,250       3,750       24.20  
5/11/2021
            17,001       6.42  
2/16/2022
                           
A. Brian Davis
    3,713       2,887       36.70  
08/02/2020
Chief Financial Officer and Vice President, Finance
    1,313       2,187       24.20  
05/11/2021
            8,001       6.42  
2/16/2022
                           
(1)
Options awards made prior to August 26, 2009 were modified to an exercise price of $4.40 per share on August 26, 2009, when our Compensation Committee approved the repricing of all then-outstanding options for active employees at such time.
(2)
These options vest as to 25% on the first anniversary of the date of grant and as to an additional 6.25% at the end of each three-month period thereafter for the following three years.  Each of the options were granted 10 years prior to the Option Expiration Date.

 

 
66

 

 
The following table sets forth information concerning stock awards held on December 31, 2012, the last day of our 2012 fiscal year, for each named executive officer.
 
Name and Principal Position
Grant Date
Number of
Securities
Underlying
Unexercisable Stock
   
Stock
 Price of
Award
 
 
Expiration
Date
 Market Value of
Shares or Units
That Have Not
Yet Vested (1)
                   
John L. Miclot
President and Chief Executive Officer
1/3/2012   
39,375
   
$
5.70
 
$
38,981
                       
Timothy Bertram, D.V.M., Ph.D.
                     
President, Research and Development and Chief Scientific Officer
5/11/2011  
3,000
   
$
24.20
 
$
2,970
    2/1/2012  
15,000
     
6.42
 
 
14,850
                       
A. Brian Davis
Chief Financial Officer and Vice President, Finance
5/11/2011   
1,750
   
$
24.20
 
$
1,733
    2/1/2012  
6,834
     
6.42
 
 
6,766
 
_______________________________________
(1)  
The market value of stock awards that have not yet vested is calculated by multiplying the closing price per share of our common stock on December 31, 2012 by the of shares unvested as of December 31, 2012.
 


 

 
67

 

 
Employment Agreements and Potential Payments Upon Termination or Change in Control
 
John L. Miclot.  On December 5, 2011, we entered into an employment agreement, which was subsequently amended and restated on January 20, 2012, with Mr. Miclot, our President and Chief Executive Officer providing for his at-will employment, commencing December 5, 2011.  Mr. Miclot’s base salary was set at $450,000 per year, subject to annual review and increases based on performance.  Mr. Miclot may also receive an annual bonus payment of up to 50% of his annual gross salary, as determined by the Compensation Committee and the Board of Directors in their discretion, based on achievement of certain mutually agreed-upon performance milestones.  Furthermore, he is eligible to participate in the group benefits program and 401(k) plan, and the Board of Directors may award Mr. Miclot’s stock incentives under our equity incentive plans in its sole discretion as a performance-based incentive.  Pursuant to the employment agreement, Mr. Miclot was provided with a stock option to purchase 78,775 shares of common stock on December 5, 2011, a stock option to purchase 39,375 shares of common stock on January 3, 2012 and a restricted stock award of 39,375 shares of common stock on January 3, 2012.  All of these equity awards were made pursuant to our 2010 Stock Option and Incentive Plan.  Additionally, under the terms of the employment agreement, we have agreed to provide for the direct payment of or reimbursement for a furnished apartment in the Winston-Salem area and the associated utility expenses, the cost of an automobile lease in Winston-Salem and the associated insurance coverage and the cost of weekly commuting expenses from Mr. Miclot’s homes in Tampa, Florida and Pittsburgh, Pennsylvania.  We have also agreed to pay the taxes associated with the provision of these benefits.  At any time, in the event Mr. Miclot’s employment is terminated by us without cause or he resigns under certain specified conditions, each as described in the Amended and Restated Management Severance Plan, then Mr. Miclot may be entitled to receive certain payments and benefits pursuant to the Amended and Restated Management Severance Plan as described on page 62.
 
Timothy Bertram, D.V.M., Ph.D.  On July 28, 2004, we entered into an offer letter with Dr. Bertram, our Vice President, Science and Technology, providing for his at-will employment, commencing as of August 1, 2004.  This offer letter, as amended on December 22, 2008, sets forth the terms and conditions of Dr. Bertram’s employment.  Dr. Bertram’s base salary was originally set at $200,000 per year, subject to annual review and increases based on performance.  Dr. Bertram was also originally entitled to receive an annual bonus payment of up to 20% of his annual gross salary, as determined by his manager and the board in their discretion, based on achievement of certain mutually agreed-upon performance milestones.  Furthermore, he is eligible to participate in the group benefits program and the Board of Directors may award Dr. Bertram stock incentives under our equity incentive plans in its sole discretion as a performance-based incentive.  Dr. Bertram also received the right to reimbursement for all reasonable out-of-pocket relocation and relocation-related expenses.  Pursuant to the offer letter, Dr. Bertram purchased 1,794 shares of restricted common stock at a purchase price per share equal to the par value of such shares, which shares have since vested in full. Such vested shares are subject to repurchase by us upon Dr. Bertram’s termination for any reason, including Dr. Bertram’s death (in such case only for a period of twelve months) at the fair market value price per share, but if the termination is for cause, then the vested shares are subject to repurchase by us at the price of $0.001 per share.  Dr. Bertram was also granted the right to participate, and did participate, in our Series A Preferred Stock financing in the amount of $50,000. At any time, in the event Dr. Bertram is terminated by us without cause or he resigns under certain specified conditions, each as described in the Amended and Restated Management Severance Plan, Dr. Bertram may be entitled to receive certain payments and benefits pursuant to the Amended and Restated Management Severance Plan as described on page 62.  In addition, the offer letter for Dr. Bertram provides that in the event of termination by us without cause six months following a change in control of our Company, Dr. Bertram’s restricted stock awards or stock options, as the case may be, shall immediately vest.
 
 A. Brian Davis.  On July 29, 2010, we entered into an offer letter with Mr. Davis, our Chief Financial Officer and Vice President, Finance, providing for his at-will employment, commencing August 1, 2010. This offer letter, sets forth the terms and conditions of Mr. Davis’s employment. Mr. Davis’s base salary was originally set at $285,000 per year, subject to annual review and increases based on performance.  Mr. Davis may also receive an annual bonus payment of up to 35% of his annual gross salary, as determined by his manager and the Board of Directors in their discretion, based on achievement of certain mutually agreed-upon performance milestones.  Furthermore, he is eligible to participate in the group benefits program and 401(k) plan, and the board may award Mr. Davis stock incentives under our equity incentive plans in its sole discretion as a performance-based incentive.  Pursuant to the offer letter, Mr. Davis was provided with an incentive stock option to purchase 6,600 shares of common stock pursuant to our 2010 Stock Option and Incentive Plan.  Additionally, effective January 1, 2013, we amended the offer letter to provide for the direct payment of or reimbursement for reasonable costs associated with Mr. Davis’s commuting expenses from his home in Pennsylvania.  We have also agreed to pay the taxes associated with the provision of these benefits.  At any time, in the event Mr. Davis’s employment is terminated by us without cause as defined in the offer letter or he resigns under certain specified conditions, each as described in the Amended and Restated Management Severance Plan, then Mr. Davis may be entitled to receive certain payments and benefits pursuant to the Amended and Restated Management Severance Plan as described on page 62.  In addition, the offer letter for Mr. Davis provides that in the event of termination by us without cause within one month prior to or nine months following a change in control of our Company, Mr. Davis’s restricted stock awards or stock options, as the case may be, shall immediately vest.
 
 
 
 
68

 
 
 
Release and Non-Disparagement Agreements
 
Our form of Release and Non-Disparagement Agreement provides that in exchange for certain severance benefits, the terminated employee releases us from all liability for any claims or damages against us.  The agreement also provides that (i) neither we nor the terminated employee will engage in any communications that shall disparage, demean or impugn one another or interfere with the other’s existing or prospective business relationships, economic or career prospects, and (ii) the terminated employee will not compete with or become employed by a Company that competes with our products or technology for a period of one (1) year after termination of employment.
 
Potential Payments Upon Termination or Change in Control
 
The following table sets forth the payments that would be made to our named executive officers if his or her employment had been terminated by us without cause (or if applicable, by the executive for good reason) on December 31, 2012 or in the event a change in control of our Company occurred on December 31, 2012, as applicable.
 
Name
 
Termination Without
Cause
(or With Good Reason)
   
Termination Without Cause (or
With Good Reason) in Connection
with a Change in Control
 
             
John L. Miclot
           
Cash Severance
 
$
675,000
   
$
675,000
 
Continued Health Benefits
   
     
 
Pro-Rata Bonus
   
225,000
     
225,000
 
Acceleration of Restricted Stock
   
     
 
Acceleration of Stock Options
   
     
 
Total:
 
$
900,000
   
$
900,000
 
                 
Timothy Bertram, D.V.M., Ph.D.
               
Cash Severance
 
$
438,573
   
$
438,573
 
Continued Health Benefits
   
12,455
     
12,455
 
Pro-Rata Bonus
   
129,719
     
129,719
 
Acceleration of Restricted Stock
   
     
17,820
 
Acceleration of Stock Options
   
     
 
Total:
 
$
580,747
   
$
598,567
 
                 
A. Brian Davis
               
Cash Severance
 
$
393,246
   
$
393,246
 
Continued Health Benefits
   
12,787
     
12,787
 
Pro-Rata Bonus
   
127,539
     
127,539
 
Acceleration of Restricted Stock
   
     
8,498
 
Acceleration of Stock Options
   
     
 
Total:
 
$
533,572
   
$
542,070
 
                 

(1)
Calculated based upon a price per share of our common stock of $0.99, which was the closing price per share of our common stock on December 31, 2012.
(2)
Under the terms of the Change in Control Payment Plan, our executive officers would receive promptly after the effective date of a change in control of the Company two times his or her then current annual base salary plus target bonus, assuming a 100% payout of such bonus.  The amounts payable to each of the executive officers under the plan will be offset by an amount equal to 50% of aggregate value to be received by each executive officer by virtue of his or her stock and stock option ownership, net of any exercise price.  Pursuant to the plan, in the event the consideration received by our stockholders is less than $25 million, the amounts payable under the plan can be reduced by an amount proportionate to the extent to which $25 million exceeds the actual amount of stockholder consideration.  The payments calculated for each executive in the above table assume stockholder consideration of approximately $11.3 million (calculated as the product of (i) our total shares of common stock outstanding at December 31, 2011 of 23,962,984 and (ii) $0.47, which was the closing price per share of our common stock on December 31, 2011).  The Change in Control Payment Plan terminated on September 30, 2012.



 
69

 



Compensation of Directors
 
Our Board of Directors determines the compensation of our non-employee directors in conjunction with recommendations made by the Compensation Committee.  The Compensation Committee evaluates the appropriate level and form of compensation for non-employee directors at least annually and recommends changes to our Board of Directors when appropriate.  Our Board of Directors is compensated through fees and grants of stock options. The description below reflects the 1-for-10 reverse stock split effective June 14, 2012.
 
Since the completion of our initial public offering in April 2010, each of our non-employee directors are entitled to receive an annual cash retainer of $35,000, except that a non-employee chairperson of the board is entitled to receive an annual cash retainer of $55,000.  Non-employee chairpersons of the Audit Committee, the Compensation Committee, the Technology Committee, and the Governance and Nominating Committee are each entitled to receive an additional annual retainer of $15,000, $10,000, $10,000 and $6,000, respectively.  Non-employee members of each of the Audit Committee, the Compensation Committee, the Technology Committee, and the Governance and Nominating Committee are entitled to receive an additional annual retainer of $7,500, $5,000, $5,000 and $3,000, respectively.
 
We reimburse all directors for travel, lodging and other reasonable expenses incurred in attending board and committee meetings.
 
In March 2012, the Board of Directors approved changes to its non-employee director compensation plan with respect to equity awards.  The changes were recommended by an independent compensation consultant to the Compensation Committee based on a review of equity incentives used by the Company’s peer group of companies.  Upon initial election or appointment to our Board of Directors, each non-employee director will be granted an option to purchase 3,000 shares of our common stock with an exercise price equal to the fair market value of our common stock on the date of grant.   These options vest quarterly over a two-year period, subject to the non-employee director’s continued service on the Board of Directors through the vesting dates.  On the date of each annual stockholder meeting, each continuing non-employee director will automatically receive an option to purchase 2,000 shares of our common stock with an exercise price equal to the fair market value of our common stock on the date of grant.  When granted, these options vest quarterly over a one-year period, subject to the non-employee director’s continued service on the Board of Directors through the vesting dates.
 
 Prior to March 2012, each non-employee director was granted an option to acquire 700 shares of common stock upon his or her initial election or appointment to the Board of Directors and an option to purchase 470 shares of common stock at each annual meeting of stockholders commencing in 2011, each with an exercise price equal to the fair market value of our common stock on the date of grant.














 
70

 


The following table sets forth information regarding compensation earned by our non-employee directors during the fiscal year ended December 31, 2012.
 
Name
 
Fees
 Earned
or Paid
in
Cash ($)
   
Stock
Awards
($)
 
Option
Awards
($)(1)
 
Non-Equity
Incentive Plan
Compensation
 ($)
   
Nonqualified
Deferred
Compensation
Earnings
($)
 
All
Other
Compensation
($)
 
Total ($)
 
David I. Scheer
 
$
73,500
   
 
$
5,049
(2)(4)
 
   
 
 
$
78,549
 
Carl-Johan Dalsgaard, M.D., Ph.D.
 
$
44,250
   
 
$
5,049
(2)(5)
 
   
 
 
$
49,299
 
Scott D. Flora
 
$
52,500
   
 
$
5,049
(3)(6)
 
   
 
 
$
57,549
 
Diane K. Jorkasky, M.D.
 
$
44,250
   
 
$
5,049
(3)(7)
 
   
 
 
$
49,299
 
Richard Kuntz, M.D., M.Sc.
 
$
52,500
   
 
$
5,049
(2)(8)
 
   
 
 
$
57,549
 
Lorin J. Randall
 
$
55,000
   
 
$
5,049
(2)(9)
 
   
 
 
$
60,049
 
__________________________________
(1)
The assumptions we used in valuing options are described in Note 14, “Stock-based Compensation,” to our audited financial statements included for the fiscal year ended December 31, 2012 included in this annual report.  This column reflects the aggregate grant date fair value as calculated in accordance with ASC 718 in connection with options we granted in the indicated year.
(2)
Options were granted at fair market value on May 21, 2012 at $2.53 per share.  Options vest quarterly over a one-year period.
(3)
Options were granted at fair market value on May 21, 2012 at $2.53 per share.  Options vest quarterly over a one-year period.  Mr. Flora resigned as a director on December 19, 2012.
(4)
Mr. Scheer has 2,940 option awards outstanding.
(5)
Mr. Dalsgaard has 2,940 option awards outstanding.
(6)
Mr. Flora has 2,700 option awards outstanding.
(7)
Ms. Jorkasky has 3,170 option awards outstanding.
(8)
Mr. Kuntz has 3,170 option awards outstanding.
(9)
Mr. Randall has 4,386 option awards outstanding.
 
 
 
 
 
 
 
 
 
 
 
71

 
 

Item 12.        Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Securities Authorized for Issuance Under Equity Compensation Plans
 
The following table gives information about our common stock that may be issued upon the exercise of stock options, warrants and rights under all of our existing equity compensation plans as of December 31, 2012, including the 2010 Stock Incentive and Option Plan (2010 Plan) and 2004 Stock Option Plan (2004 Plan).  There were no shares available for future grants under the 2004 Plan, as the 2004 Plan ceased upon the Company’s initial public offering in April 2010.
 
 
Plan Category
 
(a)
Number of  Securities to
be Issued Upon 
Exercise
of Outstanding Stock
Awards, Options
and Warrants
   
(b)
Weighted  Average
Exercise Price of
Outstanding Stock
Awards, Options
and Warrants
   
(c)
Number of  Securities
Remaining Available
for Future Issuance
(Excludes Securities
Reflected in 
Column (a))
 
Equity compensation plans approved by stockholders
   
234,465
   
$
12.37
     
46,652
 (1)
Equity compensation plans not approved by stockholders
   
---
     
---
     
---
 
__________________________________
 
(1)           Consists of shares available for grant by us under our 2010 Plan.














 
72

 


Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information about the beneficial ownership of our common stock as of March 15, 2013 by each person, or group of persons, who beneficially owns more than 5% of our capital stock; each of our directors and named executive officers; and all current directors and executive officers as a group.
 
Beneficial ownership and percentage ownership are determined in accordance with the rules and regulations of the SEC and include voting or investment power with respect to shares of stock.  This information does not necessarily indicate beneficial ownership for any other purpose.  In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to convertible notes, warrants and options held by that person that are currently convertible or exercisable, or convertible or exercisable within 60 days of March 15, 2013,  are deemed outstanding.  Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person.  Except as indicated in the footnotes to the following table or pursuant to applicable community property laws, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholder’s name.  The percentage of beneficial ownership is based on 3,119,718 shares of common stock outstanding on March 15, 2013.
 








 
73

 

Unless otherwise indicated, the address for each person or entity named below is c/o Tengion Inc., 3929 Westpoint Boulevard, Suite G, Winston-Salem, North Carolina, 27103.
 
 
Name of Beneficial Owner
 
Shares of common stock
   
Options exercisable within 60 days
   
Shares issuable upon exercise of warrants or conversion of notes
   
Total shares of common stock beneficially owned(1)
   
Beneficial Ownership Percentage
 
 
Greater than 5% Beneficial Owner
                             
HealthCap Venture Capital (2)
   
441,317
     
0
     
9,280,691
     
9,722,008
     
78.401
%
Medtronic, Inc. (3)
   
247,350
     
0
     
0
     
247,350
     
7.929
%
Bay City Capital (4)
   
32,176
     
0
     
310,313
     
342,489
     
9.985
%
Celgene Corporation (5)
   
160,951
     
0
     
167,253
     
328,204
     
9.985
%
DAFNA Capital (6)
   
16,088
     
0
     
328,185
     
344,273
     
9.985
%
Deerfield Funds (7)
   
88,967
     
0
     
247,221
     
336,188
     
9.985
%
Horizon Technology Finance (8)
   
0
     
0
     
346,058
     
346,058
     
9.985
%
RA Capital Management, LLC (9)
   
160,952
     
0
     
167,252
     
328,204
     
9.985
%
Oak Investment Partners XI, Limited Partnership (10)
 
   
204,378
     
0
     
0
     
204,378
     
6.551
%
Officers and Directors
                                       
Carl-Johan Dalsgaard, M.D., Ph. D. (11)
   
441,317
     
1,690
     
9,280,691
     
9,723,698
     
78.404
%
John L. Miclot
   
36,462
     
36,922
     
0
     
73,384
     
2.325
%
Timothy A. Bertram, D.V.M., Ph. D.
   
20,603
     
21,775
     
0
     
42,378
     
1.349
%
David I. Scheer
   
18,839
     
1,690
     
0
     
20,529
     
*
 
A. Brian Davis
   
8,466
     
8,288
     
0
     
16,754
     
*
 
Lorin J. Randall
   
379
     
3,136
     
0
     
3,515
     
*
 
Richard E. Kuntz, M.D., M. Sc.
   
0
     
1,920
     
0
     
1,920
     
*
 
Diane K. Jorkasky, M.D.
   
0
     
1,833
     
0
     
1,833
     
*
 
All current directors and executive officers as a group (8 persons)
   
526,066
     
77,254
     
9,280,691
     
9,884,011
     
79.214
%
 
* Less than one percent.
 
 
 
 
74

 

 
 (1)
This table and the information included in the notes below are based upon information supplied by named executive officers, directors and principal stockholders, including, reports and any amendments thereto filed on Schedule 13D, Schedule 13G, Form 3, and Form 4 with the SEC.  Except as otherwise indicated, the beneficial ownership limitations set forth in the Amended and Restated 2011 Warrants, 2012 Warrants or Convertible Notes, as applicable, have been applied to the table.
 
(2)
Includes 441,317 shares of common stock and Amended and Restated  2011 Warrants to purchase 6,476,125 shares, of which 242,096 shares and warrants to purchase 3,552,663 shares are held directly by HealthCap IV, L.P., a Delaware limited partnership (“HCLP”); 17,665 shares and warrants to purchase 259,226 shares are held directly by HealthCap IV, K.B., a Swedish limited partnership (“HCKB”); 174,934 shares and warrants to purchase 2,567,075 shares are held directly by HealthCap IV BIS, L.P., a Delaware limited partnership (“HCBIS”); and 6,622 shares and warrants to purchase 97,161 shares are held directly by OFCO Club IV, a Swedish non-registered partnership (“OFCO”) (HCLP, HCKB, HCBIS, and OFCO, collectively “HealthCap Venture Capital”).
 
Also includes $500,684.92 of the Convertible Notes and 2012 Warrants to purchase 2,136,986 shares of common stock of which $274,666.24 of Convertible Notes and 2012 Warrants to purchase 1,172,310 shares are held directly by HCLP; $20,039.91 of Convertible Notes and 2012 Warrants to purchase 85,532 shares are held directly by HCKB; $198,468.50 of Convertible Notes and 2012 Warrants to purchase 847,089 shares are held directly by HCBIS; and $7,510.27 of Convertible Notes and 2012 Warrants to purchase 32,055 shares are held directly by OFCO.  The Convertible Notes are currently convertible into 667,581 shares of common stock.
 
HealthCap IV GP SA, L.L.C. (“HCSA”), is the sole general partner of HCLP and HCBIS and has voting and dispositive power over the shares held by HCLP and HCBIS. HealthCap IV GP AB, L.L.C. (“HCAB”), is the sole general partner of HCKB and has voting and dispositive power over the shares held by HCKB.  HCSA and HCAB disclaim beneficial ownership of such shares, except to the extent of their pecuniary interest therein.  Johan Christenson, Carl-Johan Dalsgaard, M.D., Per-Olof Eriksson, Anki Forsberg, Peder Fredrikson, Jacob Gunterberg, Staffan Lindstrand, Bjцrn Odlander, Per Samuelsson and Eugen Steiner, the members of HCSA and HCAB, may be deemed to possess voting and dispositive power over the shares held by HCLP, HCBIS, and HCKB and may be deemed to have indirect beneficial ownership of the shares held by such entities.  The members, including Dr. Dalsgaard, who is one of our directors, disclaim beneficial ownership of shares held by HCLP, HCBIS and HCKB except to the extent of any pecuniary interest therein.
 
Odlander, Fredrikson & Co AB, L.L.C. (“OFCO AB”) is a member of OFCO and has voting and dispositive power over the shares held by OFCO. OFCO AB disclaims beneficial ownership of such shares, except to the extent of its pecuniary interest therein.  Johan Christenson, Carl-Johan Dalsgaard, M.D., Per-Olof Eriksson, Anki Forsberg, Peder Fredrikson, Staffan Lindstrand, Bjцrn Odlander, Per Samuelsson and Eugen Steiner, the members of OFCO AB, may be deemed to possess voting and dispositive power over the shares held by OFCO and may be deemed to have indirect beneficial ownership of the shares held by OFCO.  Such persons, including Dr. Dalsgaard, who is one of our directors, disclaim beneficial ownership of shares held by OFCO except to the extent of any pecuniary interest therein.
 
The addresses of the entities affiliated with HealthCap are Strandvagen 5B, SE-114 51 Stockholm, Sweden and 18 Avenue d’Ouchy, CH-1006 Lausanne, Switzerland.  None of the entities affiliated with HealthCap are subject to the beneficial ownership limitations set forth in the 2011 Warrants, Amended and Restated 2011 Warrants, 2012 Warrants or the Convertible Notes.
 
(3)
According to a Schedule 13D/A filed on January 11, 2013, comprised of 247,350 shares of common stock.  The Amended and Restated 2011 Warrants allow the holder to purchase an additional 4,857,068 shares based on an adjusted exercise price of $1.10 per share. The address of Medtronic, Inc. is 710 Medtronic Parkway, LC 270, Minneapolis, MN 55432-5604.  Under the terms of the Amended and Restated 2011 Warrants, the number of shares of our common stock that may be acquired by such holder upon any exercise of such warrants is generally limited to the extent necessary to ensure that, following such exercise, the total number of shares of our common stock then beneficially owned by a holder, together with its affiliates and any other persons or entities whose beneficial ownership, as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the applicable regulations of the SEC, could not exceed 4.99% of the total number of shares of our common stock then issued and outstanding.  This limitation may be increased to 9.99% of the total number of shares of our common stock then issued and outstanding upon 61 days written notice from the holder to the Company.  Dr. Richard E. Kuntz, one of our directors, is Senior Vice President and Chief Scientific Clinical and Regulatory Officer of Medtronic, Inc.
 
 
 
 
75

 

 
 (4)
Includes 32,176 shares of common stock, of which 31,574 shares are held directly by Bay City Capital Fund V, LP and 602 shares are held directly by Bay City Capital Fund V Co-Investment Fund, LP. Pursuant to a Securities Purchase Agreement dated October 2, 2012, Bay City Capital Fund V, LP and Bay City Capital Fund V Co-Investment Fund, LP (collectively, “Bay City Capital Funds”) purchased $1,000,000 of the Convertible Notes and 2012 Warrants to purchase 4,000,000 shares of our common stock.  The Convertible Notes are currently convertible into 1,333,333 shares of common stock.  Bay City Capital LLC is the manager of the general partner of Bay City Capital Funds. Carl Goldfischer and Fred Craves are managing directors of Bay City Capital LLC and have voting and dispositive power with respect to shares held by Bay City Capital Funds. Each such person disclaims beneficial ownership of shares held by Bay City Capital Funds except to the extent of any pecuniary interest he has therein. The address of Bay City Capital Funds is 750 Battery Street, Suite 400, San Francisco, CA 94111.  The Convertible Notes and 2012 Warrants held by Bay City Capital Funds prohibit the holder from acquiring shares of common stock upon conversion of the Convertible Notes or exercise of the 2012 Warrants to the extent that, upon such exercise, the number of shares of common stock then beneficially owned by the holder and its affiliates and any other persons or entities whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would exceed 9.985% of the total number of shares of our common stock then issued and outstanding.  
 
(5)
Pursuant to a Securities Purchase Agreement dated October 2, 2012, Celgene Corporation purchased $5,002,283.10 of the Convertible Notes and 2012 Warrants to purchase 10,228,310 shares of our common stock.  The Convertible Notes are currently convertible into 6,669,711 shares of common stock.  The address of Celgene Corporation is 86 Morris Avenue, Summit, NJ 07901.  Celgene Corporation has board observer rights which can be converted to a seat on the Company’s board of directors at any time at Celgene Corporation’s election.  The following executive officers of Celgene Corporation have the power to vote and dispose of the shares held by Celgene Corporation: Robert J. Hugin (Chief Executive Officer, President and Chairman of the Board), Jacqualyn A. Fouse (Executive Vice President and Chief Financial Officer), and Perry A. Karsen (Executive Vice President and Chief Operations Officer).  Each such person disclaims beneficial ownership of shares held by Celgene Corporation except to the extent of any pecuniary interest he or she has therein.  The Convertible Notes and 2012 Warrants held by Celgene Corporation prohibit the holder from acquiring shares of common stock upon conversion of the Convertible Notes or exercise of the 2012 Warrants to the extent that, upon such exercise, the number of shares of common stock then beneficially owned by the holder and its affiliates and any other persons or entities whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would exceed 9.985% of the total number of shares of our common stock then issued and outstanding.
 
(6)
Includes 16,088 shares of common stock, of which 5,631 shares are held directly by DAFNA Lifescience LTD, 3,861 shares are held directly by DAFNA Lifescience Market Neutral LTD and 6,596 shares are held directly by DAFNA Lifescience Select LTD.  Pursuant to a Securities Purchase Agreement dated March 1, 2011, and an Exchange Agreement effective December 31, 2012, DAFNA Lifescience Market Neutral LTD, DAFNA Lifescience Select LTD and DAFNA Lifescience LTD (collectively, “DAFNA Capital”) purchased  Amended and Restated 2011 Warrants to purchase 553,316 shares of our common stock.  Pursuant to a Securities Purchase Agreement dated October 2, 2012, DAFNA Capital purchased $500,000 of the Convertible Notes and 2012 Warrants to purchase 2,000,000 shares of our common stock.  The Convertible Notes are currently convertible into 666,667 shares of common stock.  Nathan Fischel and Fariba Ghodsian, managing members of DAFNA Capital Management, LLC, have voting and dispositive power with respect to the shares held by the DAFNA Capital.  The address of DAFNA Capital is DAFNA Capital Management, LLC, 10990 Wilshire Boulevard, Suite 1400, Los Angeles, CA 90024.  Under the terms of the Amended and Restated 2011 Warrants, the number of shares of our common stock that may be acquired by such holder upon any exercise of such warrants is generally limited to the extent necessary to ensure that, following such exercise, the total number of shares of our common stock then beneficially owned by a holder, together with its affiliates and any other persons or entities whose beneficial ownership, as calculated pursuant to Section 13(d) of the Exchange Act and the applicable regulations of the SEC, could not exceed 4.99% of the total number of shares of our common stock then issued and outstanding.  This limitation may be increased to 9.99% of the total number of shares of our common stock then issued and outstanding upon 61 days written notice from the holder to the Company.  The Convertible Notes and 2012 Warrants held by DAFNA Capital prohibit the holder from acquiring shares of common stock upon conversion of the Convertible Notes or exercise of the 2012 Warrants to the extent that, upon such exercise, the number of shares of common stock then beneficially owned by the holder and its affiliates and any other persons or entities whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would exceed 9.985% of the total number of shares of our common stock then issued and outstanding.
 
 
 
 
76

 
 
(7)
Includes 88,967 shares of common stock, of which 48,042 shares are held directly by Deerfield Special Situations International Master Fund, L.P. and 40,925 shares are held directly by Deerfield Special Situations Fund, L.P.  Pursuant to a Securities Purchase Agreement dated March 1, 2011 and an Exchange Agreement effective December 31, 2012, Deerfield Special Situations Fund, L.P. and Deerfield Special Situations International Master Fund, L.P. (together, the “Deerfield Funds”) hold Amended and Restated 2011 Warrants to purchase 2,775,482 shares of our common stock based on an adjusted exercise price of $1.10 per share.  Pursuant to a Securities Purchase Agreement dated October 2, 2012, the Deerfield Funds purchased $3,000,000 of the Convertible Notes and 2012 Warrants to purchase 12,313,243 shares of our common stock.  The Convertible Notes are currently convertible into 4,000,000 shares of common stock.  James E. Flynn has the power to vote or dispose of the shares held by the Deerfield Funds.  The address of the Deerfield Funds is c/o Deerfield Management Co., 780 Third Avenue, 37th Floor, New York, NY 10017.  Under the terms of the Amended and Restated 2011 Warrants, the number of shares of our common stock that may be acquired by such holder upon any exercise of such warrants is generally limited to the extent necessary to ensure that, following such exercise, the total number of shares of our common stock then beneficially owned by a holder, together with its affiliates and any other persons or entities whose beneficial ownership, as calculated pursuant to Section 13(d) of the Exchange Act and the applicable regulations of the SEC, could not exceed 4.99% of the total number of shares of our common stock then issued and outstanding.  This limitation may be increased to 9.99% of the total number of shares of our common stock then issued and outstanding upon 61 days written notice from the holder to the Company.  The Convertible Notes and 2012 Warrants prohibit the holder from acquiring shares of common stock upon conversion of the Convertible Notes or exercise of the 2012 Warrants to the extent that, upon such exercise, the number of shares of common stock then beneficially owned by the holder and its affiliates and any other persons or entities whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would exceed 9.985% of the total number of shares of our common stock then issued and outstanding.
 
(8)
On March 14, 2011, Horizon Technology Finance Corporation (“Horizon Technology Finance”) received warrants to purchase 7,068 shares of our common stock. On October 2, 2012, in connection with an amendment to its Venture Loan Agreement with the Company, Horizon Credit II, LLC (“Horizon Credit”), a wholly-owned subsidiary of Horizon Technology Finance, received 2012 Warrants to purchase 1,708,177 shares of our common stock.  The principal address of Horizon Technology Finance is 312 Farmington Ave, Farmington CT 06032.  Robert D. Pomeroy, Jr., as CEO of Horizon Technology Finance, may be deemed to possess voting and dispositive power over the shares of common stock which Horizon Technology Finance may obtain upon its exercise of its warrant and over the shares of common stock which Horizon Credit may obtain upon its exercise of the 2012 Warrants.  The 2012 Warrants held by Horizon Credit prohibit the holder from acquiring shares of common stock upon exercise of these warrants to the extent that, upon such exercise, the number of shares of common stock then beneficially owned by the holder and its affiliates and any other persons or entities whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would exceed 9.985% of the total number of shares of our common stock then issued and outstanding.
 
 
 
 
77

 
 
 
(9)
Includes 160,952 shares of common stock, of which 96,571 shares are held directly by RA Capital Healthcare Fund, L.P. (“RA Capital”) and 64,381 shares are held directly by Blackwell Partners, LLC (“Blackwell”).  Pursuant to a Securities Purchase Agreement dated March 1, 2011 and an Exchange Agreement effective December 31, 2012, RA Capital and Blackwell hold Amended and Restated 2011 Warrants to purchase 2,775,482 shares of our common stock.  Pursuant to a Securities Purchase Agreement dated October 2, 2012, RA Capital and Blackwell purchased $5,002,283.11 of the Convertible Notes and 2012 Warrants to purchase 20,456,621 shares of our common stock.  The Convertible Notes are currently convertible into 6,669,710 shares of common stock.  Mr. Kolchinsky is the manager of RA Capital Management, LLC, which is the investment adviser and sole general partner of RA Capital and the investment adviser of Blackwell.  Mr. Kolchinsky has the sole power to vote or dispose of the shares held by RA Capital and Blackwell.  The principal address of RA Capital Management, LLC is 20 Park Plaza, Suite 1200, Boston, MA 02116.  Under the terms of the Amended and Restated 2011 Warrants, the number of shares of our common stock that may be acquired by such holder upon any exercise of such warrants is generally limited to the extent necessary to ensure that, following such exercise, the total number of shares of our common stock then beneficially owned by a holder, together with its affiliates and any other persons or entities whose beneficial ownership, as calculated pursuant to Section 13(d) of the Exchange Act and the applicable regulations of the SEC, could not exceed 4.99% of the total number of shares of our common stock then issued and outstanding.  This limitation may be increased to 9.99% of the total number of shares of our common stock then issued and outstanding upon 61 days written notice from the holder to the Company.  The Convertible Notes and 2012 Warrants prohibit the holder from acquiring shares of common stock upon conversion of the Convertible Notes or exercise of the 2012 Warrants to the extent that, upon such exercise, the number of shares of common stock then beneficially owned by the holder and its affiliates and any other persons or entities whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act would exceed 9.985% of the total number of shares of our common stock then issued and outstanding.  
 
(10)
According to a Schedule 13G/A filed on February 14, 2013, comprised of 204,378 shares held by Oak Investment Partners XI, Limited Partnership (“Oak Investment Partners XI”), 901 Main Avenue, Suite 600, Norwalk, CT 06851.  Oak Associates XI, LLC is the general partner of Oak Investment Partners XI.  Oak Management Corporation is the manager of Oak Investment Partners XI.  Bandel L. Carano, Gerald R. Gallagher, Edward F. Glassmeyer, Fredric W. Harman and Ann H. Lamont are the managing members of Oak Investment Partners XI and, as such, may be deemed to possess shared beneficial ownership of any shares of common stock held by such entities.

 (11)
Also includes shares beneficially owned by HealthCap Venture Capital (see footnote 2).  Dr. Dalsgaard is a member of HCSA, which is the sole general partner of HCLP as well as HCBIS, and has shared voting power and shared investment power with HCLP and HCBIS.  Dr. Dalsgaard is also a member of HCAB, which is the sole general partner of HCKB and has shared voting power and shared investment power with HCKB.  Dr. Dalsgaard has disclaimed beneficial ownership of the shares listed in footnote 2 except to the extent of his pecuniary interest therein. The address for Dr. Dalsgaard is Strandvдgen 5B, SE-114 51 Stockholm, Sweden and 18 Avenue d’Ouchy, CH-1006 Lausanne, Switzerland.

 
 
 
 
78

 
 
 
Item 13.       Certain Relationships and Related Transactions, and Director Independence
 
Item 404 of Regulation S-K requires us to disclose any transaction since January 1, 2011, in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for 2012 and 2011 in which we are a participant and in which any related person has or will have a direct or indirect material interest.  A related person is any executive officer, director, nominee for director, beneficial holder of 5% or more of our common stock, or an immediate family member of any of those persons.
 
Policies and Procedures Regarding Review, Approval, or Ratification of Related Person Transactions
 
In accordance with its charter, the Audit Committee is responsible for reviewing and approving the terms and conditions of all related person transactions.  In carrying out its responsibilities, the Audit Committee reviews and considers information regarding the related person transaction as it deems appropriate under the circumstances, which may include information such as the related person’s interest in the transaction, the approximate dollar value involved in the transaction, whether the transaction was undertaken in the ordinary course of business, whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party and the purpose of, and the potential benefits to us of, the transaction.  The Audit Committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is not inconsistent with our best interests.
 
Agreements with Stockholders

2011 Financing
 
In March 2011, we closed a private placement transaction pursuant to which we sold securities consisting of 1,107,939 shares of common stock and warrants to purchase 1,046,102 shares of common stock pursuant to a securities purchase agreement.  The purchase price per security was $28.30.  In connection with the private placement, we also entered into a registration rights agreement with those investors that purchased our common stock and warrants to purchase our common stock.  Upon the closing of the private placement, Medtronic, Inc. became a beneficial owner of more than 5% of our voting securities.  In connection with the private placement, we entered into a Right of First Refusal and Right of First Negotiation Agreement with Medtronic, Inc. pursuant to which we granted Medtronic a right of first refusal to the license, sale, assignment, transfer or other disposition by us of any material portion of intellectual property (including patents and trade secrets) or other assets related to our Neo-Kidney Augment program (an NKA transaction) until October 31, 2013.  Additionally, from November 1, 2013 through July 1, 2014, Medtronic will have a right of first negotiation with respect to an NKA transaction, with an option to convert that right of first negotiation to a right of first refusal. On October 2, 2012, we and Medtronic, Inc. mutually terminated this agreement.  Dr. Kuntz, who is a member of our Board of Directors, is an executive officer of Medtronic, Inc.  Additionally, funds affiliated with HealthCap Venture Capital, which prior to the offering beneficially owned 14.4% of our voting securities, became the beneficial owner of up to 25.99% of our voting securities.  Dr. Dalsgaard, who is a member of our Board of Directors, is affiliated with HealthCap Venture Capital.  Neither Dr. Kuntz nor Dr. Dalsgaard participated in any discussions or negotiations related to the private placement and Dr. Kuntz did not participate in any discussions or negotiations related to the Right of First Refusal and Right of First Negotiation Agreement.
 
 
 
 
79

 
 
 
The following table summarizes the participation in the private placement by any of our current directors, executive officers, 5% stockholders or any member of the immediate family of any of the foregoing persons:

Name
 
Aggregate
consideration
paid
   
Shares of
common
stock Issued
   
Shares of common stock underlying outstanding
warrants
 
HealthCap Venture Capital
  $ 7,000,005       247,352       247,352  
Medtronic, Inc.
  $ 7,000,005       247,350       185,513  
Deerfield Management Co.
  $ 2,999,998       106,008       106,008  
Great Point Partners, LLC
  $ 2,830,000       100,000       100,000  
Empery Asset Management, LP
  $ 2,500,008       88,340       88,340  
                         
We recently amended and restated the warrants issued in this private placement.  All holders exchanged their warrants for amended and restated warrants containing various amendments, including an adjusted exercise price from $28.80 to $1.10 per share. With respect to our current directors, executive officers, beneficial owners of 5% of our common stock, or any member of the immediate family of any of the foregoing persons, the following table demonstrates the number of shares of common stock underlying the Amended and Restated 2011 Warrants that are held by such persons as a result of the amendment and restatement of the warrants:
 

Name
 
Shares of
common
stock underlying original 2011 Warrants
   
Shares of common
stock underlying
Amended and Restated 2011 Warrants
 
HealthCap Venture Capital
   
247,352
     
6,476,125
 
Medtronic, Inc.
   
185,513
     
4,857,068
 
RA Capital Management, LLC
   
106,008
     
2,775,482
 
Deerfield Special Situations International Master Fund, L.P.
   
64,664
     
1,693,047
 
Deerfield Special Situations Fund L.P.
   
41,343
     
1,082,435
 
DAFNA Capital
   
21,210
     
555,316
 





 


 
80

 

 
2012 Financing
 
In September 2012, we issued the Demand Notes in the aggregate amount of $1 million to certain new and existing investors in the Bridge Financing.  The Demand Notes bore interest at a rate of 10% per year.  The outstanding principal balance, with any accrued interest, was payable on demand at any time on or after October 7, 2012.  Each holder of a Demand Note, in its sole discretion, could exchange the principal balance of its Demand Note, together with accrued interest, for the first tranche of debt securities and warrants issued by the Company after September 7, 2012.  In October 2012, we closed the 2012 Financing pursuant to which we issued the Convertible Notes and 2012 Warrants, in which we raised approximately $15 million in gross proceeds, including the value of Demand Notes exchanged for Convertible Notes and 2012 Warrants.  None of the principal from the 2012 Financing has been repaid yet.  Deerfield Special Situations International Master Fund, L.P, Deerfield Special Situations Fund L.P., and funds affiliated with HealthCap Venture Capital, each of whom were a 5% stockholder prior to the 2012 Transaction, participated in the Bridge Financing and the 2012 Financing.  As a result of the 2012 Financing, Bay City Capital, Celgene Corporation, DAFNA Capital, RA Capital Management LLC became beneficial owners of 5% of our common stock.  The 2012 Financing was considered a “Subsequent Offering” and all holders of Demand Notes exchanged their Demand Notes for the Convertible Notes and 2012 Warrants issued in the 2012 Financing.  Dr. Dalsgaard, who is a member of our Board of Directors, is affiliated with HealthCap Venture Capital and did not participate in any discussions regarding the Bridge Financing or the 2012 Financing.  The following table summarizes their participation:
 
Name
 
Aggregate
consideration
paid
   
Principal amount of Notes
   
Shares of common
stock underlying
warrants
 
Bay City Capital
 
$
1,000,000.00
   
$
1,000,000.00
     
4,000,000
 
Celgene Corporation
   
5,002,283.10
     
5,002,283.10
     
10,228,310
 
DAFNA Capital
   
500,000.00
     
500,000.00
     
2,000,000
 
Deerfield Management Co
   
3,000,000.00
     
300,000.00
     
12,313,243
 
HealthCap Venture Capital
   
500,684.92
     
500,684.92
     
2,136,986
 
RA Capital Management, LLC
   
5,002,283.11
     
5,002,283.11
     
20,456,621
 
                         
 
On November 30, 2012, we notified the holders of the Convertible Notes of our intention to pay the interest due on January 1, 2013 with shares of common stock in lieu of cash.  On December 31, 2012, the holders of the Convertible Notes agreed to extend the payment date to February 1, 2013.  On January 30, 2013, the holders of the Convertible Notes agreed to extend the interest payment date to February 15, 2013.  The aggregate amount of the interest payment was $560,051.31 and we issued 482,804 shares of restricted common stock in satisfaction of these interest payments.
 
In connection with the 2012 Financing, we entered into a registration rights agreement, securities purchase agreement, and facility agreement with the investors.  In connection with those agreements, we agreed to file a registration statement covering the resale of the shares of common stock issuable upon the conversion of the Convertible Notes and the exercise of the 2012 Warrants.  We also granted the holders of the Convertible Notes the right to require us to sell to such holders up to an additional $20,000,000 in securities on the same terms as the Convertible Notes and 2012 Warrants (the “Call Option”).  The Call Option may be exercised by these holders at any time or from time to time on or before June 30, 2013.  The conversion price of the notes and exercise price of the warrants issued pursuant to the terms of the Call Option will be no greater than $0.75 and, may be lower if the conversion price on the Convertible Notes and the exercise price of the 2012 Warrants is adjusted pursuant to the terms of such instruments.
 
 
 
 
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In addition, we entered into a Right of First Negotiation Agreement (the “ROFN Agreement”) with Celgene Corporation (“Celgene”), one of the selling stockholders, pursuant to which we granted Celgene a right of first negotiation to the license, sale, assignment, transfer or other disposition by us of any material portion of intellectual property (including patents and trade secrets) or other assets related to our Neo-Urinary Conduit program.  The ROFN Agreement provides for Celgene to receive 2012 Warrants to purchase 50% fewer of the shares that otherwise would have been issued to Celgene in the 2012 Financing.  In the event of a change in control of the Company, the ROFN Agreement and all of Celgene’s rights pursuant thereto will automatically terminate in all respects and be of no further force and effect.
 
As part of the 2012 Financing, we also granted Board observer rights to Celgene Corporation.  Furthermore, the Company agreed to convert Celgene’s Board observer right to a seat on the Company’s Board at any time at Celgene’s election.
 
Also in connection with the 2012 Financing, we, Horizon Credit II LLC and Horizon Technology Finance Corporation entered into a First Amendment of Venture Loan and Security Agreement (the “Loan Amendment”).  The Loan Amendment amends the Venture Loan and Security Agreement dated as of March 14, 2011 pursuant to which Horizon made a loan of $5 million to us (the “Horizon Loan”).  The Loan Amendment provides that, effective September 1, 2012, the maturity date for the Horizon Loan is extended from January 1, 2014 until May 1, 2014.  We are now required to make monthly interest payments of $39,654.12 through June 1, 2013 and monthly interest and principal payments of $354,779.67 from July 1, 2013 through and including May 1, 2014.  Horizon’s security now includes a lien on our intellectual property assets.  Effective September 1, 2012, the interest rate on the Horizon Loan was increased from 11.75% to 13.0% per annum.  In connection with the Loan Amendment, we issued Horizon the Horizon Warrants and, upon such issuance, Horizon became a beneficial owner of 5% of our common stock.
  
Indemnification Agreements
 
We have entered into indemnification agreements with each of our directors, executive officers and certain of our key employees.  As permitted by the Delaware General Corporation Law, we have adopted provisions in our amended and restated certificate of incorporation that limit or eliminate the personal liability of our directors to us for monetary damages for a breach of their fiduciary duty as a director, except for liability for any:
 
 
·
breach of the director’s duty of loyalty to us or our stockholders;
 
 
·
act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
 
 
·
unlawful payments related to dividends or unlawful stock repurchases, redemptions or other distributions; or
 
 
·
transaction from which the director derived an improper personal benefit.
 
 
 
 
82

 
 
Pursuant to our amended and restated certificate of incorporation and amended and restated bylaws, we are obligated, to the maximum extent permitted by Delaware law, to indemnify each of our directors and officers against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation.  A “director” or “officer” includes any person who is or was a director or officer of us or as a director, partner, trustee, officer, employee or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan, foundation, association, organization or other legal entity which such person is or was serving at our request, but does not include the status of a person who is serving or has served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation transaction with the Company with respect to such person’s activities prior to said transaction unless specifically authorized by our Board of Directors or our stockholders.  Pursuant to our amended and restated bylaws, we also have the power to indemnify our employees to the extent permitted under Delaware law.  Our amended and restated bylaws provide that we shall advance expenses to directors in connection with any proceeding in which such director is involved because of his or her status as a director and we may, at the discretion of our Board of Directors, advance expenses to officers and employees in connection with any proceeding in which such officer or employee is involved because of his or her status as such.  Our amended and restated bylaws permit us to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of us or, at our request, served in such a capacity for another enterprise.

Board Determination of Independence

Our common stock is quoted on the OTCQB, which does not have director independence requirements.  However, for purposes of determining director independence, we have applied the definitions set forth in NASDAQ Rule 5605(a)(2) which states, generally, that a director is not considered to be independent if he or she is, or at any time during the past three years was, an employee of the company; or if he or she (or his or her family member) accepted compensation from the company in excess of $120,000 during any twelve month period within the three years preceding the determination of independence.

In March 2012, our Board of Directors undertook a review of the composition of our Board of Directors and its committees and the independence of each director.  Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our Board of Directors determined that none of Carl-Johan Dalsgaard, M.D., Ph.D., Diane K. Jorkasky, M.D., Richard Kuntz, M.D., M.Sc., Lorin J. Randall, or David I. Scheer, representing five of six of our current total number of directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under NASDAQ Rule 5605(a)(2).  Mr. Flora also served on the Board of Directors for part of 2012 and was determined to be independent as well.  In making such determinations, the Board of Directors considered the relationships that each such non-employee director has with our Company and other facts and circumstances the Board of Directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.

There are no family relationships among any of our directors or executive officers.

 
 
83

 
 
Item 14.        Information About Fees of Independent Registered Public Accounting Firm
 
The following table summarizes the fees of Ernst & Young LLP, our independent registered public accounting firm, billed to us for each of the last two fiscal years.
 
Fee Category
 
2012
   
2011
 
Audit Fees
 
$
420,212
   
$
295,000
 
Audit-Related Fees
   
     
18,000
 
Tax Fees
   
15,000
     
16,000
 
All Other Fees
   
     
 
Total Fees
 
$
435,212
   
$
329,000
 

Audit Fees include fees for services associated with the annual audit and the reviews of the Company’s quarterly reports on Form 10-Q.  Audit-related fees principally included accounting consultation services.  Tax fees included tax compliance, tax advice, and tax planning services.
 
Pre-Approval Policies and Procedures
 
The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services and related fees that are to be performed by our independent registered public accounting firm.  These policies generally provide that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee.  The Audit Committee has delegated to the chair of the Audit Committee the authority to approve any audit or non-audit services to be provided to us by our independent registered public accounting firm.  Any approval of services by the chair of the Audit Committee pursuant to this delegated authority is reported on at the next regular meeting of the Audit Committee.  All audit or non-audit services performed by our independent registered accounting firm were approved in advance in accordance with the procedures outlined above.
 

 
 
 
84

 
 
 
PART IV
 
 
  Item 15.  Exhibits and Financial Statement Schedules
 
 
(a)
The following documents are filed as part of this Annual Report on Form 10-K:
 
 
(1)
Financial Statements
 
See index to financial statements on page F-1
 
 
(2)
Financial Statement Schedules
 
All schedules to the financial statements are omitted as the required information is either inapplicable or presented in the financial statements or notes thereto.
 
 
(3)
Exhibits
 
The information required by this Item is set forth in the Exhibit Index hereto which is incorporated herein by reference.
 
 
(b)
Exhibits
 
The information required by this Item is set forth in the Exhibit Index hereto which is incorporated herein by reference.
 
 
 
 
 
 
 
 
 
 
85

 
 
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
TENGION, INC.
   
   
Date:  March 28, 2013 
By:  /s/  John L. Miclot
 
John L. Miclot
 
President and Chief Executive Officer
 
 
POWER OF ATTORNEY
 
We, the undersigned officers and directors of Tengion, Inc., hereby severally constitute and appoint John L. Miclot and A. Brian Davis, and each of them singly (with full power to each of them to act alone), our true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution in each of them for him and in his name, place and stead, and in any and all capacities, to sign for us and in our names in the capacities indicated below any and all amendments to this report, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities, and on the dates indicated below.
 
Signature
Title
Date
 
/s/ John L. Miclot                                                      
John L. Miclot
President and Chief Executive Officer,
Director (Principal Executive Officer)
 
March 28, 2013
/s/ A. Brian Davis                                                      
A. Brian Davis
Chief Financial Officer and Vice President of
Finance (Principal Financial and Accounting Officer)
 
March 28, 2013
/s/ David I. Scheer                                                     
David I. Scheer
 
Chairman of the Board of Directors
March 28, 2013
/s/ Carl-Johan Dalsgaard                                          
Carl-Johan Dalsgaard, M.D., Ph.D.
 
Director
March 28, 2013
/s/ Diane K. Jorkasky                                                
Diane K. Jorkasky, M.D.
 
Director
March 28, 2013
/s/ Richard E. Kuntz                                                  
Richard E. Kuntz, M.D., M.Sc.
 
Director
March 28, 2013
/s/ Lorin J. Randall                                                    
Lorin J. Randall
Director
March 28, 2013


 
 
 
 
 
 
 
 
86

 

 
TENGION, INC.
 
INDEX TO FINANCIAL STATEMENTS
 
 
 
 Page 
 
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
 
F-2
Balance Sheets
 
F-3
Statements of Operations
 
F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
 
F-5
Statements of Cash Flows
 
F-7
Notes to the Financial Statements
F-8
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-1

 
 
 
Report of Independent Registered Public Accounting Firm
 
 
 
Board of Directors
Tengion, Inc.

We have audited the accompanying balance sheet of Tengion, Inc. (the Company) (a development stage enterprise) as of December 31, 2012 and 2011, and the related statements of operations, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the years then ended, and for the period July 10, 2003 (inception) through December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years then ended and for the period from July 10, 2003 (inception) through December 31, 2012, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has recurring losses from operations and deficits in operating cash flow that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

 
/s/ ERNST & YOUNG LLP
 
Philadelphia, Pennsylvania
March 26, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-2

 
 
 
TENGION, INC.
(A Development-Stage Company)

Balance Sheets
(in thousands, except per share data)
   
December 31,
   
2011
 
2012
             
ASSETS
Current assets:
  
             
Cash and cash equivalents, including $1,194 of cash as of December 31, 2011 collateralizing letters of credit (Note 16)
  
$
9,244
 
  
$
7,536
 
Short-term investments                                                                                       
   
6,066
     
                —
 
Restricted cash                                                                                       
   
                —
     
1,000
 
Prepaid expenses and other                                                                                       
  
 
408
 
  
 
360
 
Total current assets                                                                                
  
 
15,718
 
  
 
8,896
 
Property and equipment, net of accumulated depreciation of $12,622 and $13,072 as of December 31, 2011 and 2012, respectively
  
 
1,021
 
  
 
612
 
Other assets                                                                                           
  
 
1,078
 
  
 
2,927
 
                 
Total assets                                                                                           
  
$
17,817
 
  
$
12,435
 
 
  
             
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
  
             
Current portion of long-term debt, net of debt discount of $157 as of December 31, 2012
  
$
2,205
 
  
$
1,786
 
Current portion of lease liability                                                                                       
  
 
739
 
  
 
536
 
Accounts payable                                                                                       
  
 
829
 
  
 
644
 
Accrued compensation and benefits                                                                                       
   
2,354
     
716
 
Accrued expenses                                                                                       
   
437
     
1,454
 
Derivative liability                                                                                       
   
     
2,449
 
Warrant liability                                                                                       
  
 
2,511
 
  
 
6,178
 
Total current liabilities                                                                                
  
 
9,075
 
  
 
13,763
 
Long-term debt and embedded derivative, net of debt discount of $7,515 as of December 31, 2012
  
 
2,782
 
  
 
9,483
 
Lease liability                                                                                           
  
 
943
 
  
 
524
 
Other liabilities                                                                                           
  
 
2
 
  
 
8
 
Total liabilities                                                                                
  
 
12,802
 
  
 
23,778
 
                 
Commitments and contingencies (Note 16)                                                                                           
  
 
            —
 
  
 
 
 
  
             
Stockholders’ equity (deficit):
  
             
Preferred stock, $0.001 par value; 10,000 shares authorized; zero shares issued or outstanding at December 31, 2011 and 2012, respectively
   
            —
 
  
 
 
Common stock, $0.001 par value; 750,000 shares authorized; 2,381 and 2,449 shares issued and outstanding at December 31, 2011 and  2012, respectively
  
 
2
 
  
 
2
 
Additional paid-in capital                                                                                       
  
 
235,257
     
235,828
 
Deficit accumulated during the development stage                                                                                       
  
 
(230,244
)
   
(247,173
)
Total stockholders’ equity (deficit)                                                                                
  
 
5,015
 
  
 
(11,343
)
Total liabilities and stockholders’ equity (deficit)                                                                                           
  
$
17,817
   
$
12,435
 
                 
The accompanying notes are an integral part of these financial statements.
 
 
 
 
 
 
 
 
 
F-3

 
 
 
TENGION, INC.
(A Development-Stage Company)

Statements of Operations
(in thousands, except per share data)
 
     
Period from
July 10, 2003
(inception)
through
December 31,
 
Year Ended December 31,
 
   
2011
     
2012
      2012  
Revenue
$
   
$
   
$
 
                       
Operating expenses:
                     
Research and development
 
13,293
  
   
10,103
     
127,960
 
General and administrative
 
7,191
  
   
5,496
     
47,389
 
Depreciation
 
3,141
  
   
456
     
23,608
 
Impairment of property and equipment
 
7,371
     
     
7,371
 
Other expense
 
1,705
  
   
165
     
1,870
 
                       
Total operating expenses
 
(32,701
   
(16,220
)
   
(208,198
)
Interest income
 
53
  
   
277
     
8,539
 
Interest expense
 
(849
)
   
(2,957
)
   
(17,846
)
Change in fair value of embedded derivative and derivative liability
 
     
944
     
944
 
Change in fair value of warrant liability
 
14,436
     
1,277
     
17,775
 
Net loss attributable to common stockholders
$
(19,061
 
$
(16,929
)
 
$
(198,786
)
                       
Basic and diluted net loss attributable to common stockholders per share
$
(8.82
 
$
(7.13
)
       
                       
Weighted-average common stock outstanding – basic and diluted
 
2,162
   
$
2,374
         

 
The accompanying notes are an integral part of these financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-4

 
 

TENGION, INC.
(A Development-Stage Company)

 Statements of Redeemable Convertible Preferred Stock
and Stockholders’ Equity (Deficit)
(in thousands, except per share data)

 
                      Stockholders’ equity (deficit)  
   
Redeemable
convertible
                        Additional               Deficit accumulated during the          
    preferred stock         Common stock        paid-in       Deferred        development          
    Shares       Amount         Shares       Amount        capital        compensation        stage       Total  
                                                                 
Balance, July 10, 2003
 
   
$
       
  
 
$
  
 
$
  
 
$
  
 
$
  
 
$
  
Issuance of common stock to initial stockholder
 
     
       
138
  
   
  
   
     
  
   
  
   
  
Effect of June 2012 reverse stock split (see Note 3)
 
     
       
(124
   
  
   
  
   
  
   
  
   
  
Net loss
 
     
       
  
   
  
   
  
   
  
   
(1,032
   
(1,032
Balance, December 31, 2003
 
     
       
14
  
   
  
   
     
  
   
(1,032
   
(1,032
Issuance of Series A Redeemable Convertible Preferred stock at $1.62 per share, net of expenses
 
18,741
     
30,126
       
  
   
  
   
  
   
  
   
  
   
  
Conversion of notes payable, including interest
 
2,203
     
3,562
       
  
   
  
   
  
   
  
   
  
   
  
Issuance of restricted common stock to employees and nonemployees
 
     
       
24
  
   
1
  
   
336
  
   
(336
   
  
   
1
  
Issuance of common stock to consultants
 
     
       
14
  
   
  
   
21
  
   
  
   
  
   
21
  
Issuance of common stock to convertible noteholders
 
     
       
9
  
   
  
   
67
  
   
  
   
  
   
67
  
Issuance of options to purchase common stock to consultants for services rendered
 
     
       
  
   
  
   
14
  
   
(14
   
  
   
  
Amortization of deferred compensation
 
     
       
  
   
  
   
—  
  
   
23
  
   
  
   
23
  
Change in value of restricted common stock subject to vesting
 
     
       
  
   
  
   
11
  
   
(11
   
  
   
  
Accretion of redeemable convertible preferred stock to redemption value
 
     
1,035
       
  
   
  
   
  
   
  
   
(1,035
   
(1,035
Net loss
 
     
       
  
   
  
   
  
   
  
   
(2,438
   
(2,438
Balance, December 31, 2004
 
20,944
     
34,723
       
61
  
   
1
  
   
449
  
   
(338
   
(4,505
   
(4,393
Issuance of Series A Redeemable Convertible Preferred stock at $1.62 per share, net of expenses
 
3,247
     
5,223
       
  
   
  
   
  
   
  
   
  
   
  
Issuance of restricted common stock to employees and nonemployees at $2.32 per share
 
     
       
6
  
   
  
   
140
  
   
(139
   
  
   
1
  
Issuance of warrants to purchase preferred stock to noteholders
 
     
       
  
   
  
   
681
  
   
  
   
  
   
681
  
Issuance of options to purchase common stock to consultants for services rendered
 
     
       
  
   
  
   
7
  
   
(7
   
  
   
  
Amortization of deferred compensation
 
     
       
  
   
  
   
  
   
111
  
   
  
   
111
  
Accretion of redeemable convertible preferred stock to redemption value
 
     
3,164
       
  
   
  
   
  
   
  
   
(3,164
   
(3,164
Net loss
 
     
       
  
   
  
   
  
   
  
   
(9,627
   
(9,627
Balance, December 31, 2005
 
24,191
     
43,110
       
67
  
   
1
  
   
1,277
  
   
(373
   
(17,296
   
(16,391
Issuance of Series B Redeemable Convertible Preferred stock at $1.82 per share, net of expenses
 
27,637
     
50,040
       
  
   
  
   
  
   
  
   
  
   
  
Issuance of restricted common stock to employees
 
     
       
  
   
  
   
  
   
     
  
   
  
Issuance of common stock upon exercise of options
 
     
       
     
  
   
9
  
   
  
   
  
   
9
  
Repurchased nonvested restricted stock
 
     
       
(1
   
  
   
  
   
     
  
   
  
Reclassification of deferred compensation
 
     
       
  
   
  
   
(373
)
   
373
  
   
  
   
  
Reclassification of warrants to purchase preferred stock
 
     
       
  
   
  
   
(681
)
   
  
   
  
   
(681
Stock-based compensation expense
 
     
       
  
   
  
   
400
     
  
   
  
   
400
 
Accretion of redeemable convertible preferred stock to redemption value
 
     
5,640
       
  
   
  
   
  
   
  
   
(5,640
   
(5,640
Net loss
 
     
       
  
   
  
   
  
   
  
   
(20,873
   
(20,873
Balance, December 31, 2006
 
51,828
     
98,790
       
66
  
   
1
  
   
632
  
   
     
(43,809
   
(43,176
Issuance of Series C Redeemable Convertible Preferred stock at $1.82 per share, net of expenses
 
18,333
     
33,219
       
  
   
  
   
  
   
  
   
  
   
  
Issuance of common stock upon exercise of options
 
     
       
3
  
   
  
   
60
  
   
  
   
  
   
60
  
Repurchased vested restricted stock
 
     
       
(1
   
  
   
(94
)
   
     
  
   
(94
)
Stock-based compensation expense
 
     
       
  
   
  
   
664
     
  
   
  
   
664
 
Accretion of redeemable convertible preferred stock to redemption value
 
     
8,742
       
  
   
  
   
  
   
  
   
(8,742
   
(8,742
Net loss
 
     
       
  
   
  
   
  
   
  
   
(30,988
   
(30,988
Balance, December 31, 2007
 
70,161
   
$
140,751
       
68
  
 
1
  
 
$
1,262
  
 
$
   
$
(83,539
 
$
(82,276
 
The accompanying notes are an integral part of the financial statements.
 
 
 
 
 
 
 
F-5

 

 

TENGION, INC.
(A Development-Stage Company)

 Statements of Redeemable Convertible Preferred Stock
 and Stockholders’ Equity (Deficit) – (continued)
(in thousands, except per share data)
 
             
Stockholders’ equity (deficit)
 
     
Redeemable
convertible
                       Additional                
Deficit accumulated
during the
         
    preferred stock         Common stock     paid-in       Deferred       development          
    Shares       Amount         Shares       Amount        capital        compensation        stage       Total  
                                                                 
Balance, December 31, 2007
 
70,161
   
$
140,751
       
68
  
 
 $
1
  
 
$
1,262
  
 
 $
   
$
(83,539
 
$
(82,276
Issuance of Series C Redeemable Convertible Preferred stock at $1.82 per share, net of expenses
 
11,793
     
21,352
       
  
   
  
   
  
   
  
   
  
   
  
Issuance of common stock upon exercise of options
 
     
       
     
  
   
28
  
   
  
   
  
   
28
  
Repurchased vested restricted stock
 
     
       
     
  
   
     
     
  
   
 
Stock-based compensation expense
 
     
       
  
   
  
   
1,317
     
  
   
  
   
1,317
 
Accretion of redeemable convertible preferred stock to redemption value
 
     
11,754
       
  
   
  
   
  
   
  
   
(11,754
   
(11,754
Net loss
 
     
       
  
   
  
   
  
   
  
   
(42,393
   
(42,393
Balance, December 31, 2008
 
81,954
     
173,857
       
68
  
   
1
  
   
2,607
  
   
     
(137,686
   
(135,078
Issuance of common stock upon exercise of options
 
     
       
2
  
   
  
   
54
  
   
  
   
  
   
54
  
Stock-based compensation expense
 
     
       
  
   
  
   
855
     
  
   
  
   
855
 
Accretion of redeemable convertible preferred stock to redemption value
 
     
14,059
       
  
   
  
   
  
   
  
   
(14,059
   
(14,059
Net loss
 
     
       
  
   
  
   
  
   
  
   
(29,845
   
(29,845
Balance, December 31, 2009
 
81,954
     
187,916
       
70
  
   
1
  
   
3,516
  
   
     
(181,590
   
(178,073
Issuance of common stock upon exercise of options
 
     
       
3
  
   
  
   
14
  
   
  
   
  
   
14
  
Accretion of redeemable convertible preferred stock to redemption value
 
     
3,993
       
  
   
  
   
  
   
  
   
(3,993
   
(3,993
Conversion of preferred stock to common stock
 
(81,954
)
   
(191,909
)
     
566
  
   
     
191,909
     
  
   
  
   
191,909
 
Conversion of preferred stock warrants to common stock warrants
 
     
       
  
   
  
   
123
     
  
   
  
   
123
 
Proceeds from initial public offering, net of expenses
 
     
       
600
  
   
     
25,727
     
  
   
  
   
25,727
 
Stock-based compensation expense
 
     
       
  
   
  
   
953
     
  
   
  
   
953
 
Net loss
 
     
       
  
   
  
   
  
   
  
   
(25,600
   
(25,600
Balance, December 31, 2010
 
     
       
1,239
  
   
1
  
   
222,242
  
   
     
(211,183
   
11,060
 
Proceeds from equity financing, net of expenses
 
     
       
1,108
  
   
1
  
   
28,940
     
  
   
  
   
28,941
 
Issuance of warrants to purchase common stock issued in connection with equity financing
 
     
       
  
   
  
   
(16,947
)
   
  
   
  
   
(16,947
)
Issuance of common stock upon exercise of options
 
     
       
18
     
     
83
  
   
  
   
  
   
83
  
Issuance of restricted stock to employees
 
     
       
31
     
     
     
     
     
 
Cancellation of restricted stock to employees
 
     
       
(15
)
   
     
     
     
     
 
Issuance of warrants to purchase common stock in connection with debt financing
 
     
       
  
   
  
   
105
  
   
  
   
  
   
105
  
Stock-based compensation expense
 
     
       
  
   
  
   
834
     
  
   
  
   
834
 
Net loss
 
     
       
  
   
  
   
  
   
  
   
(19,061
   
(19,061
Balance, December 31, 2011
 
     
       
2,381
  
   
2
  
   
235,257
  
   
     
(230,244
   
5,015
 
Issuance of common stock upon exercise of options
 
     
       
3
     
     
10
  
   
  
   
  
   
10
 
Issuance of restricted stock to employees
 
     
       
68
     
     
     
     
     
 
Cancellation of restricted stock to employees
 
     
       
(3
)
   
     
(5
)
   
     
     
          (5
)
Stock-based compensation expense
 
     
       
  
   
  
   
566
     
  
   
  
   
566
 
Net loss
 
     
       
  
   
  
   
  
   
  
   
(16,929
   
(16,929
Balance, December 31, 2012
 
   
$
       
2,449
  
 
$
2
  
 
$
235,828
  
 
$
   
$
(247,173
 
$
(11,343
                                                                 
The accompanying notes are an integral part of the financial statements.
 
 
 
 
F-6

 
 

TENGION, INC.
(A Development-Stage Company)

Statements of Cash Flows
(in thousands)
 
     
Year Ended December 31,
      Period from
July 10, 2003
(inception)
through
December 31,
 
    2011       2012        2012  
Cash flows from operating activities:
                     
Net loss                                                                                     
$
(19,061
 
$
(16,929
)
 
$
(198,786
Adjustments to reconcile net loss to net cash used in operating activities:
                     
Depreciation                                                                                  
 
3,141
  
   
456
     
23,608
  
Change in fair value of embedded derivative and derivative liability
 
  
   
(944
)
   
(944
)
Change in fair value of warrant liability                                                                                  
 
(14,436
   
(1,277
)
   
(17,775
Charge related to lease liability                                                                                  
 
1,705
  
   
165
     
1,870
  
Loss on disposition of property and equipment                                                                                  
 
  
   
  
   
119
  
Impairment of property and equipment                                                                                  
 
7,371
     
  
   
7,371
 
Amortization of net discount on short-term investments
 
  
   
  
   
(149
)
Noncash interest expense                                                                                  
 
162
  
   
1,614
     
4,162
  
Noncash rent (income) expense                                                                                  
 
(24
   
7
     
224
  
Stock-based compensation expense                                                                                  
 
834
  
   
566
     
5,745
  
Changes in operating assets and liabilities:
                     
Prepaid expenses and other assets                                                                              
 
(802
   
(1,070
)
   
(2,698
Accounts payable                                                                              
 
(283
   
(252
)
   
618
  
Accrued expenses and other                                                                              
 
(495
   
(1,797
   
966
  
Net cash used in operating activities                                                                                     
 
(21,888
   
(19,461
   
(175,669
                       
Cash flows from investing activities:
                     
Purchases of short-term investments                                                                                     
 
(13,066
   
     
(324,508
Increase in restricted cash                                                                                     
 
  
   
(1,000
)
   
(1,000
)
Sales and redemptions of short-term investments                                                                                     
 
7,000
  
   
6,066
     
324,657
  
Cash paid for property and equipment                                                                                     
 
(81
   
(48
)
   
(31,722
Proceeds from the sale of property and equipment                                                                                     
 
  
   
  
   
11
  
Net cash (used in) provided by investing activities                                                                                     
 
(6,147
)
   
5,018
     
(32,562
                       
Cash flows from financing activities:
                     
Proceeds from sale of redeemable convertible preferred stock, net
 
  
   
  
   
139,960
  
Proceeds from sales of common stock and warrants, net
 
29,023
  
   
5
     
54,922
  
Repurchases of common stock                                                                                     
 
  
   
  
   
(94
Proceeds from long-term debt, net of issuance costs                                                                                     
 
4,908
  
   
14,196
     
53,713
  
Payments on long-term debt                                                                                     
 
(8,624
   
(1,466
   
(32,734
Net cash provided by financing activities                                                                                     
 
25,307
     
12,735
     
215,767
 
                       
Net (decrease) increase in cash and cash equivalents                                                                                         
 
(2,728
   
(1,708
)
   
7,536
 
Cash and cash equivalents, beginning of period                                                                                         
 
11,972
  
   
9,244
     
  
Cash and cash equivalents, end of period                                                                                         
$
9,244
   
$
7,536
   
$
7,536
 

 
The accompanying notes are an integral part of these financial statements.
 
 
 
F-7

 
 

TENGION, INC.
(A Development-Stage Company)
 
Notes to Financial Statements
 
(1)           Organization and Nature of Operations
 
Tengion, Inc. (the Company) was incorporated in Delaware on July 10, 2003. The Company is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ.  Using its Organ Regeneration Platform, the Company creates these neo-organs using a patient’s own cells, or autologous cells.  The Company believes its proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues. The Company’s product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications.  In addition, the Company’s neo-organs are designed to replace the need to substitute other tissues of the body for a purpose to which they are poorly suited.
 
Building on its clinical and preclinical experience, the Company is initially leveraging its Organ Regeneration Platform to develop its Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and its Neo-Kidney Augment for patients with advanced chronic kidney disease. The Company operates as a single business segment. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of product candidate development; technological uncertainty; dependence on collaborative partners; uncertainty regarding patents and proprietary rights; comprehensive government regulations; having no commercial manufacturing experience, marketing or sales capability or experience; and dependence on key personnel.
 
On September 4, 2012, the Company was notified by NASDAQ of its determination to delist the Company’s common stock from NASDAQ effective at the open of business on September 6, 2012, due to its failure to comply with the minimum $2.5 million stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Effective at the opening of the market on September 6, 2012, the Company’s common stock was transferred from the Nasdaq Capital Market to the OTCQB, which is operated by OTC Markets, Inc., and continues to trade under the symbol “TNGN.”
 
 (2)           Management’s Plans to Continue as a Going Concern
 
The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  The Company has incurred losses since inception and has a deficit accumulated during the development stage of $247.2 million as of December 31, 2012, including $48.4 million of cumulative accretion on redeemable convertible preferred stock through April 2010.  The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its therapeutic product candidates currently in development or enters into cash flow positive business development transactions.
 
Based upon the Company’s current expected level of operating expenditures and debt repayment, and assuming the Company is not required to settle any outstanding warrants in cash or redeem, or pay cash interest on any of its Senior Secured Convertible Notes,  it expects to be able to fund operations through May 2013.  This period could be shortened if there are any unanticipated significant increases in planned spending on development programs or other unforeseen events.  The Company plans to raise additional funds through collaborative arrangements, public or private sales of debt or equity securities, commercial loan facilities, or some combination thereof.  There is no assurance that additional financing will be available when needed to allow the Company to continue its operations or if available, on terms acceptable to the Company.
 
In the event financing is not obtained, the Company could pursue additional headcount reductions and other cost cutting measures to preserve cash as well as explore the sale of selected assets to generate additional funds.  If the Company is required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs, these events could have a material adverse effect on the Company's business, results of operations and financial condition.
 
These factors raise significant concerns about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
 
 
 
 
 
 
 
 
 
F-8

 
 
 
 (3)           Summary of Significant Accounting Policies
 
(a)Use of Estimates
 
The preparation of financial statements, in accordance with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Actual results could differ from those estimates.
 
(b)Fair Value of Financial Instruments
 
As of December 31, 2011 and 2012, the carrying amounts of financial instruments held by the Company, which include cash equivalents, short-term investments, prepaid expenses and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments.  In addition, the carrying value of the Company’s debt instruments, which do not have readily ascertainable market values, approximate fair value, given that the interest rates on outstanding borrowings approximate market rates.
 
(c)Cash and Cash Equivalents
 
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.  As of December 31, 2011, cash and cash equivalents included government-backed money market funds, commercial paper, and various bank deposit accounts.  As of December 31, 2011, $1.2 million of the Company’s cash was held in a separate account collateralizing letters of credit issued by a bank in favor of the landlord of its leased facility in East Norriton, Pennsylvania.
 
(d)Short-term Investments
 
The Company classifies investments as held-to-maturity at the time of purchase and reevaluates such designation as of each balance sheet date.  Securities are classified as held-to-maturity when the Company has the positive intent and the ability to hold the securities until maturity.  Held-to-maturity investments are recorded at amortized cost, adjusted for the accretion of discounts or premiums.  Discounts or premiums are accreted into interest income over the life of the related investment using the straight-line method, which approximates the effective-yield method.  Dividend and interest income are recognized when earned.

(e)Restricted Cash
 
The Company has deposited $1 million of the gross proceeds of its Senior Secured Convertible Notes (the Convertible Notes) (see footnote 10 for discussion of the Convertible Notes) financing into an escrow account pursuant to an Escrow Agreement between the Company, the lenders, and an escrow agent. Upon the achievement of (1) the successful completion of patient implants in the Phase I clinical trial of the Company’s Neo-Urinary Conduit and (2) analysis of in-life data from the Company’s GLP studies for the Neo-Kidney Augment that demonstrates that continued development is warranted (the Milestones), the lenders will instruct the escrow agent to release the escrowed funds to the Company. If the Milestones are not achieved by March 1, 2013, at the direction of the holders of at least 40% of the aggregate principal amount of the Convertible Notes, including certain specified holders, the escrow agent will transfer to the Company the portion of the escrowed amount that the holders agree is necessary for the orderly disposition of the Company’s assets.  This deposit is classified as restricted cash as of December 31, 2012.
 
(e)Property and Equipment
 
Property and equipment are stated at cost.  Depreciation is provided over the estimated useful lives of the assets using the straight-line method.  The Company uses a life of three years for computer equipment, five years for laboratory and office and warehouse equipment, seven years for furniture and fixtures, and the lesser of the useful life of the asset or the remaining life of the underlying facility lease for leasehold improvements.  Expenditures for maintenance, repairs, and betterments that do not prolong the useful life of the asset are charged to expense as incurred.  The Company capitalizes interest in connection with the construction of property and equipment.
 
 
 
 
 
 
 
 
 
 
 
 
F-9

 
 
 
(f)Impairment of Long-Lived Assets
 
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.  During the year ended December 31, 2011, the Company recorded a charge for impairment of property and equipment.  See Note 6 for additional information.
 
(g)Research and Development
 
Research and development costs are charged to expense as incurred.  Research and development costs consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, including stock-based compensation; payments made to third party contract research organizations for preclinical studies, investigative sites for clinical trials, and consultants; costs associated with regulatory filings and the advancement of the Company’s product candidates through preclinical studies and clinical trials; laboratory and other supplies; manufacturing development costs; and related facility maintenance.
 
(h)Income Taxes
 
Income taxes are accounted for under the asset-and-liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the tax provision in the period that includes the enactment date.
 
(i)Stock-Based Compensation
 
The Company measures and recognizes compensation expense for all employee stock-based payments at fair value, net of estimated forfeitures, over the vesting period of the underlying stock-based awards.  In addition, the Company accounts for stock-based compensation to nonemployees in accordance with the accounting guidance for equity instruments that are issued to other than employees.
 
Determining the appropriate fair value of stock-based payment awards require the input of subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility.  The Company uses the Black-Scholes option-pricing model to value its stock option awards.  The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.  As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different in the future.  Since the Company does not have sufficient historical volatility of its stock for the expected term of its options, it uses comparable public companies as a basis for its expected volatility to calculate the fair value of option grants.
 
The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, such amounts will be recorded as an adjustment in the period in which estimates are revised.  The Company considers many factors when estimating expected forfeitures for stock awards granted to employees, consultants and directors, including types of awards, employee class, and an analysis of the Company’s historical and known forfeitures on existing awards.  Under the true-up provisions of the stock based compensation guidance, the Company records additional expense if the actual forfeiture rate is lower than estimated, and a recovery of expense if the actual forfeiture rate is higher than estimated, during the period in which the options vest.
 
(j) Embedded Derivative and Derivative Liability  
 
The Company accounts for the Demand Note Exchange Right and the conversion feature embedded in the Convertible Notes (the Conversion Option) in accordance with ASC 815, Derivatives and Hedging (ASC 815). Under this accounting guidance, the Company is required to bifurcate the embedded derivative from the host instrument and account for it as a free-standing derivative financial instrument.  The Company classifies these embedded derivatives as part of the carrying value of the debt host instrument.  The Company also accounts for the Call Option issued in connection with the 2012 Financing in accordance with ASC 815, as this instrument is considered a free-standing financial instrument that meets the criteria of a derivative under the guidance. The Company classifies the Call Option as a Derivative Liability on the balance sheet.  The changes in fair value of the embedded derivative or derivative liability are remeasured at each balance sheet date and recorded in current period earnings.
 
 
 
 
 
 
 
F-10

 

 
(k)Warrants
 
The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement.  Stock warrants that allow for cash settlement or provide for modification of the warrant exercise price are accounted for as derivative liabilities.  The Company classifies derivative warrant liabilities on the balance sheet as a current liability.  The changes in fair value of the derivative warrant liabilities are remeasured at each balance sheet date and recorded in current period earnings.
 
(l)Net Loss Per Share
 
Basic and diluted net loss attributable to common stockholders per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding. For all periods presented, the outstanding shares of unvested restricted stock as well as the number of common shares issuable upon exercise of outstanding stock options and warrants and conversion of notes payable have been excluded from the calculation of diluted net loss attributable to common stockholders per share because their effect would be anti-dilutive. Therefore, the weighted-average shares used to calculate both basic and dilutive loss per share are the same.
 
The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as of December 31, 2011, and 2012, as they would be anti-dilutive:
 
   
Year Ended December 31,
 
     
2011
     
2012
 
Shares underlying warrants outstanding
   
1,064,616
     
80,250,702
 
Shares underlying options outstanding
   
174,872
     
234,465
 
Unvested restricted stock
   
13,988
     
74,372
 
Convertible notes payable
   
     
20,007,002
 

 (m)Deferred Debt Offering Costs
 
Deferred debt offering costs include costs directly attributable to the Company’s debt offerings.  In accordance with authoritative literature, these costs are deferred and amortized over the term of the debt using the effective interest method.
 
(n)Reverse Stock Split
 
On May 25, 2012, the Company's Board of Directors approved a reverse stock split on the basis of one share of common stock for each currently outstanding 10 shares of pre-split common stock that became effective on June 14, 2012.  All common share and per-share data included in these financial statements reflect such reverse stock split.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-11

 
 
 
(4)    Supplemental Cash Flow Information
 
The following table contains additional cash flow information for the periods reported (in thousands).

     
Year Ended
December 31,
     
Period from
July 10, 2003
(inception)
through
December 31,
 
     2011        2012       2012  
Supplemental cash flow disclosures:
                   
 
 
Noncash investing and financing activities:
                     
Conversion of note principal to redeemable convertible preferred stock
 $
  
 
 $
  
  
 $
3,562
  
Convertible note issued to initial stockholder for consulting expense
 
  
   
  
  
 
210
  
Exchange of Demand Note for Convertible Note for Convertible Notes
 
  
   
1,005
 
  
 
1,005
  
Fair value of embedded derivatives and derivatives issued with issuance of long-term debt
 
  
   
3,669
 
  
 
3,669
  
       Fair value of warrants issued with issuance of long-term debt     105        4,944        7,234  
Fair value of warrants issued with issuance of common stock
 
16,947
  
   
 
  
 
16,947
 
Conversion of redeemable convertible preferred stock into 566 shares of common stock
 
  
   
 
  
 
191,909
  
Conversion of warrant liability                                                                                
 
  
   
 
  
 
123
  
Cash paid for interest, net of amounts capitalized                                                                                  
 
722
  
   
515
 
  
 
12,793
  
Cash paid for issuance costs classified as interest expense
 
      830       830  

(5)    Short-term Investments and Financial Instruments
 
As of December 31, 2012, the Company had no short-term investments.  As of December 31, 2011, short-term investments consisted of investments in commercial paper and U.S. government agency and corporate securities of $6.1 million.  The Company had the ability and intent to hold these investments until maturity and therefore has classified the investments as held-to-maturity.  Due to the short-term nature of those investments, unrealized gains and losses had been deemed temporary and therefore not recognized in the accompanying financial statements.  Income generated from short-term investments was recorded to interest income.
 
The fair value guidance requires fair value measurements be classified and disclosed in one of the following three categories:
 
 
·
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
 
·
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;
 
 
·
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-12

 
 
 
The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liability measured at fair value on a recurring basis as of December 31, 2011 and 2012 (in thousands).
 
      Fair value measurement at reporting date using:    
    Quoted prices in active markets for identical assets (Level 1)  
   Significant other
observable
inputs
(Level 2)
 
   Significant unobservable
inputs
(Level 3)
     Total
At December 31, 2011
                               
Assets:
                               
Cash and cash equivalents
 
$
9,244
  
 
$
  
 
$
  
 
$
9,244
  
Short-term investments
                               
    U.S. government agency funds.
   
4,021
     
     
     
4,021
 
    Corporate securities
   
2,045
     
     
     
2,045
 
Short-term investments
   
6,066
  
   
  
   
  
   
6,066
  
   
$
15,310
   
$
   
$
   
$
15,310
 
                                 
Liabilities:
                               
Warrant liability
 
$
   
$
   
$
2,511
   
$
2,511
 
                                 
 
    Fair value measurement at reporting date using:        
    Quoted prices in active markets for identical assets (Level 1)  
Significant other observable
inputs
(Level 2)
 
Significant unobservable
inputs
(Level 3)
    Total  
At December 31, 2012:
                               
Assets:
                               
        Cash and cash equivalents
 
$
7,536
   
$
   
$
   
$
7,536
 
        Short-term investments
   
     
     
     
 
   
$
7,536
   
$
   
$
  
 
$
7,536
 
Liabilities:
                               
 
        Derivative liability
 
$
   
$
 
   
$
2,449
   
$
2,449
 
        Embedded derivative liability
   
     
     
276
     
276
 
        Warrant liability
   
     
     
6,178
     
6,178
 
   
$
     
$
   
$
8,903
  
 
$
8,903
 
 
The reconciliation of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

   
Call Option
 
Balance at January 1, 2012                                                                                                            
  $  
Issuance of derivative                                                                                                         
    3,181  
Change in fair value of derivative liability                                                                                                         
    (732 )
Balance at December 31, 2012                                                                                                            
  $ 2,449  
         

The fair value of the derivative liability is based on Level 3 inputs.  For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value.  See Note 12 for further discussion of the derivative liability.
 
The reconciliation of the Demand Note Exchange Right and the Conversion Option measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):
 
   
Demand Note Exchange
Right
 
Conversion Option
 
Total
Embedded Derivatives
Balance at January 1, 2012
 
$
   
$
   
$
 
Issuance of derivative
   
310
     
488
     
798
 
Exercise of exchange right
   
(310
)
   
     
(310
)
Change in fair value of derivative liability
   
     
(212
)
   
(212
)
Balance at December 31, 2012
 
$
   
$
276
   
$
276
 
 
 
 
 
F-13

 
 
 
The fair value of the embedded derivative liability is based on Level 3 inputs.  For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value.  See Note 12 for further discussion of the embedded derivative liability.
 
The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

   
2011
Warrants
 
2012
Warrants
 
Total
Balance at January 1, 2011
 
$
   
$
   
$
 
Issuance of additional warrants
   
16,947
     
     
16,947
 
Change in fair value of warrant liability
   
(14,436
)
   
     
(14,436
)
Balance at December 31, 2011
   
2,511
     
     
2,511
 
Issuance of additional warrants
   
     
4,944
     
4,944
 
Change in fair value of warrant liability
   
(133
)
   
(1,144
)
   
(1,277
)
Balance at December 31, 2012
 
$
2,378
   
$
3,800
   
$
6,178
 

The fair value of the warrant liability is based on Level 3 inputs.  For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value.  See Note 13 for further discussion of the warrant liability.
 
Certain assets and liabilities, including property and equipment, severance benefits and the lease liability, are measured at fair value on a nonrecurring basis.  These assets and liabilities are recognized at fair value when they are deemed to be impaired or in the period in which the liability is incurred.  The Company recorded an impairment charge of $7.4 million for the year ended December 31, 2011, to fully write off certain property and equipment as discussed in Note 6.  The Company recorded another charge of $1.8 million in the year ended December 31, 2011 related to the fair value of the liability incurred at the cease-use date related to certain operating leases as discussed in Note 10.  The Company also recorded $1.7 million charge in the year ended December 31, 2011 related to termination benefits as discussed in Note 7.
 
(6)    Property and equipment
 
Property and equipment consisted of the following (in thousands):
 
   
December 31,
   
2011
 
2012
Office and warehouse equipment
  
$
323
 
  
$
323
 
Computer equipment
   
985
     
978
 
Furniture and fixtures
   
524
     
524
 
Laboratory equipment
   
4,913
     
4,961
 
Leasehold improvements
  
 
6,898
 
  
 
6,898
 
 
  
 
13,643
 
  
 
13,684
 
Less accumulated depreciation
  
 
(12,622
)
  
 
(13,072
)
 
  
$
1,021
 
  
$
612
 

During the year ended December 31, 2011, the Company recorded a non-cash property and equipment impairment charge of $7.4 million in connection with the restructuring plan described in Note 9.  Under the restructuring plan, the Company eliminated plans to use its facility in East Norriton, Pennsylvania as a manufacturing center and centralized its research and development operations in its leased facility in Winston-Salem, North Carolina.  The aggregate acquisition value of the impaired assets, most of which were leasehold improvements, was reduced by $17.6 million and the related accumulated depreciation was reduced by $10.2 million as there was no future realizable value related to these assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
F-14

 

 
(7)    Accrued compensation and benefits
 
Accrued compensation and benefits expenses consist of the following (in thousands):
 
   
December 31,
   
2011
 
2012
Accrued severance benefits
  
$
1,774
 
  
$
 
Other accrued compensation and benefits
  
 
580
 
  
 
716
 
 
  
$
2,354
 
  
$
716
 

In November 2011, the Company’s Board of Directors approved a restructuring plan designed to fund the Company’s lead development programs through key milestones in 2012, eliminate plans to use its facility in East Norriton, Pennsylvania as a manufacturing center, and centralize its research and development operations in its leased facility in Winston-Salem, North Carolina. The Company is exploring options to significantly reduce the amount of space it currently rents.

The Company offered severance benefits to the terminated employees, and recorded a $1.7 million charge for personnel-related termination costs in the fourth quarter of 2011, of which $0.8 million was included in research and development expense and $0.9 million was included in general and administrative expense in the accompanying statements of operations. As of December 31, 2012 the Company had completed payment of these severance benefits.

As of December 31, 2011 accrued severance benefits also included $0.2 million related to the severance agreement the Company entered into with its former president and chief executive officer in June 2011.  The severance agreement provided for the employee to receive 12 monthly severance payments equal to his current monthly salary and a one-time cash payment equal to his target bonus amount for 2011.  During the year ended December 31, 2011, the Company recorded compensation expense within general and administrative expense and a corresponding liability of $0.7 million for the estimated value of the Company’s obligations under the severance agreement.  As of December 31, 2012, all payments in connection with the severance agreement were made.

The following table summarizes the activity related to accrued severance benefits for the year ended December 31, 2012 (in thousands).
 
 
 
 
Balance at December 31, 2011
  $ 1,544  
Net charges paid
    (1,544 )
Balance at December 31, 2012
  $  

 
Other accrued compensation and benefits for the year ended December 31, 2011 and 2012 consisted primarily of accrued bonus of $0.4 million and $0.7 million, respectively.
 
(8)    Accrued expenses
 
Accrued expenses consist of the following (in thousands):
 
   
December 31,
   
2011
 
2012
Accrued consulting and professional fees
  
$
119
 
  
$
387
 
Accrued research and development
   
235
     
453
 
Accrued interest on convertible notes
   
     
373
 
Other
  
 
83
 
  
 
241
 
 
  
$
437
 
  
$
1,454
 
 
  
             

(9)    Lease liability
 
The Company entered into an agreement in February 2006 to lease warehouse space effective March 1, 2011, at which time the Company determined it was not likely to utilize the space during the five-year lease term.  Therefore, the Company recorded a liability as of March 1, 2011, the cease-use date, for the fair value of its obligations under the lease.  The most significant assumptions used in determining the amount of the estimated lease liability are the potential sublease revenues and the credit-adjusted risk-free rate utilized to discount the estimated future cash flows.  During 2011, the Company recorded a liability and corresponding expense, which is included in other expense on the statement of operations, of $0.9 million, based on the Company’s estimate of the fair value of its obligations.
 
 
 
 
F-15

 
 
 
In connection with the restructuring described in Note 7, the Company determined it was not likely to utilize substantially all of the leased office and manufacturing space in its East Norriton, Pennsylvania facility during the remainder of the lease term.  Therefore, the Company recorded a liability as November 30, 2011, the cease-use date, for the fair value of its obligations under the lease.  During 2011, the Company recorded a liability and corresponding expense, which is included in other expense on the statement of operations, of $0.9 million, based on the Company’s estimate of the fair value of its obligations.
 
The following table summarizes the activity related to the lease liability for the year ended December 31, 2011 and 2012 (in thousands).
 
   
Warehouse
space
 
Office and manufacturing
space
 
Total
Balance at January 1, 2011
 
$
   
$
   
$
 
Initial fair value
   
933
     
891
     
1,824
 
Charges utilized
   
(193
)
   
(45
)
   
(238
)
Additional charges to operations
   
88
     
8
     
96
 
Balance at December 31, 2011
   
828
     
854
     
1,682
 
Charges utilized
   
(239
)
   
(548
)
   
(787
)
Additional charges to operations
   
89
     
76
     
165
 
Balance at December 31, 2012
   
678
     
382
     
1,060
 
Less current portion
   
(233
)
   
(303
)
   
(536
)
   
$
445
   
$
79
   
$
524
 

(10)    Debt
 
Total debt outstanding consists of the following (in thousands):
 
   
December 31,
   
2011
 
2012
Senior Secured Convertible Notes
  
$
 
  
$
15,005
 
Embedded derivative liability
  
 
 
  
 
276
 
Working Capital Note
  
 
5,000
 
  
 
3,660
 
Equipment and Supplemental Working Capital Notes
  
 
126
 
  
 
 
Unamortized debt discount                                                                                          
  
 
(139
)
  
 
(7,672
)
 
  
 
4,987
 
  
 
11,269
 
Less current portion
  
 
(2,205
)
  
 
(1,786
)
Total  long-term debt
  
$
2,782
 
  
$
9,483
 

Principal payments due as of December 31, 2012 are as follows (in thousands):

2013                                                                                                             
 
$
1,943
 
2014                                                                                                             
   
1,717
 
2015                                                                                                             
   
15,005
 
     
18,665
 
Less embedded derivative and unamortized debt discount
   
(7,396
)
   
$
11,269
 

The Company recorded interest expense of $0.8 million and $3.0 million for the years ended December 31, 2011 and 2012, respectively.  Included in interest expense in 2011 is $.2 million of amortization of deferred financing costs.  Included in interest expense in 2012 is $0.8 million of issuance costs related to the 2012 Financing and $1.3 million in amortization of deferred financing costs and debt discount on the Convertible Notes and Working Capital Note.

Senior Secured Convertible Notes
 
On October 2, 2012, the Company completed a private placement of an aggregate principal amount of $15.0 million of Senior Secured Convertible Notes (the Convertible Notes).  The aggregate principal amount of the Convertible Notes includes the exchange of the Demand Notes (see below for further discussion).  Under the terms of the Agreement, the Convertible Notes bear interest at a rate of 10% per annum and will mature on October 2, 2015.  Interest payments are payable quarterly in cash or shares of the Company’s common stock (up to certain limits).
 
 
F-16

 
 
 
The Company issued warrants to the holders of the Convertible Notes (2012 Warrants) to purchase approximately 51.1 million shares of common stock at an initial exercise price of $0.75 per share. The exercise price and number of shares issuable upon exercise of the warrants are subject to adjustment under certain circumstances.  See Note 13 for further discussion.
 
The Company also granted the holders of the Convertible Notes the right to require the Company to sell to such holders up to an additional $20 million in securities on the same terms as the Convertible Notes and 2012 Warrants (the Call option).  The Call Option may be exercised by the holders of the Convertible Notes at any time or from time to time on or before June 30, 2013.  The conversion price of the notes and exercise price of the warrants issued pursuant to the terms of the Call Option will be no greater than $0.75 and, may be lower if the conversion price on the Convertible Notes and the exercise price of the 2012 Warrants are adjusted pursuant to the terms of such instruments.
 
The Company recorded a discount upon issuance of the Convertible Notes of approximately $8.3 million, related to the 2012 Warrants (as discussed further in Note 13) and the Call Option (as discussed further in Note 12), each of which were considered freestanding instruments and are recorded on the balance sheet as a Warrant Liability and Derivative Liability respectively, and the Conversion Option, which was considered an embedded derivative that was required to be bifurcated from the host instrument and recorded at fair value (as discussed further in Note 12).  The discount will be accreted over the term of the Convertible Notes and included in interest expense using the effective interest method.
 
In connection with the 2012 Financing, the Company incurred $1.5 million of issuance costs.  The issuance costs were allocated to the Convertible Notes, 2012 Warrants, and the Call Option based on the relative carrying values at the date of issuance.  The Company allocated $0.8 million to the 2012 Warrants and the Call Option which was charged to interest expense upon issuance.  The remaining $0.7 million of issuance costs were allocated to the carrying value of the Convertible Notes and are recorded in other assets as deferred financing costs, which are amortized using the effective interest method over the term of the notes.  The Company recorded $0.2 million in interest expense for the amortization of the deferred financing costs related to the Convertible Notes in 2012.

The Convertible Notes are convertible under certain circumstances into shares of the Company's common stock at a conversion rate of 1,333 shares per $1,000 of principal amount of the Convertible Notes. The conversion rate is also subject to adjustment under certain circumstances. The Company may not redeem the Convertible Notes.
 
In connection with the issuance of the Convertible Notes, 2012 Warrants, and Call Option (collectively, the 2012 Financing), the Company entered into a registration rights agreement, securities purchase agreement and facility agreement with the selling stockholders.  In connection with those agreements, the Company agreed to file a registration statement covering the resale of the shares of common stock issuable upon the conversion of the Convertible Notes and the exercise of the 2012 Warrants.  
 
On December 31, 2012, January 30, 2013, and February 14, 2013, the Company entered into amendment agreements with the holders of the Convertible Notes. Pursuant to these amendments, the holders agreed to extend the interest payments that were due to them on January 1, 2013 to February 15, 2013. The aggregate amount of the interest payment due on January 1, 2013 was $0.4 million, which amount continued to accrue interest at the rate of 10% per annum.  Additionally, the amendments extended the deadline required under the registration rights agreement to register the shares underlying the Convertible Notes and 2012 Warrants from December 31, 2012 to March 31, 2013.
 
Demand Notes
 
On September 7, 2012, the Company issued demand notes (the Demand Notes) in the aggregate amount of $1.0 million to certain new and existing investors.  The Demand Notes bore interest at a rate of 10% per year and were secured by a lien on substantially all of the Company’s assets, other than its intellectual property assets.  The outstanding principal balance, with any accrued interest, was payable on demand at any time on or after October 7, 2012.  Each holder of a Demand Note, in its sole discretion, could exchange the principal balance of its Demand Note, together with accrued interest, for the first tranche of debt securities and warrants issued by the Company after September 7, 2012 (Exchange Right).  On October 2, 2012, the Company issued the Convertible Notes and the holders of the Demand Notes exercised their Exchange Right.
 
Working Capital Note
 
In March 2011, the Company refinanced the outstanding debt owed to one of its lenders.  Pursuant to the terms of the refinancing, the Company simultaneously borrowed $5.0 million from the lender and repaid the then outstanding principal amount of $4.5 million.  As a result of the amendment, this refinancing was treated as a modification for accounting purposes.  The fees paid to the lender were amortized over the remaining term of the debt and any third party fees paid were expensed immediately.
 
 
 
 
 
 
 
 
 
F-17

 
 
 
As of December 31, 2011, the outstanding balance of this loan was $5.0 million.  The Company was obligated to make interest-only payments through January 2012, followed by 24 monthly payments of principal and interest at an interest rate of 11.75% per annum.

In connection with the 2012 Financing, in October 2012, the Company amended the terms of the working capital note.  Retroactively, effective September 1, 2012, the maturity date for the working capital note is extended from January 1, 2014 to May 1, 2014.  The Company is now required to make monthly interest payments of approximately $40,000 through June 1, 2013 and monthly interest and principal payments of $0.4 million from July 1, 2013 through and including May 1, 2014.   Retroactively, effective September 1, 2012, the interest rate on the Horizon Loan was increased from 11.75% to 13.0% per annum.  As a result of the amendment, this refinancing was treated as a modification for accounting purposes.  The fees paid to the lender were amortized over the remaining term of the debt and any third party fees paid were expensed immediately.  In addition, the Company issued the lender, ten-year warrants to purchase 1,138,785 shares of common stock and five-year warrants to purchase 569,392 shares of common stock in connection with the amendment.  See Note 13 for further discussion of the warrant liability.
 
 Borrowings under the working capital note are secured by all of the Company’s assets, except for permitted liens that have priority, including liens on certain equipment acquired to secure the purchase price or lease obligation, as defined in the loan agreement.  In October 2012, the security was extended to include a lien on the Company’s intellectual property.
 
(11)    Capital Structure
 
Common Stock
 
Since inception, the Company has sold common stock to certain officers, directors, employees, consultants, and Scientific Advisory Board members.  As of December 31, 2012, the Company was authorized to issue 750,000,000 shares of common stock.  Each holder of common stock is entitled to one vote for each share held.  The Company will, at all times, reserve and keep available out of its authorized but unissued shares of common stock sufficient shares to effect the exercise of outstanding stock options and warrants.
 
In March 2011, the Company closed a private placement transaction pursuant to which the Company sold securities consisting of 1,107,939 shares of common stock and warrants to purchase 1,046,102 shares of common stock.  The purchase price per security was $28.30.  The Company received net proceeds of $28.9 million.

In connection with the March 2011 equity financing, the Company filed a registration statement with the SEC for the registration of the total number of shares sold to the investors and shares issuable upon exercise of the warrants and the registration statement was declared effective by the SEC on May 16, 2011.  The Company is required to use commercially reasonable efforts to cause the registration statement to remain continuously effective until such time when all of the registered shares are sold or such shares may be sold by non-affiliates without volume or manner-of-sale restrictions pursuant to Rule 144 of the Securities Act and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144.  In the event the Company fails to meet certain legal requirements in regards to the registration statement, it will be obligated to pay the investors, as partial liquidated damages and not as a penalty, an amount in cash equal to 1.5% of the aggregate purchase price paid by investors for each monthly period that the registration statement is not effective, up to a maximum aggregate payment of 6% of the purchase price paid by investors, except that if the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1), the maximum aggregate payment would be 12% of the purchase price paid by investors.  If the Company determines a registration payment arrangement in connection with the securities issued in March 2011 is probable and can be reasonably estimated, a liability will be recorded. As of December 31, 2011 and 2012, the Company concluded the likelihood of having to make any payments under the arrangements was remote, and therefore did not record any related liability.
 
Preferred Stock
 
As of December 31, 2011, the Company was authorized to issue 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, and restrictions thereof.  These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.  The issuance of the Company’s preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation.  In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control of the Company or other corporate action.  There are no shares issued or outstanding as of December 31, 2012.
 
 
 
 
 
 
 
 
 
 
F-18

 
 
 
 
(12)    Embedded Derivative and Derivative Liability  
 
The Company accounts for the Demand Note Exchange Right and the Conversion Option in accordance with ASC 815, Derivatives and Hedging (ACS 815). Under this accounting guidance, the Company is required to bifurcate the embedded derivative from the host instrument and account for it as a derivative financial instrument.  The Company also accounts for the Call Option issued in connection with the 2012 Financing in accordance with ASC 815, as this instrument is considered a free-standing financial instrument that meets the criteria of a derivative under the guidance.
 
Demand Note Exchange Right, Embedded Derivative Conversion Option and Call Option Derivative Liability
 
On October 2, 2012, the Company issued the Convertible Notes and the holders of the Demand Notes exercised their Exchange Right. The Company classified the fair value of the Conversion Option and Call Option as a liability and re-measured the fair value as of December 31, 2012.
 
The fair value of the Demand Note Exchange Right as of the date of issuance, as well as the fair values of the Conversion Option and Call Option as of the date of issuance and as of December 31, 2012, was determined using a risk-neutral framework within a Monte Carlo analysis.  The valuation of the Demand Note Exchange Right, Conversion Option, and Call Option is subjective and is affected by changes in inputs to the valuation model including the assumptions regarding the aggregate value of the Company’s debt and equity instruments; assumptions regarding the expected amounts and dates of future debt and equity financing activities; assumptions regarding the likelihood and timing of Fundamental Transactions or Major Transactions (as defined in the agreement); the historical and prospective volatility in the value of the company’s debt and equity instruments; risk-free rates based on U.S. Treasury security yields; and the Company’s dividend yield.  In performing the valuation of the Conversion Option and Call Option, the Company believed the common stock price had not fully adjusted for the potential future dilution from this private placement.  Therefore, the Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. The valuation resulted in a model-derived common stock value of $0.04 per share as of December 31, 2012 primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of warrants issued in 2011 and 2012.  Changes in these assumptions can materially affect the fair value estimate.
 
The following table summarizes the calculated aggregate fair values of the Demand Note Exchange Right, the Conversion Option and the Call Option as of the dates indicated along with assumptions utilized in each calculation.
 
   
Embedded Derivative and Derivative Liability
 
   
Demand
Note
Exchange
Right
 
Conversion Option
 
Call Option
 
   
September
30, 2012
 
October
2, 2012
 
December
31, 2012
 
October
2, 2012
 
December
31, 2012
 
                                         
Calculated aggregate value (in thousands)
 
$
310
  
 
$
488
  
 
$
276
   
$
3,181
  
 
$
2,449
 
Equity volatility
   
115%
     
115%
     
115%
     
115%
     
115%
 
Asset volatility
   
90%
     
90%
     
90%
     
90%
     
90%
 
Probability of Fundamental Transaction or Major Transaction
   
100%
     
100%
     
100%
     
100%
     
100%
 
Weighted average risk-free interest rate
   
0.2%
     
0.2%
     
0.3%
     
0.2%
     
0.3%
 
Dividend yield
   
None
     
None
     
None
     
None
     
None
 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-19

 
 
 
 
(13)    Warrants
 
The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement.  Stock warrants are accounted for as derivative liabilities if the stock warrants allow for cash settlement or provide for modification of the warrant exercise price in the event subsequent sales of common stock are at a lower price per share than the then-current warrant exercise price.  The Company classifies derivative warrant liabilities on the balance sheet as a current liability, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant. 

The following table summarizes outstanding warrants to purchase common stock:
 
 
   
   Shares Exercisable as
of December 31,
   Exercise    
    2011   2012   Price   Expiration
Equity-classified warrants
                           
Issued to vendors
   
389
     
389
   
$
23.20
   
September 2015 through
December 2016
Issued pursuant to refinancing
of Working Capital Note
   
7,068
     
7,068
   
$
28.80
   
March 2016
Issued to lenders
   
6,449
     
6,449
   
$
234.40
   
August 2013 through
December 2016
Issued to lenders
   
4,608
     
4,608
   
$
263.90
   
October 2015 through
September 2019
     
18,514
     
18,514
             
                             
Liability-classified warrants
                           
Issued pursuant to March 2011 equity financing (1)
   
1,046,102
     
27,388,851
   
$
1.10
   
March 2016
Issued pursuant to October 2012 debt financing
   
     
52,843,337
   
$
0.75
   
October 2014 through October 2022
     
1,046,102
     
80,232,188
             
Total
   
1,064,616
     
80,250,702
             
 
(1)
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share.  Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.

Equity-classified Warrants
 
In March 2011, the Company granted a warrant to a lender to purchase 7,068 shares of common stock in connection with the refinancing of the Company’s Working Capital Note.  See Note 10 for a discussion of the refinancing.  The Company determined the fair value of the warrant as of the date of grant was $14.90 per share by utilizing the Black-Scholes model.  In estimating the fair value of the warrant, the Company utilized the following inputs: closing price per share of common stock of $27.40, volatility of 64.96%, expected term of 5 years, risk-free interest rate of 2.0% and dividend yield of zero.
 
Liability-classified Warrants
 
2011 Warrants

In March 2011, the Company issued warrants (2011 Warrants) to purchase 1,046,102 shares of common stock in connection with a private placement transaction.  Each warrant was exercisable in whole or in part at any time until March 4, 2016 at a per share exercise price of $28.80, subject to certain adjustments as specified in the warrant agreement.  The Company valued the warrants as derivative financial instruments as of the date of issuance (March 4, 2011) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations.
 
 
 
F-20

 
 

On December 31, 2012, the Company commenced an offer to the holders of 2011 Warrants to amend and restate the 2011 Warrants.  The Company subsequently executed exchange agreements (Exchange Agreements) with all of the holders of 2011 Warrants to exchange their 2011 Warrants for amended and restated warrants (2011 Amended and Restated Warrants).

Pursuant and subject to the Exchange Agreements, which generally governed the process of the exchange, the Holders executing the Exchange Agreements exchanged the 2011 Warrants held by each of them for 2011 Amended and Restated Warrants that provide for the following amendments:
 
 
·
an adjusted exercise price of $1.10, and a proportionate adjustment in the number of shares underlying the 2011 Warrants, which takes into account all adjustments under the 2011 Warrants as a result of the 2012 Financing;
 
·
certain edits to remove a Delisting (as defined in the 2011 Warrants) from qualifying as a fundamental transaction;
 
·
a Black Scholes calculation used to the determine the cash value received by a holder from the Company in connection with a repurchase of the unexercised portion of a warrant after the occurrence of a fundamental transaction that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company’s common stock, immediately prior to the closing of a fundamental transaction;
 
·
a Black Scholes calculation for purposes of determining the value of options issued in connection with the sale of other securities that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company’s common stock on the date the options are publicly announced, and if not announced, on the date they are issued; and
 
·
excluding the 2012 Financing and exercise of the call option provided under its terms as a trigger for adjustments to the exercise price of the warrants except that adjustments to the exercise price, conversion price or purchase price of the 2012 Financing securities (i) resulting from registration of such securities with the Securities Exchange Commission or the commencements of the Rule 144 Period, as contemplated by the 2012 Financing documents, will result in a proportional adjustment to the exercise price of the warrants and (ii) resulting from additional financings or other events will result in adjustments of the exercise price of the warrants pursuant to the terms of the 2011 Amended and Restated Warrant.
 
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share.  Following execution by the holders of the Exchange Agreements and receipt of the Amended and Restated 2011 Warrants, such holders had the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.  
 
The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price.  In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Fundamental Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange).  The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Fundamental Transaction.

The net cash settlement value at the time of any future Fundamental Transaction will depend upon the value of the following inputs at that time: the price per share of the Company’s common stock, the volatility of the Company’s common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company’s dividend yield.  The warrant requires use of a volatility assumption equal to the greater of (i) 100%, (ii) the 30-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction, or (iii) the arithmetic average of the 10, 30, and 50-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction. The net cash settlement value at the time of a Fundamental Transaction could exceed the carrying value. For example, as of December 31, 2012, the calculated cash settlement value of $16.5 million exceeded the fair value of $2.4 million.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-21

 
 
 
As of December 31, 2011, the fair value of the warrants is determined using a risk-neutral lattice methodology within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or Delisting into the calculation of fair value.  The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company’s common stock, assumptions regarding the expected amounts and dates of future equity financing activities, assumptions regarding the likelihood and timing of Fundamental Transactions or a Delisting, the historical volatility of the stock prices of the Company’s peer group, risk-free rates based on U.S. Treasury security yields, and the Company’s dividend yield.  Changes in these assumptions can materially affect the fair value estimate.

The fair value of the 2011 Warrants as of December 31, 2012 was determined using a risk-neutral framework within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or, in the case of the December 31, 2011 valuation, a Delisting into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company’s common stock; assumptions regarding the expected amounts and dates of future debt and equity financing activities; assumptions regarding the likelihood and timing of Fundamental Transactions and, the historical volatility of the stock prices of the Company’s common stock; risk-free rates based on U.S. Treasury security yields; and the Company’s dividend yield.  
 
 In connection with the valuation performed on the 2011 Warrants, the Company believed the common stock price had not fully adjusted for the potential future dilution from the private placement completed on October 2, 2012 due to the trading restrictions on the unregistered shares of common stock issued and issuable from the conversion of debt and warrants, the uncertainty of the Company's outcome on its research programs, and the anti-dilution adjustment features of the warrants.  Therefore, the Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements.  The valuation resulted in a model-derived common stock value of $0.05 per share primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of 2011 and 2012 Warrants.  Changes in these assumptions can materially affect the fair value estimate. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.

During the year ended December 31, 2011 and 2012, the Company recorded non-operating income of $14.4 million and $0.1 million, respectively due to a decrease in the estimated fair value of these warrants. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-22

 
 

The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2011 Warrants as of the dates indicated along with the assumptions utilized in each calculation.
 
    Fair value as of December 31,   Net cash settlement value as of
    2011     2012     December 31, 2012
                   
Calculated aggregate value (in thousands)
  $ 2,511     $ 2,378     $ 16,525 (2)
Exercise price per share of warrant (1) 
  $ 28.80     $ 1.10     $ 1.10  
Closing price per share of common stock    4.70       Not applicable     0.99  
Equity volatility
    93.8 %     115.0 %     100.0 % (3)
Asset volatility
 
Not applicable
      90.0 %  
Not applicable
 
Probability of Fundamental Transaction
    28.9 %     100 %  
Not applicable
 
Weighted average risk-free interest rate
    0.7 %     0.3 %     0.4 %
Dividend yield
 
None
   
None
   
None
 

(1)
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share.  Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.
 
(2)
Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.
 
(3)
Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012 based on the terms of the Amended and Restated Warrant Agreement.
 
2012 Warrants

On October 2, 2012, as part of the 2012 Financing, the Company issued the 2012 Warrants to holders of the Convertible Notes.  The 2012 Warrants are exercisable at an exercise price of $0.75 per share subject to certain adjustments as specified in the warrant agreement.  The Company valued the warrants as derivative financial instruments as of the date of issuance (October 2, 2012) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations.

The 2012 Warrants include (i) five-year warrants to purchase up to 16,672,145 shares of common stock, (ii) ten-year warrants to purchase up to 33,344,293 shares of common stock and (iii) two-year warrants, issued only to holders of the Demand Notes, to purchase up to 1,118,722 shares of common stock.
 
In addition, the Company issued Horizon, ten-year warrants to purchase 1,138,785 shares of common stock and five-year warrants to purchase 569,392 shares of common stock in connection with the Loan Amendment (see Note 10).

The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price.  In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Major Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange).  The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Major Transaction.

The net cash settlement value at the time of any future Major Transaction will depend upon the value of the following inputs at that time: the price per share of the Company’s common stock, the volatility of the Company’s common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company’s dividend yield.  The warrant requires use of a volatility assumption equal to the Five-Day Volume Weighted Average Price (VWAP) determined as of the trading day immediately following announcement of a Major Transaction. The net cash settlement value at the time of a Fundamental Transaction could exceed the carrying value. For example, as of December 31, 2012, the calculated cash settlement value of $39.9 million exceeded the fair value of $3.8 million.
 
 
 
 
 
 
F-23

 
 
 
The fair value of the warrants as of October 2, 2012 and December 31, 2012 was determined using a risk-neutral framework within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction.  In addition, the following inputs were used in the valuation model: assumptions regarding the aggregate value of the Company’s debt and equity instruments, the amounts and dates of future debt financing transaction, and the historical and prospective volatility in the value of the Company’s debt and equity instruments.   The Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. As of December 31, 2012, the valuation resulted in a model-derived common stock value of $0.04 per share primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of the 2011 and 2012 Warrants.  Changes in these assumptions can materially affect the fair value estimate.  The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.

During the year ended December 31, 2012, the Company recorded non-operating income of $1.3 million, due to a decrease in the estimated fair value of these warrants. 

The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2012 Warrants as of the dates indicated along with the assumptions utilized in each calculation.
   
Fair value as of:
 
Net cash settlement value
as of
December 31, 2012
   
October 2, 2012
   
December 31, 2012
 
                   
Calculated aggregate value (in thousands)
  $ 4,944     $ 3,800     $ 39,900 (1)
Exercise price per share of warrant
  $ 0.75     $ 0.75     $ 0.75  
Closing price per share of common stock
 
Not applicable
   
Not applicable
    $ 0.99 (2)
Equity volatility
    115 %     115 %     76 % (3)
Asset volatility
    90 %     90 %  
Not applicable
 
Probability of Fundamental Transaction
    100 %     100 %  
Not applicable
 
Expected term (years)
 
Not applicable
   
Not applicable
      8.0  
Risk-free interest rate
    0.2 %     0.3 %     1.4 %
Dividend yield
 
None
   
None
   
None
 
                         

(1)
Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model defined in the 2012 Warrant Agreement.
 
(2)
Represents the 5 day Tengion stock VWAP used to calculate the net cash settlement value as of December 31, 2012.
 
(3)
Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012, defined in the 2012 Warrant Agreement.
 
(14)    Stock-based Compensation
 
The Company currently maintains two stock-based compensation plans.  Under the 2004 Stock Option Plan (the 2004 Plan), stock awards were granted to employees, directors, and consultants of the Company, in the form of restricted stock and stock options. The amounts and terms of options granted were determined by the Company’s compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. There are no shares available for future grants under the 2004 Plan, as grants from the 2004 Plan ceased upon the Company’s initial public offering in April 2010.
 
The 2010 Stock Incentive and Option Plan (2010 Plan) became effective upon the closing of the Company’s initial public offering.  Under the 2010 Plan, stock awards may be granted to employees, directors, and consultants of the Company, in the form of restricted or unrestricted stock, stock appreciation rights, cash-based or performance share awards and stock options. The amounts and terms of options granted are determined by the Company’s compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors.  The 2010 Plan allows for the transfer of forfeited shares from the 2004 Plan.  As of December 31, 2012, 46,652 shares of common stock were available for future grants under the Plan.
 
 
 
 
 
 
F-24

 
 

Stock Options
 
The following table summarizes stock option activity under the Plans:
 
   
Number of shares
 
Weighted-average exercise
price
 
Weighted-average remaining contractual term (in years)
 
Aggregate intrinsic
value (in thousands)
 
                         
Outstanding at December 31, 2010
 
137,896
   
$
24.88
           
Granted
 
130,569
   
$
11.34
           
Exercised
 
(18,735
)
 
$
4.40
           
Forfeited
 
(74,858
)
 
$
25.36
           
Outstanding at December 31, 2011
 
174,872
   
$
16.76
           
Granted
 
87,184
   
$
5.66
           
Exercised
 
(2,432
)
 
$
4.40
           
Forfeited
 
(25,159
)
 
$
20.45
           
Outstanding at December 31, 2012
 
234,465
   
$
12.37
 
8.5
 
$
 
                         
Vested and expected to vest at December 31, 2012
 
218,118
   
$
12.69
 
8.4
 
$
 
                         
Exercisable at December 31, 2012
 
71,442
   
$
21.45
 
7.6
 
$
 
                         
During 2011 and 2012, the Company issued options to purchase 129,569, and 87,184 shares of common stock, respectively, to employees and non-employee directors under the Plans.  The per-share weighted-average fair value of the options granted to employees during 2011 and 2012 was estimated at $6.10, and $5.66, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
   
Year Ended December 31,
 
   
2011
   
2012
 
             
Volatility                                                                                          
        79%          84%  
Expected term                                                                                          
 
5.5 years
   
6.0 years
 
Risk-free interest rate                                                                                          
       1.4%          1.1%  
Dividend yield                                                                                          
 
     None
   
    None
 
                 

Total stock-based compensation expense recognized for stock options to employees and non-employee directors for the years ended December 31, 2011 and 2012 was $0.7 million and $0.4 million, respectively.  As of December 31, 2012, there was $0.7 million of unrecognized compensation expense, net of forfeitures, related to non-vested employee stock options and remaining incremental expense associated with the modification of stock options and no unrecognized compensation expense related to non-vested non-employee director stock options.
 
During 2011, the Company issued options to purchase 1,000 shares of common stock to non-employee consultants under the Plan.  No options were granted to non-employees during the year ended December 31, 2012.  The per-share weighted-average fair value of the options granted to non-employees during 2011 was estimated at $2.90 on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
   
Year Ended December 31,
 
   
2011
   
2012
 
             
Volatility                                                                                        
     89%    
Not applicable
 
Expected term                                                                                        
 
5 years
   
Not applicable
 
Risk-free interest rate                                                                                        
    0.8%    
Not applicable
 
Dividend yield                                                                                        
 
 None
   
Not applicable
 
 
 
 
 
 
F-25

 

 
Total stock-based compensation expense recognized for stock options to nonemployees for the years ended December 31, 2011 and 2012 was $9,000 and $1,000, respectively.  As of December 31, 2012, there was not any unrecognized compensation expense related to non-vested nonemployee stock options.
 
Restricted Stock
 
The Company has issued restricted stock as compensation for the services of certain employees and other third parties.  The grant date fair value of restricted stock was based on the fair value of the common stock on the date of grant, and compensation expense is recognized based on the period in which the restrictions lapse.
 
The following table summarizes restricted stock activity under the Plans:
   
Number
of shares
 
Weighted-average
grant date
fair value
 
Nonvested at December 31, 2010                                                                                                   
 
   
$
 
Granted                                                                                              
 
31,096
   
$
24.20
 
Vested                                                                                              
 
(2,167
)
 
$
24.20
 
Forfeited                                                                                              
 
(14,941
)
 
$
24.20
 
Nonvested at December 31, 2011                                                                                                   
 
13,988
   
$
24.20
 
Granted                                                                                              
 
67,863
   
$
  6.00
 
Vested                                                                                              
 
(5,047
)
 
$
24.20
 
Forfeited                                                                                              
 
(2,432
)
 
$
17.36
 
Nonvested at December 31, 2012                                                                                                   
 
74,372
   
$
  7.81
 
               
Total stock-based compensation expense for restricted stock was $0.1 million and $0.2 million for the years ended December 31, 2011 and 2012, respectively.  As of December 31, 2012, there was $0.4 million of unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted- average period of 2.9 years.
 
(15)    Employee Benefit Plan
 
The Company maintains a defined contribution 401(k) plan (the 401(k) Plan) for the benefit of its employees.  Employee contributions are voluntary and are determined on an individual basis, limited by the maximum amounts allowable under federal tax regulations.  As of December 31, 2012, the Company has not elected to match any of the employee’s contributions to the 401(k) Plan.
 
(16)    Commitments and Contingencies
 
(a)Leases and Letters of Credit
 
The Company leases office space and office equipment under operating leases, which expire at various times through February 2016.  Excluding the lease liability activity described in Note 9, rent expense under these operating leases was $0.7 million and $0.2 million for each of the years ended December 31, 2011 and 2012, respectively.
 
The following table summarizes future minimum lease payments as of December 31, 2012 (in thousands):
         
2013                                                                                                                 
 
$
947
 
2014                                                                                                                 
   
1,055
 
2015                                                                                                                 
   
1,079
 
2016                                                                                                                 
   
278
 
Total minimum lease payments (1)                                                                                                           
  
$
3,360
 
         
 
(1)
The future minimum lease payments above do not include the impact of any potential sublease income discussed in Note 9 related to the Company’s lease liability.
 
 
 
 
F-26

 

 
Effective March 2011, the lease agreement for the Company’s facility in East Norriton, Pennsylvania required the Company to provide security and restoration deposits totaling $2.2 million to the landlord, an increase from the prior amount of $1.7 million. Until January 2011, the Company obtained letters of credit from a bank in favor of the landlord to satisfy the obligations.  In January 2011, the Company deposited $1.0 million with the landlord as a security deposit, which amount is recorded as a non-current other asset on the Company’s balance sheet as of December 31, 2011.  As of December 31, 2011, an outstanding letter of credit was satisfying the remaining restoration deposit obligation of $1.2 million.  At the end of the lease term, the landlord has the right to require us to utilize the funds collateralizing this letter of credit to restore the facility to its original condition. The letter of credit was collateralized by an account held at the bank.  The letter of credit expired on December 2, 2012. As a result, the Company has deposited an additional $1.2 million in an account held by the landlord to satisfy its deposit obligation.

In May 2011, the Company exercised the first five-year renewal option under its lease for laboratory space in Winston-Salem, North Carolina.  The amended lease extends the lease term to October 2016 and provides for payments of average annual base rent of approximately $0.2 million commencing in October 2011.

(b)  
License and Research Agreements
 
In 2003, a license agreement was executed with Children’s Medical Center Corporation (CMCC), whereby CMCC granted the Company a license to utilize certain patent rights.  In accordance with the license agreement, the Company paid an initial license fee of $0.2 million, which was recorded as research and development expense.  Additionally, the license agreement requires the Company to reimburse CMCC for patent costs related to the underlying licensed rights.  In, 2011, 2012, and for the period from July 10, 2003 (inception) through December 31, 2012, the Company recorded $0.2 million, $0.1 million, and $2.4 million, respectively, related to the reimbursement of such patent costs as general and administrative expenses in the accompanying statements of operations.
 
The Company is obligated to make payments to CMCC upon the occurrence of various development and sales milestones.  During the fourth quarter of 2006, the Company achieved two of its development milestones for the first licensed product launched, as defined in the agreement, and paid $0.4 million, which was recorded as research and development expense for the year ended December 31, 2006.  No further milestones payments have been made.  If the Company develops and obtains regulatory approval of a licensed product in each of the four subfields covered under the license, it will be required to pay CMCC milestones aggregating approximately $6.9 million, which includes $0.4 million paid to date.  Also, if cumulative net sales of all licensed products reach a certain level, the Company will be required to make a one-time sales milestone payment of $2.0 million.  The timing and likelihood of such milestone payments are not currently known to the Company.  A portion of the milestone payments the Company makes will be credited against its future royalty payments.  The Company must pay CMCC royalties in the mid-single digit range based on net sales of licensed products as defined in the agreement by the Company, its affiliates and its sublicensees, which royalties will be reduced for certain amounts the Company is required to pay to license patents or intellectual property from third parties and under certain circumstances if there is a competing product.  No royalties will be payable with respect to sales of licensed products in countries where there is no valid patent claim, unless the Company advised CMCC not to file for patent protection in that country and later chose to market and sell licensed products in such country.  The license agreement, and the Company’s obligation to pay royalties, terminates on the later of the expiration, on a country-by-country basis, of the last patent right and October 2018.
 
In January 2006 the Company entered into a license agreement with Wake Forest University Health Sciences, or WFUHS, which was amended in May 2007, for the license of certain of WFUHS’s intellectual property rights.  Under the license agreement, the Company issued WFUHS a warrant to purchase 320 shares of the Company’s common stock through January 1, 2016 at an exercise of $23.20 per share and is required to pay WFUHS a percentage of certain consideration received from a sublicensee.  The Company is not required to make any milestone payments to WFUHS related to the development or commercialization of the licensed products, but the Company is required to pay certain license maintenance fees with respect to each product covered by new development patents, commencing two years after the Company initiates the first animal study conducted under cGLP, with respect to such product.  These license maintenance fees, which are in the low six figure range with respect to each product, will be creditable against royalties the Company is obligated to pay to WFUHS for such product.  In addition, the Company is required to pay WFUHS royalties in the low- to mid-single digit range based on net sales of licensed products in all countries.  With respect to any product covered by an improvement patent, the Company’s obligation to pay royalties to WFUHS terminates upon the later of the expiration, on a product-by-product basis, of the last to expire patent covering such product and the date that is 15 years from the first commercial sale of such product, provided that no such royalty is payable more than seven years after expiration of the last-to-expire patent covering such product.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
F-27

 
 
 
(17)    Income Taxes
 
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:

   
2011
 
2012
Percent of pre-tax income:
               
U.S. federal statutory income tax rate                                                                                    
   
(34.0
)
   
(34.0
)
State taxes, net of federal benefit                                                                                    
   
(7.2
)
   
(4.6
)
Interest expense –revaluation of warrants                                                                                    
   
(25.5
)
   
(2.4
)
Other                                                                                    
   
0.8
     
1.4
 
Valuation allowance                                                                                    
   
65.9
     
39.6
 
Effective income tax expense rate
   
     
 
                 

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows (in thousands):

   
December 31,
   
2011
 
2012
Net operating loss carryforwards                                                                               
  
$
56,702
 
  
$
61,522
 
Research and development credits                                                                               
  
 
5,241
 
  
 
5,636
 
Depreciation and amortization                                                                               
  
 
5,198
 
  
 
5,040
 
Capitalized start-up costs                                                                               
  
 
14,703
 
  
 
16,453
 
Other temporary differences                                                                               
  
 
2,384
 
  
 
1,340
 
Gross deferred tax asset                                                                          
  
 
84,228
 
  
 
89,991
 
Deferred tax assets valuation allowance                                                                               
  
 
(84,228
)
  
 
(89,991
)
 
  
$
 
  
$
 
 
  
             

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible.  Due to the Company’s history of losses, the deferred tax assets are fully offset by a valuation allowance at December 31, 2011 and 2012.  The valuation allowance in 2011 increased by $13.3 million over 2010 and the valuation allowance in 2012 increased by $5.8 million over 2011, related primarily to additional net operating losses incurred by the Company and additional capitalized start-up expenses.
 
The Company has moved its corporate headquarters to its leased facility in Winston-Salem, North Carolina during the first quarter of 2012.   As a result of differences in effective tax rates in North Carolina versus Pennsylvania, the deferred effective state tax rate is anticipated to be reduced.  As the Company has a full valuation allowance on its deferred taxes, there is no impact related to the change in the effective state tax rate on the balance sheet and statement of operations.   The Company is updating its forecasted effective state tax rate to consider this impact on its deferred taxes and will continue to monitor and update the rate as necessary.  Additionally, the Company has approximately $8.3 million of deferred tax asset related to Pennsylvania net operating loss carryforwards.  The ultimate use of this deferred tax asset may be impacted by the size of operations remaining in Pennsylvania in the future.  This deferred tax asset is currently offset by a full valuation allowance.
 
As of December 31, 2011, and 2012, approximately $35.7 million and $42.7 million, respectively, of the Company’s expenses had been capitalized for tax purposes as start-up costs.  For tax purposes, capitalized start-up costs will be amortized over fifteen years beginning when the Company commences operations, as defined under the Internal Revenue Code.
 
The following table summarizes carryforwards of net operating losses and tax credits as of December 31, 2012 (in thousands).
 
   
Amount
   
Expiration
Federal net operating losses
  $ 150,936      
2023 to 2032
 
State net operating losses
    167,352      
2019 to 2032
 
Research and development credits
    5,636      
2024 to 2032
 
 
 
 
 
 
F-28

 

 
The Tax Reform Act of 1986 (the Act) provides for a limitation on the annual use of net operating loss and research and development tax credit carryforwards following certain ownership changes (as defined by the Act) that could limit the Company’s ability to utilize these carryforwards.  The Company has not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since its formation, due to the significant costs and complexities associated with such a study.  The Company may have experienced various ownership changes, as defined by the Act, as a result of past financings.  Accordingly, the Company’s ability to utilize the aforementioned carryforwards may be limited.  Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes; therefore, the Company may not be able to take full advantage of these carryforwards for federal or state income tax purposes.
 
(18)    Subsequent Events
 
On January 30, 2013, the Company entered into a Second Consent and Amendment Agreement (the Second Amendment) with investors (the Investors) in the Company’s 2012 Financing. Pursuant to the Second Amendment, the Investors agreed to extend the interest payments that were due on February 1, 2013 to February 15, 2013. The aggregate amount of the interest payments is $0.5 million, which amount will continue to accrue interest at the rate of ten percent (10%) per annum.

Additionally, the Second Amendment amends the registration rights agreement between the Company and the Investors entered into in connection with the 2012 Financing, as amended by the First Amendment, to extend the deadline to register the shares underlying the Convertible Notes and 2012 Warrants issued in the 2012 Financing from January 30, 2013 to March 1, 2013, a date that is 150 days following the issuance of the Convertible Notes and 2012 Warrants.

2012 Financing Transaction Document Amendments
 
On February 14, 2013, the Company entered into the Amendment Agreement to the 2012 Warrants and Convertible Notes (the Warrants and Notes Amendment) and the Third Amendment Agreement to the Registration Rights Agreement and Facility Agreement (the Registration Rights and Facility Amendment and together with the 2012 Warrants and the Convertible Notes Amendment, the 2012 Financing Transaction Document Amendments), each by and among the Company and the investors in the 2012 Financing. Pursuant to the 2012 Financing Transaction Document Amendments, the Company and its investors in the 2012 Financing agreed to:
 
 
·
Limit its registration obligations for the shares underlying the Convertible Notes and the 2012 Warrants, issued in connection with the 2012 Financing to the share limitations imposed by the Securities and Exchange Commission, which requires that the amount of shares registered not exceed one third of its public float; 
 
·
Provide that shares underlying the 2012 Warrants be registered prior to any other securities that the Company is required to register under the 2012 Financing Transaction Document Amendments and extend the deadline for the Company to file an initial registration statement  to register shares underlying the securities issued in the 2012 Financing to March 31, 2013, a day that is 180 calendar days following the date on which the Convertible Notes and 2012 Warrants were issued; 
 
·
Extend the additional filing and registration deadlines with respect to additional registration statements that are required to be filed by the Company; 
 
·
Provide for a pro rata allocation amongst the 2012 Financing investors of the shares of Common Stock the Company is able to register in each registration statement it is required to file; 
 
·
Provide for the assumption that resales of shares of its common stock, when eligible, will be under Rule 144 under the Securities Act of 1933, as amended, unless a 2012 Financing investor informs us of a sale under the registration statement; 
 
·
Allow the Company to satisfy its interest obligations under the Convertible Notes through the issuance of shares of restricted common stock or, if such issuance would result in a 2012 Financing investor holding more than 9.985% of the total number of its outstanding shares (the 9.985% Limitation), with warrants to purchase shares of common stock for nominal consideration that would become exercisable only to the extent that such exercise would not result in an investor going over the 9.985% Limitation (the Interest Warrants); 
 
·
Extend the interest payments due April 1, 2013 under the Convertible Notes by one day to April 2, 2013; and 
 
·
Exclude securities that may be issued or issuable pursuant to any financing that it may complete in 2013 with securities with an issuance, conversion price or exercise price greater than $0.75 and gross proceeds of no more than $30 million (the 2013 Financing) from the definition of a Major Transaction and to include the 2013 Financing in the definition of Permitted Liens and Indebtedness under the 2012 Financing Transaction Document Amendments.

 
 
 
 
 
 
 
 
 
F-29

 
 
 
Exhibit Index

Exhibit No.
 
Description
     
3.1
 
Fourth Amended and Restated Certificate of Incorporation of Tengion, Inc. (Incorporated by reference to Exhibit 3.1 to Amendment No. 3 to our Registration Statement on Form S-1 filed on March 17, 2010 (Registration No. 333-164011)).
     
3.2
 
Amended and Restated Bylaws of Tengion, Inc. (Incorporated by reference to Exhibit 3.2 to Amendment No. 3 to our Registration Statement on Form S-1 filed on March 17, 2010 (Registration No. 333-164011)).
     
4.1
 
Form of Tengion, Inc.’s Common Stock Certificate.  (Incorporated by reference to Exhibit 4.1 to Amendment No. 3 to our Registration Statement on Form S-1 filed on March 17, 2010 (Registration No. 333-164011)).
     
4.2
 
Second Amended and Restated Investor Rights Agreement by and among the investors listed therein and Tengion, Inc., dated as of September 24, 2007.  (Incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-1 filed on December 23, 2009 (Registration No. 333-164011)).
     
4.3
 
Amendment No. 1 to Second Amended and Restated Investor Rights Agreement by and among the investors listed therein and Tengion, Inc., dated as of October 15, 2008.  (Incorporated by reference to Exhibit 4.3 to our Registration Statement on Form S-1 filed on December 23, 2009 (Registration No. 333-164011)).
     
4.4
 
Registration Rights Agreement by and among the investors party thereto and Tengion, Inc., dated as of March 4, 2011.  (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on March 16, 2011).
     
4.5
 
Form of Preferred Stock Warrant by and between Oxford Finance Corporation and the Company.  (Incorporated by reference to Exhibit 4.4 to our Registration Statement on Form S-1 filed on December 23, 2009 (Registration No. 333-164011)).
     
4.6
 
Form of Preferred Stock Warrant by and between Horizon Funding Company II LLC and the Company.  (Incorporated by reference to Exhibit 4.5 to our Registration Statement on Form S-1 filed on December 23, 2009 (Registration No. 333-164011)).
     
4.7
 
Stock Subscription Warrant issued to APCO Worldwide Inc., dated September 1, 2005.  (Incorporated by reference to Exhibit 4.6 to Amendment No. 2 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).
     
4.8
 
Form of Warrant to Purchase Common Stock, dated as of March 4, 2011.  (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on March 1, 2011).
     
4.9
 
Warrant to Purchase Common Stock issued to Horizon Technology Finance Corporation, dated March 14, 2011.  (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed on March 16, 2011).
     
4.10
 
Form of Interest Warrant to Purchase Common Stock of Tengion, Inc. (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed on February 14, 2013).
     
4.11
 
Form of Amended and Restated Warrant issued in exchange for the 2011 Warrants (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed on January 7, 2013).
     
4.12
 
Form of Senior Secured Convertible Note dated October 2, 2012 (Incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K, filed October 4, 2012).
     
4.13
 
Form of Warrant issued October 2, 2012 (Incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K, filed October 4, 2012).
     
4.14
 
Amended and Restated Secured Promissory Note issued as of September 1, 2012 to Horizon Credit II LLC (Incorporated by reference to Exhibit 4.3 to our Current Report on Form 8-K, filed October 4, 2012).
 
 
 
 
 
 

 
 
 
Exhibit No.
 
Description
     
10.1
 
Lease Agreement by and between 3929 Westpoint Industrial, LLC and Tengion, Inc., dated as of June 8, 2005.  (Incorporated by reference to Exhibit 10.1 to Amendment No. 2 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).
     
10.2
 
First Amendment to Lease by and among Fawn Industrial LLC and 1881 Industrial LLC, successors in interest to 3929 Westpoint Industrial, LLC and together as Landlord, and Tengion, Inc., dated as of March 15, 2007.  (Incorporated by reference to Exhibit 10.2 to our Registration Statement on Form S-1 filed on December 23, 2009 (Registration No. 333-164011)).
     
10.3
 
Lease Agreement by and between Norriton Business Campus, L.P. and Tengion, Inc., dated as of February 1, 2006, as amended.  (Incorporated by reference to Exhibit 10.4 to our Registration Statement on Form S-1 filed on December 23, 2009 (Registration No. 333-164011)).
     
10.4
 
Amended and Restated Tengion, Inc. 2004 Stock Incentive Plan, Form Notice of Stock Option Grant and Stock Option Agreement.  (Incorporated by reference to Exhibit 10.5 to Amendment No. 2 to our Registration Statement on Form S-1 filed on February 23, 2010 (Registration No. 333-164011)).#
     
10.5
 
2010 Stock Option and Incentive Plan, Form of Incentive Stock Option Agreement, Form of Non-Qualified Stock Option Agreement and Form of Restricted Stock Award Agreement.  (Incorporated by reference to Exhibit 10.34 to Amendment No. 2 to our Registration Statement on Form S-1 filed on February 23, 2010 (Registration No. 333-164011)).#
     
10.6
 
Exclusive License Agreement by and between Children’s Medical Center Corporation and Tengion, Inc., dated as of October 10, 2003.  (Incorporated by reference to Exhibit 10.6 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).*
     
10.7
 
Tengion, Inc. Non-Employee Director Compensation Policy.  (Incorporated by reference to Exhibit 10.36 to Amendment No. 3 to our Registration Statement on Form S-1 filed on March 17, 2010 (Registration No. 333-164011)).#
     
10.8
 
License Agreement by and between the Company and Wake Forest University Health Sciences, effective as of January 1, 2006.  (Incorporated by reference to Exhibit 10.7 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).*
     
10.9
 
License Agreement Amendment No. 1 by and between the Company and Wake Forest University Health Sciences, dated as of May 3, 2007.  (Incorporated by reference to Exhibit 10.8 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).*
     
10.10
 
Venture Loan and Security Agreement by and between Horizon Technology Finance Corporation and Tengion, Inc., dated as of March 14, 2011.  (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on March 16, 2011).
     
10.11
 
Master Security Agreement No. 5081099 by and between Oxford Finance Corporation and Tengion, Inc., dated as of July 20, 2005.  (Incorporated by reference to Exhibit 10.14 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).
     
10.12
 
Amendment Agreement by and between Oxford Finance Corporation and Tengion, Inc., dated as of April 3, 2006.  (Incorporated by reference to Exhibit 10.15 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).
     
10.13
 
Amendment Agreement by and between Oxford Finance Corporation and Tengion, Inc., dated as of December 28, 2006.  (Incorporated by reference to Exhibit 10.16 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).
 
 
 
 
 
 
 
 

 
 
 
Exhibit No.
 
Description
     
10.14
 
Offer Letter by and between Tim Bertram and Tengion, Inc., dated July 28, 2004.  (Incorporated by reference to Exhibit 10.24 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).#
     
10.15
 
Offer Letter Amendment by and between Tim Bertram and the Company, dated as of December 22, 2008.  (Incorporated by reference to Exhibit 10.26 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).#
     
10.16
 
Restricted Stock Purchase Agreement by and between the Company and Tim Bertram, dated as of August 16, 2004.  (Incorporated by reference to Exhibit 10.27 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).
     
10.17
 
Restricted Stock Purchase Agreement by and between the Company and Tim Bertram, dated as of July 28, 2004.  (Incorporated by reference to Exhibit 10.28 to Amendment No. 1 to our Registration Statement on Form S-1 filed on January 29, 2010 (Registration No. 333-164011)).
     
10.18
 
Offer Letter by and between A. Brian Davis and the Company, dated as of July 29, 2010.  (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).#
     
10.19
 
Form of Indemnification Agreement.  (Incorporated by reference to Exhibit 10.33 to Amendment No. 3 to our Registration Statement on Form S-1 filed on March 17, 2010 (Registration No. 333-164011)).
     
10.20
 
Third Amendment to Master Security Agreement No. 5081099 dated as of June 23, 2010 by and between the Company and Oxford Finance Corporation. (Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).
     
10.21
 
Second Amendment to Lease, dated May 23, 2011, by and between Fawn Industrial, LLC, 1881 Industrial LLC and Tengion, Inc. (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 25, 2011).
     
10.22
 
Severance Agreement and General Release of Claims by and between the Company and Steven A. Nichtberger, MD, dated June 29, 2011 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 30, 2011).#
     
10.23
 
Form of Severance Agreement and Release of Claims by and between the Company and each of Mark Stejbach and Sunita Sheth, MD (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on November 23, 2011).#
     
10.24
 
Amended Employment Agreement by and between the Company and John L. Miclot, dated January 20, 2012 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on January 20, 2012).#
     
10.25
 
Form of Amendment Agreement to the 2012 Warrants and Convertible Notes by and between Tengion, Inc. and each investor in the 2012 Financing (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on February 14, 2013).
     
10.26
 
Third Amendment Agreement to the Registration Rights Agreement and Facility Agreement by Tengion, Inc. and the other signatories thereto, dated February 14, 2013 (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on February 14, 2013). 
     
10.27
 
Second Consent and Amendment Agreement between Tengion, Inc. and the investors party thereto, dated January 30, 2012 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on February 4, 2013).
     
10.28
 
Consent and Amendment Agreement by and between Tengion, Inc. and the investors party thereto, dated December 31, 2012 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on January 7, 2013).
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Exhibit No.
 
Description
     
10.29
 
Securities Purchase Agreement by and between Tengion, Inc. and the investors party thereto, dated October 2, 2012 (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed October 4, 2012).
     
10.30
 
Facility Agreement by and between Tengion, Inc. and the lenders party thereto, dated October 2, 2012 (Incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed October 4, 2012).
     
10.31
 
Security Agreement by and between Tengion, Inc. and the secured parties thereto, dated October 2, 2012 (Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed October 4, 2012).
     
10.32
 
Tengion Inc. Amended and Restated Management Severance Pay Plan (Incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed March 20, 2012).#
     
10.33
 
Registration Rights Agreement by and between Tengion, Inc. and the parties thereto, dated October 2, 2012 (Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K filed on October 4, 2012).
     
10.34
 
Escrow Agreement by and between Tengion, Inc., Ballard Spahr LLP as escrow agent, and the parties thereto, dated October 2, 2012 (Incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K filed on October 4, 2012).
     
10.35
 
Right of First Negotiation Agreement by and between Tengion, Inc. and Celgene Corporation, dated October 2, 2012 (Incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K filed on October 4, 2012).
     
10.36
 
First Amendment of Venture Loan and Security Agreement by and between Tengion, Inc., Horizon Credit II LLC and Horizon Technology Finance Corporation, dated October 2, 2012 (Incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K filed on October 4, 2012).
     
10.37
 
Joinder Agreement by and between Tengion, Inc. and Horizon Credit II LLC, dated October 2, 2012 (Incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K filed on October 4, 2012).
     
10.38
 
Termination Agreement by and between Tengion, Inc. and Medtronic, Inc., dated October 2, 2012 (Incorporated by reference to Exhibit 10.9 to our Current Report on Form 8-K filed on October 4, 2012).
     
10.39
 
Form of Securities Purchase Agreement, by and between Tengion, Inc. and the purchasers thereto, dated March 1, 2011 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on March 1, 2011).
     
23.1
 
     
24.1
 
Power of Attorney (included on signature page).  (Filed herewith).
     
31.1
 
     
31.2
 
     
32.1
 
     
32.2   Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
 
 
 
 
 
 
 
 
 
 
 

 
 
 
Exhibit No.
 
Description
 
101
 
 
The following materials from the Registrant’s Annual Report on Form 10-K for the annual report ended December 31, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Balance Sheets, (ii) Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit), (iii) the Condensed Statements of Operations, (iv) the Condensed Statements of Cash Flows, and (v) Notes to Condensed Financial Statements. **

#  -           Indicates a management contract or any compensatory plan, contract or arrangement.

*  -           Confidential status has been granted for certain portions thereof pursuant to a Commission Order granted April 9, 2010.  Such provisions have been filed separately with the Commission.

 **  -Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit
 101 hereto are deemed not filed as part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.







































 

 


 
EX-23.1 2 ex23-1.htm EXHIBIT 23.1 ex23-1.htm
 
 
 
Exhibit 23.1
 
 
Consent of Independent Registered Public Accounting Firm
 
We consent to the incorporation by reference in the following Registration Statements:
 
(1)  
Registration Statement (Form S-8 No. 333-166996) pertaining to the Tengion, Inc. Amended and Restated 2004 Stock Incentive Plan,
 
(2)  
Registration Statement (Form S-8 Nos. 333-166996, 333-173573, and 333-178864) pertaining to the  Tengion, Inc. 2010 Stock Option and Incentive Plan, and
 
(3)  
Registration Statement (Form S-3 No. 333-179293) pertaining to registration of its common stock preferred stock, debt securities, warrants, rights and units;
 
of our report dated March 26, 2013, with respect to the financial statements of Tengion, Inc. included in its Annual Report (Form 10-K) for the year ended December 31, 2012, filed with the Securities and Exchange Commission.
 
 
 
 
 /s/ ERNST & YOUNG LLP
 

 
Philadelphia, Pennsylvania
March 26, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

EX-31.1 3 ex31-1.htm EXHIBIT 31.1 ex31-1.htm
 
 
 
Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
 
I, John L. Miclot, certify that:
 
 
1.             I have reviewed this Annual Report of Tengion, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  March 28, 2013 
 
 
   
 
/s/ John L. Miclot
 
John L. Miclot
 
President and Chief Executive Officer
 
(Principal Executive Officer)
   
 
 
 

EX-31.2 4 ex31-2.htm EXHIBIT 31.2 ex31-2.htm
 
 
 
Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
 
I, A. Brian Davis, certify that:
 
 
1.
I have reviewed this Annual Report of Tengion, Inc.;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  March 28, 2013 
 
   
 
/s/ A. Brian Davis
 
A. Brian Davis
 
Chief Financial Officer and Vice President, Finance
 
(Principal Financial and Accounting Officer)
   
 
 
 

EX-32.1 5 ex32-1.htm EXHIBIT 32.1 ex32-1.htm
 
 
 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
 
In connection with the Annual Report of Tengion, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John L. Miclot, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
 
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: March 28, 2013
 
 
/s/ John L. Miclot
 
John L. Miclot
 
President and Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

EX-32.2 6 ex32-2.htm EXHIBIT 32.2 ex32-2.htm
 
 
 

Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
 
 
In connection with the Annual Report of Tengion, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, A. Brian Davis, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
 
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date: March 28, 2013
 
   
 
/s/A. Brian Davis
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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margin-right: 0pt;">&#160;</div></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;">The Company has deposited $1 million of the gross proceeds of its Senior Secured Convertible Notes (the Convertible Notes) (see footnote 10 for discussion of the Convertible Notes) financing into an escrow account pursuant to an Escrow Agreement between the Company, the lenders, and an escrow agent. Upon the achievement of (1) the successful completion of patient implants in the Phase I clinical trial of the Company's Neo-Urinary Conduit and (2) analysis of in-life data from the Company's GLP studies for the Neo-Kidney Augment that demonstrates that continued development is warranted (the Milestones), the lenders will instruct the escrow agent to release the escrowed funds to the Company. If the Milestones are not achieved by March 1, 2013<font style="display: inline; font-weight: bold;">, </font>at the direction of the holders of at least 40% of the aggregate principal amount of the Convertible Notes, including certain specified holders, the escrow agent will transfer to the Company the portion of the escrowed amount that the holders agree is necessary for the orderly disposition of the Company's assets. This deposit is classified as restricted cash as of December 31, 2012.</font><br /></div></div> <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(c)Cash and Cash Equivalents</div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2011, cash and cash equivalents included government-backed money market funds, commercial paper, and various bank deposit accounts. As of December 31, 2011, $1.2 million of the Company's cash was held in a separate account collateralizing letters of credit issued by a bank in favor of the landlord of its leased facility in East Norriton, Pennsylvania.</div></div></div> -2728000 -1708000 45944000 7536000 9244000 0 0 9244000 7536000 0 0 7536000 <div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">(4)&#160;&#160;&#160;&#160;&#160; &#160;</font><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Supplemental Cash Flow Information</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div><div style="text-align: justify; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160; <div style="text-align: justify; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table contains additional cash flow information for the periods reported (in thousands).</div><div><div><div><div style="text-indent: 0pt; display: block;"><br /></div></div></div></div><div><div><div><div><table><tr><td align="left" valign="top" style="padding-bottom: 2px; width: 64%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="6" valign="bottom" style="border-bottom: black 2px solid; width: 7%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Year Ended </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31,</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Period from</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">July 10, 2003</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(inception)</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">through</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31, </div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="padding-bottom: 2px; width: 64%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 7%; font-family: times new roman; font-size: 10pt; font-weight: bold;">2011</td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 7%; font-family: times new roman; font-size: 10pt; font-weight: bold;">2012</td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 12%; font-family: times new roman; font-size: 10pt; font-weight: bold;">2012</td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Supplemental cash flow disclosures:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Noncash investing and financing activities:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Conversion of note principal to redeemable convertible preferred stock</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,562</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Convertible note issued to initial stockholder for consulting expense</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">210</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Exchange of Demand Note for Convertible Note for Convertible Notes</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,005</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,005</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Fair value of embedded derivatives and derivatives issued with issuance of long-term debt</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,669</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,669</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="padding-left: 0pt; width: 64%; font-family: times new roman; margin-left: 9pt; font-size: 10pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160; Fair value of warrants issued with issuance of long-term debt </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;">105</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;">4,944</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;">7,234</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Fair value of warrants issued with issuance of common stock</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">16,947</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">16,947</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; 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display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr></table></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 6pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(1)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">The future minimum lease payments above do not include the impact of any potential sublease income discussed in Note 9 related to the Company's lease liability.</div></td></tr></table></div><div style="text-indent: 0pt; 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With respect to any product covered by an improvement patent, the Company's obligation to pay royalties to WFUHS terminates upon the later of the expiration, on a product-by-product basis, of the last to expire patent covering such product and the date that is 15 years from the first commercial sale of such product, provided that no such royalty is payable more than seven years after expiration of the last-to-expire patent covering such product.</div></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div></div> 0 0 2381000 2449000 2000 2000 2381000 2449000 0.001 0.001 750000000 750000000 Each holder of common stock is entitled to one vote for each share held 10 566000 18665000 <div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">(10)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Debt</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160; <div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Total debt outstanding consists of the following (in thousands):</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31,</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td valign="top" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Senior Secured Convertible Notes</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">15,005</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Embedded derivative liability</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Working Capital Note</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">5,000</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,660</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Equipment and Supplemental Working Capital Notes</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">126</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Unamortized debt discount </div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(139</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(7,672</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="width: 76%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,987</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">11,269</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Less current portion</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">(2,205</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(1,786</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Total long-term debt</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">2,782</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">9,483</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Principal payments due as of December 31, 2012 are as follows (in thousands):</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="width: 88%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2013 </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,943</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 88%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2014 </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,717</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 88%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2015 </div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">15,005</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 88%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">18,665</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 88%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Less embedded derivative and unamortized debt discount</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(7,396</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 88%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">11,269</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company recorded interest expense of $0.8 million and $3.0 million for the years ended December 31, 2011 and 2012, respectively. Included in interest expense in 2011 is $.2 million of amortization of deferred financing costs. Included in interest expense in 2012 is $0.8 million of issuance costs related to the 2012 Financing and $1.3 million in amortization of deferred financing costs and debt discount on the Convertible Notes and Working Capital Note.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; font-style: italic; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Senior Secured Convertible Notes</div><div style="text-align: justify; font-style: italic; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">On October 2, 2012, the Company completed a private placement of an aggregate principal amount of $15.0 million of Senior Secured Convertible Notes (the Convertible Notes). The aggregate principal amount of the Convertible Notes includes the exchange of the Demand Notes (see below for further discussion). Under the terms of the Agreement, the Convertible Notes bear interest at a rate of 10% per annum and will mature on October 2, 2015. Interest payments are payable quarterly in cash or shares of the Company's common stock (up to certain limits).</div></div></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;The Company issued warrants to the holders of the Convertible Notes (2012 Warrants) to purchase approximately 51.1 million shares of common stock at an initial exercise price of $0.75 per share. 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Therefore, the Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. The valuation resulted in a model-derived common stock value of $0.04 per share as of December 31, 2012 primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of warrants issued in 2011 and 2012. 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font-weight: bold; margin-right: 0pt;">December </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">31, 2012</div></td><td valign="top" style="border-bottom: black 2px solid; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 40%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Calculated aggregate value (in thousands)</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">310</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">488</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,181</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,449</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Equity volatility</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Asset volatility</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Probability of Fundamental Transaction or Major Transaction</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Weighted average risk-free interest rate</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.2%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.2%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.3%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.2%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.3%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Dividend yield</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div> 310000 488000 276000 3181000 2449000 0 944000 944000 0 0 212000 732000 <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(j) Embedded Derivative and Derivative Liability </div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company accounts for the Demand Note Exchange Right and the conversion feature embedded in the Convertible Notes (the Conversion Option) in accordance with ASC 815, Derivatives and Hedging (ASC 815). Under this accounting guidance, the Company is required to bifurcate the embedded derivative from the host instrument and account for it as a free-standing derivative financial instrument. The Company classifies these embedded derivatives as part of the carrying value of the debt host instrument. The Company also accounts for the Call Option issued in connection with the 2012 Financing in accordance with ASC 815, as this instrument is considered a free-standing financial instrument that meets the criteria of a derivative under the guidance. The Company classifies the Call Option as a Derivative Liability on the balance sheet. The changes in fair value of the embedded derivative or derivative liability are remeasured at each balance sheet date and recorded in current period earnings.</div></div></div> <div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">(14)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Stock-based Compensation</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">The Company currently maintains two stock-based compensation plans. Under the 2004 Stock Option Plan (the 2004 Plan), stock awards were granted to employees, directors, and consultants of the Company, in the form of restricted stock and stock options. The amounts and terms of options granted were determined by the Company's compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. There are no shares available for future grants under the 2004 Plan, as grants from the 2004 Plan ceased upon the Company's initial public offering in April 2010.</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The 2010 Stock Incentive and Option Plan (2010 Plan) became effective upon the closing of the Company's initial public offering. Under the 2010 Plan, stock awards may be granted to employees, directors, and consultants of the Company, in the form of restricted or unrestricted stock, stock appreciation rights, cash-based or performance share awards and stock options. The amounts and terms of options granted are determined by the Company's compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. The 2010 Plan allows for the transfer of forfeited shares from the 2004 Plan. As of December 31, 2012, 46,652 shares of common stock were available for future grants under the Plan.</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Stock Options</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes stock option activity under the Plans:</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 53%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 10%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Number of shares</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 10%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Weighted-average exercise </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">price</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Weighted-average remaining contractual term (in years)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 10%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Aggregate intrinsic </div><div style="text-align: center; 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font-size: 10pt;">&#160;</td><td align="right" valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr><td valign="bottom" style="width: 53%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; 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font-family: times new roman; font-size: 10pt;">&#160; </td><td colspan="6" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Year Ended December 31,</div></td><td valign="bottom" style="border-bottom: black 2px solid; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 76%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Shares underlying warrants outstanding</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,064,616</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">80,250,702</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Shares underlying options outstanding</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">174,872</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">234,465</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Unvested restricted stock</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">13,988</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">74,372</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Convertible notes payable</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">20,007,002</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr></table></div></div></div> 0 0 -0.34 -0.34 -0.255 -2.4 -0.072 -4.6 0.396 0.659 0.014 0.008 2354000 716000 P2Y10M24D 700000 0 0 400000 1000000 0.6496 1 1 1 1 1 1 1 1 1 1800000 900000 900000 <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):</div><div><div><div style="text-indent: 0pt; display: block;"><br /></div></div><div style="text-align: left;"><div><table><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011 </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Warrants</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012 </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Warrants</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Total</div></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at January 1, 2011</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issuance of additional warrants</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">16,947</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">16,947</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Change in fair value of warrant liability</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(14,436</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(14,436</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2011</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,511</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,511</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issuance of additional warrants</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,944</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,944</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Change in fair value of warrant liability</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(133</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(1,144</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(1,277</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr></table></div><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 4px; width: 64%;"><div><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012</div></div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,378</div></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,800</div></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,178</div></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div> 0 0 0 0 0 0 0 2449000 2511000 0 2511000 2378000 3800000 6178000 0 276000 276000 0.002 0.002 0.003 0.002 0.003 0.02 0.007 0.003 0.002 0.003 P5Y 0 0 0 28.80 1.10 0.75 0.75 3181000 310000 488000 798000 <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes the calculated aggregate fair values of the Demand Note Exchange Right, the Conversion Option and the Call Option as of the dates indicated along with assumptions utilized in each calculation.</div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div></div></div><div><div style="text-align: left;"><div><table><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="18" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Embedded Derivative and Derivative Liability</div></td><td valign="top" style="border-bottom: black 2px solid; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Demand </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Note </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Exchange </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Right</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Conversion Option</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="6" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Call Option</div></td><td valign="top" style="border-bottom: black 2px solid; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">September </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">30, 2012</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">October </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2, 2012</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">31, 2012</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">October </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2, 2012</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">31, 2012</div></td><td valign="top" style="border-bottom: black 2px solid; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 40%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Calculated aggregate value (in thousands)</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">310</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">488</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,181</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,449</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Equity volatility</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">115%</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Asset volatility</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">90%</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Probability of Fundamental Transaction or Major Transaction</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">100%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 40%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Weighted average risk-free interest rate</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.2%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.2%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.3%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.2%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.3%</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td align="left" valign="bottom" style="width: 40%;"><div><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Dividend yield</div></div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div> 0 0 0 0 0 0 0 0 0 0 <div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">(5)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;</font><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Short-term Investments and Financial Instruments</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">As of December 31, 2012, the Company had no short-term investments. As of December 31, 2011, short-term investments consisted of investments in commercial paper and U.S. government agency and corporate securities of $6.1 million. The Company had the ability and intent to hold these investments until maturity and therefore has classified the investments as held-to-maturity. Due to the short-term nature of those investments, unrealized gains and losses had been deemed temporary and therefore not recognized in the accompanying financial statements. Income generated from short-term investments was recorded to interest income.</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The fair value guidance requires fair value measurements be classified and disclosed in one of the following three categories:</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 36pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 36pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 36pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 36pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 36pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 36pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following fair value hierarchy table presents information about each major category of the Company's financial assets and liability measured at fair value on a recurring basis as of December 31, 2011 and 2012 (in thousands).</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="11" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 41%; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Fair value measurement at reporting date using:</font></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="text-align: center; padding-bottom: 2px; width: 13%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Quoted prices in active markets for identical assets (Level 1)</td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant other </font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">observable </div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 2)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant unobservable </font></div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 3)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Total</font></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">At December 31, 2011</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Assets:</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Cash and cash equivalents</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">9,244</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">9,244</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Short-term investments</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">U.S. government agency funds.</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,021</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,021</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Corporate securities</div></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,045</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,045</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Short-term investments</div></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,066</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,066</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 44%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">15,310</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">15,310</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Liabilities:</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 4px; width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Warrant liability</div></td><td align="left" valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,511</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,511</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="11" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 41%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Fair value measurement at reporting date using:</td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 11%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Quoted prices in active markets for identical assets (Level 1)</td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant other observable </div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 2)</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant unobservable </div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 3)</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Total</td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">At December 31, 2012:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 27pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Assets:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Cash and cash equivalents</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Short-term investments</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 44%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="top" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 27pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Liabilities:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-indent: 0pt; display: block;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Derivative liability</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="top" style="width: 11%;"><div style="text-indent: 0pt; display: block;"></div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,449</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,449</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Embedded derivative liability</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Warrant liability</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,178</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,178</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 44%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td valign="top" style="border-bottom: black 4px double; width: 11%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">8,903</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">8,903</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div></div></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The reconciliation of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 82%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 16%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Call Option</div></td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td></tr><tr><td valign="bottom" style="width: 82%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Balance at January 1, 2012 </div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">&#8212;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 82%;"><div style="text-align: justify; text-indent: 18pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Issuance of derivative </div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">3,181</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 82%;"><div style="text-align: justify; text-indent: 18pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Change in fair value of derivative liability </div></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">(732 </td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">)</td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 82%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012 </div></td><td align="right" valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="border-bottom: black 4px double; text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">2,449</td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 4px double; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 82%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The fair value of the derivative liability is based on Level 3 inputs. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value. See Note 12 for further discussion of the derivative liability.</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;">The reconciliation of the Demand Note Exchange Right and the Conversion Option measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):</font></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><br />&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Demand Note Exchange </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Right</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Conversion Option</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Total </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Embedded Derivatives</div></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at January 1, 2012</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issuance of derivative</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">310</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">488</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">798</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Exercise of exchange right</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(310</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(310</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Change in fair value of derivative liability</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(212</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(212</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div> <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(b)Fair Value of Financial Instruments</div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">As of December 31, 2011 and 2012, the carrying amounts of financial instruments held by the Company, which include cash equivalents, short-term investments, prepaid expenses and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments. In addition, the carrying value of the Company's debt instruments, which do not have readily ascertainable market values, approximate fair value, given that the interest rates on outstanding borrowings approximate market rates.</div></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div></div> -732000 -14436000 0 -14436000 -133000 -1144000 -1277000 0 -212000 -212000 <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The reconciliation of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):</div><div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><br /></div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 82%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 16%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Call Option</div></td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td></tr><tr><td valign="bottom" style="width: 82%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Balance at January 1, 2012 </div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">&#8212;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 82%;"><div style="text-align: justify; text-indent: 18pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Issuance of derivative </div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">3,181</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 82%;"><div style="text-align: justify; text-indent: 18pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Change in fair value of derivative liability </div></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">(732 </td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">)</td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 82%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012 </div></td><td align="right" valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="border-bottom: black 4px double; text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;">2,449</td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 4px double; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 82%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 15%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div><div><div><br /></div></div></div></div><div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The reconciliation of the Demand Note Exchange Right and the Conversion Option measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><br />&#160;</div></div></div></div><div><div><div><div style="text-align: left; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Demand Note Exchange </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Right</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Conversion Option</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Total </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Embedded Derivatives</div></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at January 1, 2012</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issuance of derivative</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">310</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">488</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">798</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Exercise of exchange right</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(310</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(310</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Change in fair value of derivative liability</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(212</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(212</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div></div></div> 0 0 -16000 -119000 7191000 5496000 47389000 200000 100000 2400000 0 6100000 4021000 0 0 4021000 2045000 0 0 2045000 6066000 0 0 6066000 0 0 0 0 <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(f)Impairment of Long-Lived Assets</div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 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font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Initial fair value</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">933</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">891</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,824</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Charges utilized</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(193</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(45</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(238</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Additional charges to operations</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">88</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">8</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">96</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2011</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">828</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">854</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,682</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Charges utilized</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(239</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(548</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(787</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Additional charges to operations</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">89</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">76</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">165</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">678</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">382</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,060</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Less current portion</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(233</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(303</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(536</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 64%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">445</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">79</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">524</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div><div style="text-indent: 0pt; display: block;"><br /></div></div></div></div> 9075000 13763000 0 2449000 2449000 0 0 6178000 6178000 0 8903000 8903000 0 0 276000 276000 0 0 2511000 2511000 0 12802000 23778000 193000 45000 238000 239000 548000 787000 17817000 12435000 200000 0 276000 0 15005000 5000000 3660000 126000 0 4987000 11269000 15005000 1717000 1943000 2205000 1786000 2782000 9483000 -6147000 5018000 -35656000 -32562000 25307000 12735000 170488000 215767000 -19061000 -16929000 -198786000 0 0 0 0 -1032000 -1032000 0 0 0 0 -2438000 -2438000 0 0 0 0 -9627000 -9627000 0 0 0 0 -20873000 -20873000 0 0 0 0 -30988000 -30988000 0 0 0 0 -42393000 -42393000 0 0 0 0 -29845000 -29845000 0 0 0 0 -25600000 -25600000 0 0 0 0 -19061000 0 0 0 0 -16929000 -107351000 -21888000 -19461000 -88888000 -175669000 14400000 100000 1300000 2023 to 2032 2019 to 2032 2024 to 2032 32701000 16220000 208198000 150936000 167352000 1079000 1055000 947000 278000 3359000 <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(1)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;Organization and Nature of Operations</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160; <div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Tengion, Inc. (the Company) was incorporated in Delaware on July 10, 2003. The Company is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ. Using its Organ Regeneration Platform, the Company creates these neo-organs using a patient's own cells, or autologous cells. The Company believes its proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues. The Company's product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications. In addition, the Company's neo-organs are designed to replace the need to substitute other tissues of the body for a purpose to which they are poorly suited.</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Building on its clinical and preclinical experience, the Company is initially leveraging its Organ Regeneration Platform to develop its Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and its Neo-Kidney Augment for patients with advanced chronic kidney disease. The Company operates as a single business segment. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of product candidate development; technological uncertainty; dependence on collaborative partners; uncertainty regarding patents and proprietary rights; comprehensive government regulations; having no commercial manufacturing experience, marketing or sales capability or experience; and dependence on key personnel.</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">On September 4, 2012, the Company was notified by NASDAQ of its determination to delist the Company's common stock from NASDAQ effective at the open of business on September 6, 2012, due to its failure to comply with the minimum $2.5 million stockholders' equity requirement for continued listing on the Nasdaq Capital Market. 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</td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,898</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,898</div></td><td valign="bottom" style="border-bottom: black 2px solid; 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width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">(12,622</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">(13,072</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 76%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,021</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">612</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td></tr></table></div></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">During the year ended December 31, 2011, the Company recorded a non-cash property and equipment impairment charge of $7.4 million in connection with the restructuring plan described in Note 9. Under the restructuring plan, the Company eliminated plans to use its facility in East Norriton, Pennsylvania as a manufacturing center and centralized its research and development operations in its leased facility in Winston-Salem, North Carolina. The aggregate acquisition value of the impaired assets, most of which were leasehold improvements, was reduced by $17.6 million and the related accumulated depreciation was reduced by $10.2 million as there was no future realizable value related to these assets.</div></div><br /></div> 8624000 1466000 3245000 32734000 4500000 13293000 10103000 127960000 400000 <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(g)Research and Development</div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Research and development costs are charged to expense as incurred. Research and development costs consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, including stock-based compensation; payments made to third party contract research organizations for preclinical studies, investigative sites for clinical trials, and consultants; costs associated with regulatory filings and the advancement of the Company's product candidates through preclinical studies and clinical trials; laboratory and other supplies; manufacturing development costs; and related facility maintenance.</div></div></div> 0 1000000 1544000 1774000 0 200000 1544000 0 -230244000 -247173000 0 0 0 P8Y4M24D P5Y6M P6Y P5Y P7Y7M6D P8Y6M <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following fair value hierarchy table presents information about each major category of the Company's financial assets and liability measured at fair value on a recurring basis as of December 31, 2011 and 2012 (in thousands).</div><div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div></div></div></div><div><div><div><div></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="11" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 41%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Fair value measurement at reporting date using:</td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="text-align: center; padding-bottom: 2px; width: 13%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Quoted prices in active markets for identical assets (Level 1)</td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant other </div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">observable </div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 2)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant unobservable </div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 3)</div></td><td valign="bottom" style="padding-bottom: 2px; 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display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Assets:</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Cash and cash equivalents</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">9,244</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">9,244</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Short-term investments</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">U.S. government agency funds.</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,021</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,021</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Corporate securities</div></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,045</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,045</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Short-term investments</div></td><td align="left" valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,066</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,066</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 44%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">15,310</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">15,310</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Liabilities:</div></td><td align="left" valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 4px; width: 44%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Warrant liability</div></td><td align="left" valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,511</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,511</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div></div></div><div style="text-align: left;"><div><table><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="11" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 41%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Fair value measurement at reporting date using:</td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 11%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Quoted prices in active markets for identical assets (Level 1)</td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant other observable </div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 2)</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%;"><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Significant unobservable </div><div style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">inputs</font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">(Level 3)</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Total</td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">At December 31, 2012:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 27pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Assets:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Cash and cash equivalents</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Short-term investments</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="top" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 44%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="top" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,536</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 27pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Liabilities:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-indent: 0pt; display: block;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Derivative liability</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="top" style="width: 11%;"><div style="text-indent: 0pt; display: block;"></div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,449</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,449</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Embedded derivative liability</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="top" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 44%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Warrant liability</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; 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margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">During 2011 and 2012, the Company issued options to purchase 129,569, and 87,184 shares of common stock, respectively, to employees and non-employee directors under the Plans. 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</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td></tr></table></div></div> <div><div style="text-align: justify; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table contains additional cash flow information for the periods reported (in thousands).</div><div><div><div><div><div style="text-indent: 0pt; display: block;"><br /></div></div></div></div></div><div><div><div><div><div><table><tr><td align="left" valign="top" style="padding-bottom: 2px; width: 64%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="6" valign="bottom" style="border-bottom: black 2px solid; width: 7%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Year Ended </div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31,</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Period from</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">July 10, 2003</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(inception)</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; 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text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Supplemental cash flow disclosures:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Noncash investing and financing activities:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Conversion of note principal to redeemable convertible preferred stock</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,562</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Convertible note issued to initial stockholder for consulting expense</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">210</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Exchange of Demand Note for Convertible Note for Convertible Notes</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,005</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,005</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Fair value of embedded derivatives and derivatives issued with issuance of long-term debt</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,669</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,669</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="padding-left: 0pt; width: 64%; font-family: times new roman; margin-left: 9pt; font-size: 10pt;">&#160;&#160;&#160;&#160;&#160;&#160;&#160; Fair value of warrants issued with issuance of long-term debt </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;">105</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%; display: inline; font-family: times new roman; font-size: 10pt;">4,944</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;">7,234</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Fair value of warrants issued with issuance of common stock</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">16,947</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">16,947</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Conversion of redeemable convertible preferred stock into 566 shares of common stock</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">191,909</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr style="height: 18px;"><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Conversion of warrant liability </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">123</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr style="height: 16px;"><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Cash paid for interest, net of amounts capitalized </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">722</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">515</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">12,793</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td></tr><tr><td align="left" valign="top" style="width: 64%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Cash paid for issuance costs classified as interest expense</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 7%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: 'Times New Roman'; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td style="text-align: right; width: 7%; font-family: 'Times New Roman'; font-size: 10pt; vertical-align: bottom;">830</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td style="text-align: right; width: 12%; font-family: 'Times New Roman'; font-size: 10pt; vertical-align: bottom;">830</td><td valign="bottom" style="width: 1%;"></td></tr></table></div></div></div></div></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Total debt outstanding consists of the following (in thousands):</div><div><div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31,</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td valign="top" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Senior Secured Convertible Notes</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">15,005</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Embedded derivative liability</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">276</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Working Capital Note</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">5,000</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">3,660</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Equipment and Supplemental Working Capital Notes</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">126</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Unamortized debt discount </div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(139</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(7,672</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="width: 76%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,987</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">11,269</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Less current portion</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">(2,205</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(1,786</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 76%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Total long-term debt</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">2,782</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">9,483</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">During 2011, the Company issued options to purchase 1,000 shares of common stock to non-employee consultants under the Plan. No options were granted to non-employees during the year ended December 31, 2012. 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width: 1%; font-family: times new roman; font-size: 10pt; border-top: black 0.5pt solid; font-weight: bold;">&#160;</td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 72%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td><td valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;">&#160;</td></tr><tr><td valign="bottom" style="width: 72%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td colspan="2" valign="bottom" style="width: 11%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr><td valign="bottom" style="width: 72%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Volatility </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: center; width: 10%; font-family: times new roman; font-size: 10pt;">89%</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr><td valign="bottom" style="width: 72%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Expected term </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td colspan="2" valign="bottom" style="text-align: center; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">5 years</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr><td valign="bottom" style="width: 72%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Risk-free interest rate </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="text-align: center; width: 10%; font-family: times new roman; font-size: 10pt;">0.8%</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td></tr></table></div><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="width: 72%;"><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Dividend yield </div></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td colspan="2" valign="bottom" style="text-align: center; width: 11%;"><div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td></tr></table></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Principal payments due as of December 31, 2012 are as follows (in thousands):</div><div><div><div style="text-indent: 0pt; display: block;"><br /></div></div><div style="text-align: left;"><div><table><tr><td valign="bottom" style="width: 88%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2013 </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,943</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 88%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2014 </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,717</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 88%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2015 </div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; 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margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">18,665</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 88%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Less embedded derivative and unamortized debt discount</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(7,396</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr></table></div><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 4px; width: 88%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">11,269</div></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as of December 31, 2011, and 2012, as they would be anti-dilutive:</div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;">&#160; </td><td colspan="6" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Year Ended December 31,</div></td><td valign="bottom" style="border-bottom: black 2px solid; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 76%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Shares underlying warrants outstanding</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,064,616</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">80,250,702</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Shares underlying options outstanding</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">174,872</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">234,465</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Unvested restricted stock</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">13,988</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">74,372</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Convertible notes payable</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">20,007,002</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr></table></div></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes the activity related to the lease liability for the year ended December 31, 2011 and 2012 (in thousands).</div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div></div><div><div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Warehouse</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">space</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Office and manufacturing</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">space</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Total</div></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at January 1, 2011</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Initial fair value</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">933</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">891</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,824</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; 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display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(45</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(238</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Additional charges to operations</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">88</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">8</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">96</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2011</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">828</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">854</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,682</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Charges utilized</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(239</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(548</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(787</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Additional charges to operations</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">89</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">76</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">165</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">678</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">382</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,060</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 64%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Less current portion</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(233</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(303</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(536</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 64%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">445</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">79</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">524</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">A reconciliation of the statutory U.S. federal rate to the Company's effective tax rate is as follows:</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;">&#160; </td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td valign="bottom" style="padding-bottom: 2px; font-family: times new roman; font-size: 10pt;">&#160; </td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td></tr><tr><td align="left" valign="bottom" style="width: 76%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Percent of pre-tax income:</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">U.S. federal statutory income tax rate </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(34.0</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(34.0</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">State taxes, net of federal benefit </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(7.2</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(4.6</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Interest expense &#8211;revaluation of warrants </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(25.5</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(2.4</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="width: 76%;"><div style="text-align: justify; text-indent: 9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Other </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.8</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1.4</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 76%;"><div style="text-align: justify; text-indent: 9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Valuation allowance </div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">65.9</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">39.6</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 76%;"><div style="text-align: justify; text-indent: 9pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Effective income tax expense rate</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr></table></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued expenses consist of the following (in thousands):</div><div><div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid; width: 29%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31,</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; 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display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td></tr><tr><td valign="bottom" style="width: 53%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Outstanding at December 31, 2010</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">137,896</div></td><td valign="bottom" style="width: 1%; 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display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 53%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Granted</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160;</td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">130,569</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="top" style="width: 1%; 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</td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">5.66</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; 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</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; 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font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">12.69</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="border-bottom: black 4px double; width: 12%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">8.4</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; 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</td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; 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display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr><tr><td valign="bottom" style="width: 88%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2013 </div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; 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display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr></table></div></div><div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 6pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(1)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">The future minimum lease payments above do not include the impact of any potential sublease income discussed in Note 9 related to the Company's lease liability.</div></td></tr></table></div></div></div> <div><div style="text-align: justify; 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width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">(89,991</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">)</div></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 76%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 76%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td align="right" valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;">&#160; </td></tr></table></div></div> <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes outstanding warrants to purchase common stock:</div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div></div></div><div><div><div><div></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="7" valign="top" style="border-bottom: black 2px solid; text-align: center; width: 23%; border-top: medium none;"><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Shares Exercisable as </div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">of December 31,</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="bottom" style="text-align: center; padding-bottom: 2px; width: 11%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">Exercise </td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="padding-bottom: 2px; width: 32%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="top" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">2011</td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">2012</td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="top" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">Price</td><td valign="bottom" style="text-align: center; padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 32%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">Expiration</td></tr><tr><td align="left" valign="bottom" style="width: 31%; border-top: medium none;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Equity-classified warrants</div></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 9%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 9%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 9%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 32%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued to vendors</div></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">389</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">389</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">23.20</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">September 2015 through </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">December 2016</div></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued pursuant to refinancing </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">of Working Capital Note</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,068</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,068</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">28.80</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">March 2016</div></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued to lenders</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,449</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,449</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">234.40</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">August 2013 through</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">December 2016</div></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued to lenders</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,608</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,608</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">263.90</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">October 2015 through</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">September 2019</div></td></tr><tr><td valign="bottom" style="width: 31%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">18,514</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">18,514</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 32%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 31%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 32%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Liability-classified warrants</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 32%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued pursuant to March 2011 equity financing <font style="display: inline; font-size: 10pt;">(1)</font></div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,046,102</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">27,388,851</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="middle" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1.10</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">March 2016</div></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued pursuant to October 2012 debt financing</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">52,843,337</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="middle" style="padding-bottom: 2px; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.75</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">October 2014 through October 2022</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 31%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,046,102</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">80,232,188</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 32%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 31%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Total</div></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; 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In addition, the Company accounts for stock-based compensation to nonemployees in accordance with the accounting guidance for equity instruments that are issued to other than employees.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Determining the appropriate fair value of stock-based payment awards require the input of subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility. The Company uses the Black-Scholes option-pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based payment awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different in the future. Since the Company does not have sufficient historical volatility of its stock for the expected term of its options, it uses comparable public companies as a basis for its expected volatility to calculate the fair value of option grants.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company's current estimates, such amounts will be recorded as an adjustment in the period in which estimates are revised. The Company considers many factors when estimating expected forfeitures for stock awards granted to employees, consultants and directors, including types of awards, employee class, and an analysis of the Company's historical and known forfeitures on existing awards. Under the true-up provisions of the stock based compensation guidance, the Company records additional expense if the actual forfeiture rate is lower than estimated, and a recovery of expense if the actual forfeiture rate is higher than estimated, during the period in which the options vest.</div></div></div> 12.69 0 0 70161000 68000 0 14000 20944000 61000 24191000 67000 51828000 66000 81954000 68000 81954000 70000 0 1239000 0 2381000 0 2449000 6066000 0 <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(3) Summary of Significant Accounting Policies</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(a)Use of Estimates</div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The preparation of financial statements, in accordance with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.</div></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(b)Fair Value of Financial Instruments</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">As of December 31, 2011 and 2012, the carrying amounts of financial instruments held by the Company, which include cash equivalents, short-term investments, prepaid expenses and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments. In addition, the carrying value of the Company's debt instruments, which do not have readily ascertainable market values, approximate fair value, given that the interest rates on outstanding borrowings approximate market rates.</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(c)Cash and Cash Equivalents</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. 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Upon the achievement of (1) the successful completion of patient implants in the Phase I clinical trial of the Company's Neo-Urinary Conduit and (2) analysis of in-life data from the Company's GLP studies for the Neo-Kidney Augment that demonstrates that continued development is warranted (the Milestones), the lenders will instruct the escrow agent to release the escrowed funds to the Company. If the Milestones are not achieved by March 1, 2013<font style="display: inline; font-weight: bold;">, </font>at the direction of the holders of at least 40% of the aggregate principal amount of the Convertible Notes, including certain specified holders, the escrow agent will transfer to the Company the portion of the escrowed amount that the holders agree is necessary for the orderly disposition of the Company's assets. 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text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td></tr><tr><td valign="bottom" style="width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued severance benefits</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,774</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Other accrued compensation and benefits</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">580</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">716</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,354</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">716</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In November 2011, the Company's Board of Directors approved a restructuring plan designed to fund the Company's lead development programs through key milestones in 2012, eliminate plans to use its facility in East Norriton, Pennsylvania as a manufacturing center, and centralize its research and development operations in its leased facility in Winston-Salem, North Carolina. The Company is exploring options to significantly reduce the amount of space it currently rents.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company offered severance benefits to the terminated employees, and recorded a $1.7 million charge for personnel-related termination costs in the fourth quarter of 2011, of which $0.8 million was included in research and development expense and $0.9 million was included in general and administrative expense in the accompanying statements of operations. As of December 31, 2012 the Company had completed payment of these severance benefits.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">As of December 31, 2011 accrued severance benefits also included $0.2 million related to the severance agreement the Company entered into with its former president and chief executive officer in June 2011. The severance agreement provided for the employee to receive 12 monthly severance payments equal to his current monthly salary and a one-time cash payment equal to his target bonus amount for 2011. During the year ended December 31, 2011, the Company recorded compensation expense within general and administrative expense and a corresponding liability of $0.7 million for the estimated value of the Company's obligations under the severance agreement. As of December 31, 2012, all payments in connection with the severance agreement were made.</div><div style="text-indent: 0pt; display: block;"><br /></div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes the activity related to accrued severance benefits for the year ended December 31, 2012 (in thousands).</div><div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="width: 85%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 13%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 85%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 36pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2011</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 12%; font-family: times new roman; font-size: 10pt;">1,544</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 85%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 36pt; font-size: 10pt; margin-right: 0pt;">Net charges paid</div></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: right; width: 12%; font-family: times new roman; font-size: 10pt;">(1,544 </td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">)</td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 85%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 36pt; font-size: 10pt; margin-right: 0pt;">Balance at December 31, 2012</div></td><td align="right" valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="border-bottom: black 4px double; text-align: right; width: 12%; font-family: times new roman; font-size: 10pt;">&#8212;</td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 4px double; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Other accrued compensation and benefits for the year ended December 31, 2011 and 2012 consisted primarily of accrued bonus of $0.4 million and $0.7 million, respectively.</div></div></div></div> <div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">(8)&#160;&#160;&#160;&#160;&#160;&#160;&#160; &#160;&#160;</font><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Accrued expenses</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160; <div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued expenses consist of the following (in thousands):</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid; width: 29%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31,</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; width: 14%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; width: 14%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td></tr><tr><td valign="bottom" style="width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued consulting and professional fees</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">119</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">387</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued research and development</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">235</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">453</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued interest on convertible notes</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">373</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Other</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">83</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">241</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">437</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,454</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 70%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 12%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div></div> <div><div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">(13)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; </font><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;">Warrants</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160; <div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are accounted for as derivative liabilities if the stock warrants allow for cash settlement or provide for modification of the warrant exercise price in the event subsequent sales of common stock are at a lower price per share than the then-current warrant exercise price. The Company classifies derivative warrant liabilities on the balance sheet as a current liability, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant. </div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes outstanding warrants to purchase common stock:</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-indent: 0pt; display: block;"></div><div><div></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="7" valign="top" style="border-bottom: black 2px solid; text-align: center; width: 23%; border-top: medium none;"><div><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Shares Exercisable as </font></div><div style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">of December 31,</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="bottom" style="text-align: center; padding-bottom: 2px; width: 11%; border-top: medium none;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Exercise </font></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="padding-bottom: 2px; width: 32%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="top" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">2011</td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">2012</td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td colspan="3" valign="top" style="border-bottom: black 2px solid; text-align: center; width: 11%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">Price</td><td valign="bottom" style="text-align: center; padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 32%; font-family: times new roman; font-size: 10pt; border-top: medium none; font-weight: bold;">Expiration</td></tr><tr><td align="left" valign="bottom" style="width: 31%; border-top: medium none;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Equity-classified warrants</div></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 9%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 9%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 9%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="top" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 1%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td><td valign="bottom" style="width: 32%; font-family: times new roman; font-size: 10pt; border-top: medium none;"></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued to vendors</div></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">389</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">389</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">23.20</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">September 2015 through </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">December 2016</div></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued pursuant to refinancing </div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">of Working Capital Note</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,068</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">7,068</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">28.80</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">March 2016</div></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued to lenders</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,449</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">6,449</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">234.40</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">August 2013 through</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">December 2016</div></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued to lenders</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,608</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">4,608</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="padding-bottom: 2px; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">263.90</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">October 2015 through</div><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">September 2019</div></td></tr><tr><td valign="bottom" style="width: 31%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">18,514</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">18,514</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 32%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 31%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 32%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Liability-classified warrants</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 32%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td align="left" valign="bottom" style="width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued pursuant to March 2011 equity financing <font style="display: inline; font-size: 10pt;">(1)</font></div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,046,102</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">27,388,851</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="middle" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1.10</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">March 2016</div></td></tr><tr><td align="left" valign="bottom" style="padding-bottom: 2px; width: 31%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Issued pursuant to October 2012 debt financing</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">52,843,337</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="middle" style="width: 1%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="middle" style="padding-bottom: 2px; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">0.75</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="left" valign="bottom" style="padding-bottom: 2px; width: 32%;"><div style="text-align: left; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">October 2014 through October 2022</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 31%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,046,102</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">80,232,188</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 32%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 31%;"><div style="text-align: justify; text-indent: -18pt; display: block; font-family: times new roman; margin-left: 18pt; font-size: 10pt; margin-right: 0pt;">Total</div></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,064,616</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">80,250,702</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 32%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div></div></div><div>&#160;</div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(1)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.</div></td></tr></table></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: left; font-style: italic; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Equity-classified Warrants</div><div style="text-align: left; font-style: italic; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">In March 2011, the Company granted a warrant to a lender to purchase 7,068 shares of common stock in connection with the refinancing of the Company's Working Capital Note. See Note 10 for a discussion of the refinancing. The Company determined the fair value of the warrant as of the date of grant was $14.90 per share by utilizing the Black-Scholes model. In estimating the fair value of the warrant, the Company utilized the following inputs: closing price per share of common stock of $27.40, volatility of 64.96%, expected term of 5 years, risk-free interest rate of 2.0% and dividend yield of zero.</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: justify; font-style: italic; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Liability-classified Warrants</div><div style="text-align: justify; font-style: italic; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">&#160;</div><div style="text-align: justify; font-style: italic; text-indent: 36pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011 Warrants</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In March 2011, the Company issued warrants (2011 Warrants) to purchase 1,046,102 shares of common stock in connection with a private placement transaction. Each warrant was exercisable in whole or in part at any time until March 4, 2016 at a per share exercise price of $28.80, subject to certain adjustments as specified in the warrant agreement. The Company valued the warrants as derivative financial instruments as of the date of issuance (March 4, 2011) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations.</div><br />On December 31, 2012, the Company commenced an offer to the holders of 2011 Warrants to amend and restate the 2011 Warrants. The Company subsequently executed exchange agreements (Exchange Agreements) with all of the holders of 2011 Warrants to exchange their 2011 Warrants for amended and restated warrants (2011 Amended and Restated Warrants).</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Pursuant and subject to the Exchange Agreements, which generally governed the process of the exchange, the Holders executing the Exchange Agreements exchanged the 2011 Warrants held by each of them for 2011 Amended and Restated Warrants that provide for the following amendments:</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 54pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">an adjusted exercise price of $1.10, and a proportionate adjustment in the number of shares underlying the 2011 Warrants, which takes into account all adjustments under the 2011 Warrants as a result of the 2012 Financing;</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 54pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">certain edits to remove a Delisting (as defined in the 2011 Warrants) from qualifying as a fundamental transaction;</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 54pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">a Black Scholes calculation used to the determine the cash value received by a holder from the Company in connection with a repurchase of the unexercised portion of a warrant after the occurrence of a fundamental transaction that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company's common stock, immediately prior to the closing of a fundamental transaction;</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 54pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">a Black Scholes calculation for purposes of determining the value of options issued in connection with the sale of other securities that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company's common stock on the date the options are publicly announced, and if not announced, on the date they are issued; and</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 18pt;"><div style="display: inline; font-family: Times New Roman; font-size: 10pt;"></div></td><td style="width: 54pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#183;</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">excluding the 2012 Financing and exercise of the call option provided under its terms as a trigger for adjustments to the exercise price of the warrants except that adjustments to the exercise price, conversion price or purchase price of the 2012 Financing securities (i) resulting from registration of such securities with the Securities Exchange Commission or the commencements of the Rule 144 Period, as contemplated by the 2012 Financing documents, will result in a proportional adjustment to the exercise price of the warrants and (ii) resulting from additional financings or other events will result in adjustments of the exercise price of the warrants pursuant to the terms of the 2011 Amended and Restated Warrant.</div><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">&#160;</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></div><div style="text-indent: 0pt; display: block;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;">Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Following execution by the holders of the Exchange Agreements and receipt of the Amended and Restated 2011 Warrants, such holders had the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10. </font><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price. In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Fundamental Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange). The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Fundamental Transaction.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The net cash settlement value at the time of any future Fundamental Transaction will depend upon the value of the following inputs at that time: the price per share of the Company's common stock, the volatility of the Company's common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company's dividend yield. The warrant requires use of a volatility assumption equal to the greater of (i) 100%, (ii) the 30-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction, or (iii) the arithmetic average of the 10, 30, and 50-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction. The net cash settlement value at the time of a Fundamental Transaction could exceed the carrying value. For example, as of December 31, 2012, the calculated cash settlement value of $16.5 million exceeded the fair value of $2.4 million.</div><div style="text-indent: 0pt; display: block;"></div><br />As of December 31, 2011, the fair value of the warrants is determined using a risk-neutral lattice methodology within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or Delisting into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company's common stock, assumptions regarding the expected amounts and dates of future equity financing activities, assumptions regarding the likelihood and timing of Fundamental Transactions or a Delisting, the historical volatility of the stock prices of the Company's peer group, risk-free rates based on U.S. Treasury security yields, and the Company's dividend yield. Changes in these assumptions can materially affect the fair value estimate.</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The fair value of the 2011 Warrants as of December 31, 2012 was determined using a risk-neutral framework within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or, in the case of the December 31, 2011 valuation, a Delisting into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company's common stock; assumptions regarding the expected amounts and dates of future debt and equity financing activities; assumptions regarding the likelihood and timing of Fundamental Transactions and, the historical volatility of the stock prices of the Company's common stock; risk-free rates based on U.S. Treasury security yields; and the Company's dividend yield. </div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><br /><font style="display: inline; font-family: Times New Roman; font-size: 10pt;">In connection with the valuation performed on the 2011 Warrants, the Company believed the common stock price had not fully adjusted for the potential future dilution from the private placement completed on October 2, 2012 due to the trading restrictions on the unregistered shares of common stock issued and issuable from the conversion of debt and warrants, the uncertainty of the Company's outcome on its research programs, and the anti-dilution adjustment features of the warrants. Therefore, the Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. The valuation resulted in a model-derived common stock value of $0.05 per share primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of 2011 and 2012 Warrants. Changes in these assumptions can materially affect the fair value estimate. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.</font></div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">During the year ended December 31, 2011 and 2012, the Company recorded non-operating income of $14.4 million and $0.1 million, respectively due to a decrease in the estimated fair value of these warrants. </div></div><div style="text-indent: 0pt; display: block;"><br /></div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160; <div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2011 Warrants as of the dates indicated along with the assumptions utilized in each calculation.</div><div><div></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 22%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Fair value as of December 31,</td><td valign="bottom" style="padding-bottom: 2px; width: 2%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="text-align: center; padding-bottom: 2px; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Net cash settlement value as of</td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 10%; font-family: times new roman; font-size: 10pt; font-weight: bold;">2011</td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 9%; font-family: times new roman; font-size: 10pt; font-weight: bold;">2012</td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 2%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">December 31, 2012</td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Calculated aggregate value (in thousands)</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">2,511</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">2,378</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">16,525</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 70%; vertical-align: text-top;">(2)</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Exercise price per share of warrant <font style="display: inline; font-size: 10pt;">(1)</font></div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">28.80</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.10</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.10</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;">Closing price per share of common stock</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$ </td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">4.70</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="text-align: right; width: 1%;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Not applicable</font></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$ </td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.99</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Equity volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">93.8</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">115.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;">% <font style="display: inline; font-size: 70%; vertical-align: text-top;">(3)</font></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Asset volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">90.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Probability of Fundamental Transaction</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">28.9</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Weighted average risk-free interest rate</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.7</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.3</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.4</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;">%</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Dividend yield</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div><div style="text-indent: 0pt; display: block;"><br /></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(1)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(2)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(3)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012 based on the terms of the Amended and Restated Warrant Agreement.</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">&#160;</div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012 Warrants</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">On October 2, 2012, as part of the 2012 Financing, the Company issued the 2012 Warrants to holders of the Convertible Notes. The 2012 Warrants are exercisable at an exercise price of $0.75 per share subject to certain adjustments as specified in the warrant agreement. The Company valued the warrants as derivative financial instruments as of the date of issuance (October 2, 2012) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The 2012 Warrants include (i) five-year warrants to purchase up to 16,672,145 shares of common stock, (ii) ten-year warrants to purchase up to 33,344,293 shares of common stock and (iii) two-year warrants, issued only to holders of the Demand Notes, to purchase up to 1,118,722 shares of common stock.</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">In addition, the Company issued Horizon, ten-year warrants to purchase 1,138,785 shares of common stock and five-year warrants to purchase 569,392 shares of common stock in connection with the Loan Amendment (see Note 10).</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price. In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Major Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange). The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Major Transaction.</div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The net cash settlement value at the time of any future Major Transaction will depend upon the value of the following inputs at that time: the price per share of the Company's common stock, the volatility of the Company's common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company's dividend yield. The warrant requires use of a volatility assumption equal to the Five-Day Volume Weighted Average Price (VWAP) determined as of the trading day immediately following announcement of a Major Transaction. The net cash settlement value at the time of a Fundamental Transaction could exceed the carrying value. For example, as of December 31, 2012, the calculated cash settlement value of $39.9 million exceeded the fair value of $3.8 million.</div><div style="text-indent: 0pt; display: block;"></div><br />The fair value of the warrants as of October 2, 2012 and December 31, 2012 was determined using a risk-neutral framework within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction. In addition, the following inputs were used in the valuation model: assumptions regarding the aggregate value of the Company's debt and equity instruments, the amounts and dates of future debt financing transaction, and the historical and prospective volatility in the value of the Company's debt and equity instruments. The Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. As of December 31, 2012, the valuation resulted in a model-derived common stock value of $0.04 per share primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of the 2011 and 2012 Warrants. Changes in these assumptions can materially affect the fair value estimate. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.</div></div></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">During the year ended December 31, 2012, the Company recorded non-operating income of $1.3 million, due to a decrease in the estimated fair value of these warrants. </div><div style="text-indent: 0pt; display: block;"><br /></div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2012 Warrants as of the dates indicated along with the assumptions utilized in each calculation.</div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid; width: 23%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Fair value as of:</div></td><td rowspan="2" valign="bottom" style="padding-bottom: 2px; width: 2%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="3" rowspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Net cash settlement value</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">as of</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31, 2012</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 10%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">October 2, 2012</div></td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 10%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31, 2012</div></td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Calculated aggregate value (in thousands)</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">4,944</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">3,800</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">39,900</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 70%; vertical-align: text-top;">(1)</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Exercise price per share of warrant</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.75</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.75</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.75</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Closing price per share of common stock</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.99</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 70%; vertical-align: text-top;">(2)</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Equity volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">115</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">115</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">76</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">% <font style="display: inline; font-size: 70%; vertical-align: text-top;">(3)</font></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Asset volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">90</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">90</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Probability of Fundamental Transaction</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Expected term (years)</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">8.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Risk-free interest rate</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.2</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.3</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.4</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Dividend yield</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div style="text-indent: 0pt; display: block;"><br /></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(1)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model defined in the 2012 Warrant Agreement.</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(2)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the 5 day Tengion stock VWAP used to calculate the net cash settlement value as of December 31, 2012.</div></td></tr></table></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(3)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012, defined in the 2012 Warrant Agreement.</div></td></tr></table></div></div></div> 2400000 3800000 <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(d)Short-term Investments </div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company classifies investments as held-to-maturity at the time of purchase and reevaluates such designation as of each balance sheet date. Securities are classified as held-to-maturity when the Company has the positive intent and the ability to hold the securities until maturity. Held-to-maturity investments are recorded at amortized cost, adjusted for the accretion of discounts or premiums. Discounts or premiums are accreted into interest income over the life of the related investment using the straight-line method, which approximates the effective-yield method. Dividend and interest income are recognized when earned.</div></div></div> <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(n)Reverse Stock Split</div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">On May 25, 2012, the Company's Board of Directors approved a reverse stock split on the basis of one share of common stock for each currently outstanding 10 shares of pre-split common stock that became effective on June 14, 2012. All common share and per-share data included in these financial statements reflect such reverse stock split.</div></div></div> 0 3669000 3669000 16947000 0 16947000 September 2015 through December 2016 March 2016 August 2013 through December 2016 October 2015 through September 2019 March 2016 October 2014 through October 2022 14.9 P30D P10D P30D P50D 2511000 2378000 4944000 3800000 16525000 39900000 1.10 0.75 0.99 0.99 1 0.76 P4Y2M12D 0.004 0.006 0 0 2 1.15 1.15 1.15 1.15 1.15 0.938 1.15 1.15 1.15 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 P5D <div><div style="text-align: justify; font-style: italic; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 36pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">(k)Warrants</div><div><div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">&#160;</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants that allow for cash settlement or provide for modification of the warrant exercise price are accounted for as derivative liabilities. The Company classifies derivative warrant liabilities on the balance sheet as a current liability. The changes in fair value of the derivative warrant liabilities are remeasured at each balance sheet date and recorded in current period earnings.</div></div></div></div> 0 0 210000 2 1200000 P5Y 2 4 6900000 2000000 P2Y P15Y P7Y 5040000 5198000 16453000 14703000 42700000 35700000 P15Y P5Y 933000 891000 1824000 88000 8000 96000 89000 76000 165000 28.30 0.015 0.06 0.12 16947000 0 16947000 0 4944000 4944000 <div><div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2011 Warrants as of the dates indicated along with the assumptions utilized in each calculation.</div><div><div><div><div><div></div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 22%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Fair value as of December 31,</td><td valign="bottom" style="padding-bottom: 2px; width: 2%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="text-align: center; padding-bottom: 2px; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">Net cash settlement value as of</td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 10%; font-family: times new roman; font-size: 10pt; font-weight: bold;">2011</td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 9%; font-family: times new roman; font-size: 10pt; font-weight: bold;">2012</td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 2%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; text-align: center; width: 13%; font-family: times new roman; font-size: 10pt; font-weight: bold;">December 31, 2012</td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 9%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Calculated aggregate value (in thousands)</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">2,511</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">2,378</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">16,525</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 70%; vertical-align: text-top;">(2)</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Exercise price per share of warrant <font style="display: inline; font-size: 10pt;">(1)</font></div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">28.80</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.10</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.10</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;">Closing price per share of common stock</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$ </td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">4.70</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="text-align: right; width: 1%; font-family: times new roman; font-size: 10pt;">Not applicable</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$ </td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.99</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Equity volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">93.8</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">115.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;">% <font style="display: inline; font-size: 70%; vertical-align: text-top;">(3)</font></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Asset volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">90.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Probability of Fundamental Transaction</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">28.9</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Weighted average risk-free interest rate</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.7</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.3</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.4</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;">%</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Dividend yield</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 9%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 3%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div><div style="text-indent: 0pt; display: block;"><br /></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(1)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.</div></td></tr></table></div></div></div></div></div><div><div><div><div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(2)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.</div></td></tr></table></div></div></div></div></div><div><div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div><div><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(3)</div></div></div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012 based on the terms of the Amended and Restated Warrant Agreement.</div></td></tr></table></div></div></div></div> <div><div>The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2012 Warrants as of the dates indicated along with the assumptions utilized in each calculation.</div><div><div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid; width: 23%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Fair value as of:</div></td><td rowspan="2" valign="bottom" style="padding-bottom: 2px; width: 2%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="3" rowspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 11%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">Net cash settlement value</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">as of</div><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31, 2012</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 63%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 10%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">October 2, 2012</div></td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td><td colspan="2" valign="bottom" style="border-bottom: black 2px solid; width: 10%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31, 2012</div></td><td nowrap="nowrap" valign="bottom" style="border-bottom: black 2px solid; text-align: left; width: 1%; font-family: times new roman; font-size: 10pt; font-weight: bold;"></td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td colspan="2" valign="bottom" style="width: 10%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Calculated aggregate value (in thousands)</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">4,944</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">3,800</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">39,900</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 70%; vertical-align: text-top;">(1)</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Exercise price per share of warrant</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.75</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.75</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.75</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Closing price per share of common stock</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">$</td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.99</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 70%; vertical-align: text-top;">(2)</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Equity volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">115</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">115</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">76</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">% <font style="display: inline; font-size: 70%; vertical-align: text-top;">(3)</font></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Asset volatility</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">90</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">90</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Probability of Fundamental Transaction</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">100</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Expected term (years)</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Not applicable</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">8.0</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Risk-free interest rate</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.2</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">0.3</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;">1.4</td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;">%</td></tr><tr><td valign="bottom" style="width: 63%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Dividend yield</div></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td align="right" colspan="2" valign="bottom" style="width: 10%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">None</div></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="width: 63%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 2%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="text-align: right; width: 9%; font-family: times new roman; font-size: 10pt;"></td><td nowrap="nowrap" valign="bottom" style="text-align: left; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div><div style="text-indent: 0pt; display: block;"><br /></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(1)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model defined in the 2012 Warrant Agreement.</div></td></tr></table></div></div></div><div><div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(2)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the 5 day Tengion stock VWAP used to calculate the net cash settlement value as of December 31, 2012.</div></td></tr></table></div></div></div><div><table align="center" border="0" cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr valign="top"><td style="width: 45pt;"><div style="text-indent: 0pt; font-family: Times New Roman; margin-left: 0pt; font-size: 70%; vertical-align: text-top; margin-right: 0pt;">(3)</div></td><td><div style="text-align: justify; font-family: Times New Roman; font-size: 10pt;">Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012, defined in the 2012 Warrant Agreement.</div></td></tr></table></div></div> 310000 0 310000 17600000 <div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued compensation and benefits expenses consist of the following (in thousands):</div><div style="text-align: justify; text-indent: 0pt; display: block; font-family: Times New Roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#160;</div><div><div style="text-align: left;"><table cellpadding="0" cellspacing="0" style="width: 100%; font-family: times new roman; font-size: 10pt;"><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="7" valign="bottom" style="border-bottom: black 2px solid; width: 29%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">December 31,</div></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; width: 14%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2011</div></td><td valign="top" style="padding-bottom: 2px; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td colspan="3" valign="bottom" style="border-bottom: black 2px solid; width: 14%;"><div style="text-align: center; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; font-weight: bold; margin-right: 0pt;">2012</div></td></tr><tr><td valign="bottom" style="width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Accrued severance benefits</div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">1,774</div></td><td valign="top" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">&#8212;</div></td><td valign="bottom" style="width: 1%; display: inline; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 2px; width: 70%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">Other accrued compensation and benefits</div></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">580</div></td><td valign="top" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 2px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td align="right" valign="bottom" style="border-bottom: black 2px solid; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">716</div></td><td valign="bottom" style="border-bottom: black 2px solid; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr><tr><td valign="bottom" style="padding-bottom: 4px; width: 70%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">2,354</div></td><td valign="top" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td><td valign="bottom" style="padding-bottom: 4px; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;"></div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%;"><div style="text-align: justify; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">$</div></td><td align="right" valign="bottom" style="border-bottom: black 4px double; width: 12%;"><div style="text-align: right; text-indent: 0pt; display: block; font-family: times new roman; margin-left: 0pt; font-size: 10pt; margin-right: 0pt;">716</div></td><td valign="bottom" style="border-bottom: black 4px double; width: 1%; font-family: times new roman; font-size: 10pt;"></td></tr></table></div></div></div> 12 700000 235000 453000 24 1000 1000000 P10Y P5Y P5Y P10Y P2Y P10Y P5Y P150D P180D 0.09985 P1D Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Following execution by the holders of the Exchange Agreements and receipt of the Amended and Restated 2011 Warrants, such holders had the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10. Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Following execution by the holders of the Exchange Agreements and receipt of the Amended and Restated 2011 Warrants, such holders had the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10 The future minimum lease payments above do not include the impact of any potential sublease income discussed in Note 9 related to the Company's lease liability. Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant. Represents the 5 day Tengion stock VWAP used to calculate the net cash settlement value as of December 31, 2012. Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012 based on the terms of the 2011 warrant agreement. Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012. 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Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Remaining Contractual Term Expected term Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term Exercisable at December 31, 2011 Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Remaining Contractual Term Outstanding Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term Sale of Stock, Name of Transaction [Domain] Financial assets and liabilities measured at fair value on a recurring basis Restricted stock activity Supplemental Cash Flow Information Debt outstanding Weighted-average assumptions Principal payments due Potentially Dilutive Securities Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block] Activity related to lease liability Reconciliation of statutory U.S. federal rate to entity's effective tax rate Accrued expenses Schedule of Accrued Liabilities [Table Text Block] Stock option activity Schedule of Capital Leased Assets [Table] Future minimum lease payments Deferred tax assets Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table] Outstanding warrants Schedule of Share-based Compensation Arrangements by Share-based Payment Award [Table] Activity related to accrued severance benefits Schedule of Property, Plant and Equipment [Table] Security deposit Security Deposit Series A Preferred Stock [Member] Series C Preferred Stock [Member] Series B Preferred Stock [Member] Personnel-related termination costs Charge related to termination benefits Number of shares [Abstract] Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] Stock-based compensation expense Share-based Compensation Forfeited (in dollars per share) Granted (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value Forfeited (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period Nonvested (in dollars per share) Nonvested (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value Weighted-average exercise price [Abstract] Equity awards granted under plan vesting period Weighted-average grant date fair value [Abstract] Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Roll Forward] Stock options issued for purchase of common stock (in shares) Granted (in shares) Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Nonvested (in shares) Nonvested (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number Vested (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period Forfeited (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value Common stock value per share (in dollars per share) Closing price per share of common stock (in dollars per share) Granted (in dollars per share) Issuance of restricted stock to employees (in shares) Granted (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period Exercised (in dollars per share) Risk free interest rate (in hundredths) Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate Volatility (in hundredths) Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate Dividend yield (in hundredths) Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate Vested (in dollars per share) Fair value of options (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value Exercisable at December 31, 2012 (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Number of shares available for future grants (in shares) Number of shares [Abstract] Weighted-average assumptions [Abstract] Forfeited (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period Vested and expected to vest at December 31, 2012 (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number Exercisable at December 31, 2012 Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Aggregate Intrinsic Value Outstanding (in dollars per share) Outstanding (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Outstanding Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value Vested and expected to vest at December 31, 2012 Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value Exercisable at December 31, 2012 (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Weighted Average Exercise Price Outstanding (in shares) Outstanding (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Award Type [Domain] Stock-Based Compensation Vested and expected to vest at December 31, 2012 (in dollars per share) Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price Balance (in shares) Balance (in shares) Shares, Outstanding Short-term investments Summary of Significant Accounting Policies Significant Accounting Policies [Text Block] State Net Operating Losses [Member] Statement [Table] Statement [Line Items] Statements of Cash Flows [Abstract] Statement, Equity Components [Axis] Balance Sheets [Abstract] Class of Stock [Axis] Stock Options [Member] Shares underlying options outstanding [Member] Cancellation of restricted stock to employees (in shares) Stock Issued During Period, Shares, Restricted Stock Award, Forfeited Issuance of common stock upon exercise of options Stock Issued During Period, Value, Stock Options Exercised Effect of June 12 reverse stock split (see Note 3) (in shares) Stock Issued During Period, Shares, Reverse Stock Splits Issuance of common stock to initial stockholder Stock Issued During Period, Value, New Issues Conversion of preferred stock to common stock Conversion of redeemable convertible preferred stock into 566 shares of common stock Stock Issued During Period, Value, Conversion of Convertible Securities Cancellation of restricted stock to employees Stock Issued During Period, Value, Share-based Compensation, Forfeited Issuance of common stock (in shares) Issuance of common stock to initial stockholder (in shares) Issuance of common stock upon exercise of options (in shares) Exercised (in shares) Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period Conversion of preferred stock to common stock (in shares) Stock Issued During Period, Shares, Conversion of Convertible Securities Issuance of restricted common stock to employees Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures Issuance of restricted common stock to employees (in shares) Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures Stockholders' equity (deficit): Stockholders equity: Total stockholders' equity (deficit) Balance Balance Stockholders' Equity Attributable to Parent Capital Structure [Abstract] Capital Structure Stockholders' Equity Note Disclosure [Text Block] Subsequent Events Subsequent Events [Abstract] Subsequent Event Type [Domain] Subsequent Event [Line Items] Subsequent Event Type [Axis] Subsequent Event [Table] Subsequent Event [Member] Subsidiary or Equity Method Investee, Sale of Stock by Subsidiary or Equity Investee [Table] Subsidiary, Sale of Stock [Line Items] Subsidiary, Sale of Stock [Axis] Summary of carryforwards of net operating losses and tax credits Supplemental Cash Flow Information [Abstract] Research and development credits Title of Individual with Relationship to Entity [Domain] Types of Financial Instruments [Domain] Type of Restructuring [Domain] Use of Estimates U.S. government agency funds [Member] Increase in valuation allowance Warrant liability [Member] Shares underlying warrants outstanding [Member] Warrants [Abstract] Warrant liability Weighted-average common stock outstanding - basic and diluted (in shares) Laboratory equipment [Member] Document and Entity Information [Abstract] The amount of debt discount on current portion of long term debt that was originally recognized at the issuance of the instrument that has yet to be amortized. Long Term Debt Current, Unamortized Discount Current portion of long-term debt, debt discount The amount of debt discount on long term debt that was originally recognized at the issuance of the instrument that has yet to be amortized. Long Term Debt, Unamortized Discount Long-term debt, debt discount The value of grants made during the period on other than stock (or unit) option plans (for example, phantom stock or unit plan, stock or unit appreciation rights plan, performance target plan). Issuance of restricted stock to employees Issuance of restricted stock to employees Equity impact of the value of non vested restricted common stock repurchased during the period. Repurchased Non Vested Restricted Stock Repurchased nonvested restricted stock Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (unaudited) [Abstract] Minimum stockholders' equity requirement for continued listing on the Nasdaq Capital Market. Minimum stockholders equity requirement for continued listing on stock exchange Minimum stockholders equity requirement for continued listing on Nasdaq Capital Market Percentage of aggregate principal amount of notes transfer by escrow agent to the entity if milestones are not achieved. Percentage of aggregate principal amount of notes transfer by escrow agent if milestones not achieved Percentage of aggregate principal amount of notes transfer by escrow agent if milestones not achieved (in hundredths) Increase or decrease in fair value of equity warrants to purchase shares of common stock. Increase Decrease In Warrant Liability Change in fair value of warrant liability Change in fair value of warrant liability The fair value of demand notes in exchange for Convertible Notes in noncash investing or financing activities. Exchange of Demand Note for Convertible Notes Exchange of Demand Note for Convertible Notes The amount of the embedded derivative liability and debt discount that was originally recognized at the issuance of the instrument that has yet to be amortized. Debt Instrument and Embedded Derivative Liability, Unamortized Debt Discount Less embedded derivative and unamortized debt discount The reduction in the value of stock outstanding during the period as a result of a reverse stock split. Stock Issued During Period Value Reverse Stock Splits Effect of June 12 reverse stock split (see Note 3) Equity impact of the value of new stock issued during the period for an equity financing. Stock Issued During Period Value New Issues Equity Financing Proceeds from equity financing, net of expenses Number of shares issued during the period for an equity financing. Stock Issued During Period Shares New Issues Equity Financing Proceeds from equity financing, net of expenses (in shares) Equity impact of the value of warrants to purchase common stock issued during the period related to equity financing. Issuance Of Common Stock Warrants Equity Financing Issuance of warrants to purchase common stock issued in connection with equity financing Equity impact of the value of Series C Redeemable Convertible Preferred stock issued during the period at $1.82 per share, net of issuance costs. Issuance Of Series C Redeemable Convertible Preferred Shares Value Issuance of Series C Redeemable Convertible Preferred stock, net of expenses The number of Series C Redeemable Convertible Preferred stock issued during the period at $1.82 per share, net of issuance costs. Issuance Of Series C Redeemable Convertible Preferred Shares Issuance of Series C Redeemable Convertible Preferred stock, net of expenses (in shares) Equity impact of the value of Series B Redeemable Convertible Preferred stock issued during the period at $1.82 per share, net of issuance costs. Issuance Of Series B Redeemable Convertible Preferred Shares Value Issuance of Series B Redeemable Convertible Preferred stock, net of expenses The number of Series B Redeemable Convertible Preferred stock issued during the period at $1.82 per share, net of issuance costs. Issuance Of Series B Redeemable Convertible Preferred Shares Issuance of Series B Redeemable Convertible Preferred stock, net of expenses (in shares) Equity impact of the value of warrants to purchase common stock issued during the period related to debt financing. Issuance Of Common Stock Warrants Debt Financing Issuance of warrants to purchase common stock in connection with debt financing Equity impact of the value of vested restricted common stock repurchased during the period. Repurchased Vested Restricted Stock Repurchased vested restricted stock The number of vested restricted stock repurchased during the period. Repurchased Vested Restricted Stock Shares Repurchased vested restricted stock (in shares) The number of non-vested restricted stock repurchased during the period. Repurchased Nonvested Restricted Stock Shares Repurchased nonvested restricted stock (in shares) Equity impact resulting from the reclassification of deferred compensation to additional paid-in capital. Reclassification Of Deferred Compensation Reclassification of deferred compensation Equity impact resulting from the reclassification of warrants to purchase preferred stock. Reclassification Of Preferred Stock Warrants Reclassification of warrants to purchase preferred stock Equity impact of the value of Series A Redeemable Convertible Preferred stock issued during the period at $1.61683 per share, net of issuance costs. IssuanceOfSeriesRedeemableConvertiblePreferredSharesValue Issuance of Series A Redeemable Convertible Preferred stock, net of expenses The number of Series A Redeemable Convertible Preferred stock issued during the period at $1.61683 per share, net of issuance costs. Issuance Of Series Redeemable Convertible Preferred Shares Issuance of Series A Redeemable Convertible Preferred stock, net of expenses (in shares) The fair value of Redeemable Convertible Preferred stock issued during the period for notes payable. Redeemable Convertible Preferred Stock Value Issued For Notes Payable Conversion of notes payable, including interest Conversion of note principal to redeemable convertible preferred stock The number of shares of Redeemable Convertible Preferred stock issued during the period for notes payable. Redeemable Convertible Preferred Stock Shares Issued For Notes Payable Conversion of notes payable, including interest (in shares) Value of stock related to Restricted Stock Awards issued during the period to employees and nonemployees. Stock Issued During Period Shares Restricted Stock Award Nonemployees Value Issuance of restricted common stock to employees and nonemployees Number of shares issued during the period to employees and nonemployees related to Restricted Stock Awards. Stock Issued During Period Shares Restricted Stock Award Nonemployees Shares Issuance of restricted common stock to employees and nonemployees (in shares) Equity impact of the value of warrants to purchase preferred stock issued during the period to holders of notes payable. Issuance Of Preferred Stock Options Noteholders Issuance of warrants to purchase preferred stock to noteholders Equity impact of the value of new common stock issued during the period to consultants for services rendered. Stock Issued During Period Value New Issues Consultants Issuance of common stock to consultants Number of new common stock shares issued during the period to consultants for services rendered. Stock Issued During Period Shares New Issues Consultants Issuance of common stock to consultants (in shares) Equity impact of the value of new common stock issued during the period to holders of convertible notes payable. Stock Issued During Period Value New Issues Convertible Noteholders Issuance of common stock to convertible noteholders Number of new common stock shares issued during the period to holders of convertible notes payable. Issuance of common stock to convertible noteholders (in shares) Issuance of common stock to convertible noteholders (in shares) Equity impact of the value of options to purchase common stock issued during the period to consultants for services to be rendered in the future. Issuance Of Common Stock Options Consultants Issuance of options to purchase common stock to consultants for services rendered Amortization during the period of deferred compensation previously recognized in equity created by employee and nonemployee agreements whereby earned compensation will be paid in the future. Amortization Of Deferred Compensation Amortization of deferred compensation Equity impact resulting from the change in value of nonvested restricted common stock. Change In Value Of Nonvested Restricted Common Stock Change in value of restricted common stock subject to vesting Equity impact of the conversion of preferred stock warrants to common stock warrants. Conversion Of Preferred Stock Warrants To Common Stock Warrants Conversion of preferred stock warrants to common stock warrants Conversion of warrant liability Equity impact of the value of new stock issued during the period from the entity's first offering of stock to the public, net of expenses incurred with the issuance of the new shares. Proceeds from initial public offering, net of expenses Proceeds from initial public offering, net of expenses Number of new shares issued during the period from the entity's first offering of stock to the public. Proceeds from initial public offering, net of expenses (in shares) Proceeds from initial public offering, net of expenses (in shares) Value per share of Series A redeemable convertible preferred stock. Series A Redeemable Convertible Preferred Stock, Value Per Share Series A Redeemable Convertible Preferred stock, value per share (in dollars per share) Value of restricted common stock per share issued to employees and nonemployees. Restricted Common Stock Value Per Share Restricted common stock issued to employees and nonemployees, value per share (in dollars per share) Value per share of Series B redeemable convertible preferred stock. Series B Redeemable Convertible Preferred Stock, Value Per Share Series B Redeemable Convertible Preferred stock, value per share (in dollars per share) Value per share of Series C redeemable convertible preferred stock. Series C Redeemable Convertible Preferred Stock, Value Per Share Series C Redeemable Convertible Preferred stock, value per share (in dollars per share) Change in value of lease liability for unused property. Change in value of lease liability Charge related to lease liability Interest expenses included in net income that result in no cash inflows or outflows in the period. Noncash interest expense Rent expenses included in net income that result in no cash inflows or outflows in the period. Noncash rent expense Noncash rent (income) expense The cash inflow associated with the amount received from entity's first offering of stock to the public, a private placement transaction, and the exercise of stock options. Proceeds From Sale Of Common Stock And Warrants Net Proceeds from sales of common stock and warrants, net Management's Plans to Continue as a Going Concern [Abstract] The entire disclosure for the management's plans to continue as a going concern. Management's Plans To Continue As A Going Concern [Text Block] Management's Plans to Continue as a Going Concern The entire disclosure for the accrued compensation and benefits. Accrued Compensation And Benefits [Text Block] Accrued compensation and benefits The entire disclosure for accrued expenses. Accrued Expenses [Text Block] Accrued expenses Disclosure of the accounting treatment for stock warrants. Warrants [Text Block] Warrants Portion of the balance sheet assertion valued at fair value by the entity whether such amount is presented as a separate caption or as a parenthetical disclosure. Additionally, this element may be used in connection with the fair value disclosures required in the footnote disclosures to the financial statements. The element may be used in both the balance sheet and disclosure in the same submission. This item represents warrants settleable in cash classified as equity. Warrants Settleable in Cash, Fair Value Disclosure Warrants fair value Disclosure of accounting policy for Short-term Investments which are intended to be sold in the short term (usually less than one year or the normal operating cycle, whichever is longer) including trading securities, available-for-sale securities, held-to-maturity securities, and other short-term investments. Short-term Investments [Policy Text Block] Short-term Investments Disclosure of accounting policy for Reverse Stock Split. The reverse stock split arrangement. Also provide the retroactive effect given by the reverse split that occurs after the balance sheet date but before the release of financial statements. Reverse Stock Split [Policy Text Block] Reverse Stock Split Element represents the fair value of embedded derivatives issued with issuance of long-term debt. Fair value of embedded derivatives issued with issuance of long-term debt Fair value of embedded derivatives and derivatives issued with issuance of long-term debt Element represents the fair value of warrants issued with issuance of common stock. Fair value of warrants issued with issuance of common stock Fair value of warrants issued with issuance of common stock Represents conversion option contracts as derivative instrument. Conversion Option [Member] Conversion Option [Member] Represents the entity classified warrants issued to lenders, which are expired over a period. Warrants Issued to lenders from August 2013 through December 2016 [Member] Warrants issued to lenders, expired from August 2013 through December 2016 [Member] Represents the entity classified warrants issued to lenders, which are expired over a period. Warrants Issued to lenders expired from October 2015 through September 2019 [Member] Warrants issued to lenders, expired from October 2015 through September 2019 [Member] Represents the entity classified warrants issued to march 2011 equity financing, which are expired over a period. Warrants Issued pursuant to March 2011 equity financing In March 2016 [Member] Warrants issued pursuant to March 2011 equity financing, expired in March 2016 [Member] Information regarding the number of days used to calculate volatility of net cash settlement value. Volatility Days [Axis] Information regarding the number of days used to calculate volatility of net cash settlement value. Volatility Days [Domain] First set of number of days used to determine volatility of the net cash settlement value. Condition 1 [Member] Second set of number of days used to determine volatility of the net cash settlement value. Condition 2 [Member] Third set of number of days used to determine volatility of the net cash settlement value. Condition 3 [Member] Warrants Outstanding [Abstract] Outstanding warrants to purchase common stock [Abstract] Represents expiration period range of warrants held. Warrants expiration period range Expiration Element represents the fair value of warrants as of the date of grants. Fair value of warrants grants Fair value of warrants grants (in dollars per share) Element represents the number of days to determine the volatility of warrants. Number of days to determine volatility Number of days to determine volatility Represents the number of days to determine the average volatility of warrants. Number of days to determine average volatility Number of days used to determine volatility by taking arithmetic average Calculated aggregate fair values and net cash settlement value of warrants [Abstract] Calculated aggregate fair values and net cash settlement value [Abstract] Element represents the fair value of the warrants. Fair value of warrants Calculated aggregate value Net cash settlement value [Abstract] Net cash settlement value [Abstract] Element represents the cash settlement value of the warrants. Net cash settlement value of warrants Calculated aggregate value Represents cash settlement value for the exchange of the underlying asset. Net cash settlement value assumptions exercise price of warrant Exercise price per share of warrant (in dollars per share) Represents cash settlement related to closing price of a single share of a number of saleable stocks of a company. Net cash settlement value assumptions closing share price Closing price per share of common stock (in dollars per share) Measure of dispersion, in percentage terms (for instance, the standard deviation or variance), for a given stock price. Net cash settlement value assumptions volatility Equity volatility (in hundredths) Period the instrument, asset or liability is expected to be outstanding, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Net cash settlement value assumptions expected term Expected term (years) Net cash settlement risk-free interest rate assumption used in valuing an instrument. Net cash settlement value assumptions risk free interest rate Weighted average risk-free interest rate (in hundredths) Expected dividends to be paid to holders of the underlying shares or financial instruments (expressed as a percentage of the share or instrument's price). Net cash settlement value assumptions dividend yield Dividend yield (in hundredths) Represents the entity classified warrants issued to October 2012 debt financing, which are expired over a period. Warrants issued pursuant to October 2012 debt financing, expired from October 2014 through October 2022 [Member] Number of holders with whom entity executed exchange agreement to exchange their 2011 Warrants for amended and restated warrants (2011 Amended and Restated Warrants). Number of holders with whom entity executed exchange agreement Information by type of warrants issued. Warrants by Type [Axis] Name of the class or type of warrants issued. Warrants by Type [Domain] Measure of dispersion for equity, in percentage terms (for instance, the standard deviation or variance), for a given stock price. Fair Value Assumptions, Expected Equity Volatility Rate Equity volatility (in hundredths) Equity volatility (in hundredths) Measure of dispersion for assets, in percentage terms (for instance, the standard deviation or variance). Fair Value Assumptions, Expected Asset Volatility Rate Asset volatility (in hundredths) Represents the warrants issued by the entity which are expired over a period of two years. Two Year Warrants [Member] Two-Year Warrants [Member] Period of volume weighted average price (VWAP) of stock used to calculate net cash settlement value. Period of volume weighted average price used to calculate net cash settlement value Tangible personal property used to produce goods and services, including, but is not limited to, tools, dies and molds, office equipment but excluding computers. Laboratory Office And Warehouse Equipment [Member] Laboratory, Office and Warehouse Equipment [Member] Antidilutive securities excluded from computation of earning per share [Abstract] Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding [Abstract] Reverse Stock Split [Abstract] Disclosure of accounting policy for warrant liability. Warrant Liability [Policy Text Block] Warrants Additional cash flow information [Abstract] Supplemental cash flow disclosures [Abstract] Element represents the value of convertible note issued to initial shareholder for consulting expenses. Convertible note issued to initial stockholder for consulting expense Convertible note issued to initial stockholder for consulting expense Represents the Consultants of the entity's board of Consultants who is not a current employee of the entity or any parent or subsidiary. Non-employee consultants [Member] Non-employee consultants [Member] Represents the stock based compensation plan 2004 details of stock awards were granted to employees, director, and consultant of the entity. Stock Option Plan, 2004 [Member] 2004 Stock Option Plan [Member] Represents the stock based compensation plan 2010 details of stock awards were granted to employees, director, and consultant of the entity. Stock Incentive And Option Plan, 2010 [Member] 2010 Stock Incentive and Option Plan [Member] Represents the director of the entity's board of directors who is not a current employee of the entity or any parent or subsidiary. Non Employee Director [Member] Non-Employee Director [Member] Represents the director of the entity's board of directors who is employee or not a current employee of the entity or any parent or subsidiary. Employee And Non Employee Director [Member] Element represents the number of share based plans maintain by the entity. Number of share based compensation plans Schedule Of Share Based Compensation Activity [Abstract] Summarizes stock option activity [Abstract] Weighted average remaining contractual term [Abstract] Weighted-average remaining contractual term [Abstract] Aggregate intrinsic value [Abstract] Schedule of share based compensation restricted stock activity [Abstract] Summarizes restricted stock activity [Abstract] Schedule setting forth key provisions of an arrangement under which the entity has agreed to fulfill certain commitments over a period of time greater than one year or the normal operating cycle, if longer, including the item for which expenditures will be made, minimum quantities, milestones, time period and committed amount. Commitment [Table] Represents the organization with which entity entered into a license agreement. Children Medical Center Corporation [Member] Children's Medical Center Corporation (CMCC) [Member] Represents the organization with which entity entered into a license agreement. Wake Forest University Health Sciences [Member] Wake Forest University Health Sciences (WFUHS) [Member] Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table. Commitment [Line Items] Leases and Letters of Credit and License and Research Agreements [Abstract] Leases and Letters of Credit [Abstract] The remaining security deposit obligation, typically cash, provided to a counterparty to provide certain assurance of performance by the entity pursuant to the terms of a written or oral agreement, such as a lease. Remaining security deposit obligation Remaining security deposit obligation This line item represents the number of years for which lease is to be renewed during the period. Number of years for which lease is to be renewed License and Research Agreements [Abstract] This line item represents the number of development milestones for the first licensed product launched, as defined in the agreement. Number of development milestones achieved This line item represents the number of subfields covered under the license for specified aggregate payments. Number of subfields for specified aggregate payments Number of subfields for specified aggregate payments This line item represents the aggregate milestones payments to be paid based on development of and obtaining regulatory approval of a licensed product. Aggregate milestones payments to be paid based on condition Aggregate milestones payments to be paid based on condition This line item represents the sales milestone payment to be paid based on cumulative net sales, i.e. if cumulative net sales of all licensed products reach a certain level, the entity will be required to make a one-time sales milestone payment. Sales milestone payment based on specified condition Sales milestone payment based on specified condition This line item represents the period after which license maintenance fees required to be paid with respect to each product covered by new development patents. Period after which license maintenance fees required to be paid This line item represents the period for which royalty is to be paid after first sale or on a product-by-product basis. Period for which royalty is to be paid after first sale This line item represents the maximum period for which royalty is payable after expiration of the last-to-expire patent covering such product. Maximum period for payment of royalty after expiration of product Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences from depreciation and amortization. Deferred tax assets depreciation and amortization Depreciation and amortization Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences from capitalized start-up costs. Deferred tax assets capitalized start up costs Capitalized start-up costs This line item represents the start up costs capitalized during the period. Capitalized start up costs Capitalized start-up cost This line item represents the amortization period for start up costs capitalized during the period. Amortization period for capitalized start up costs Carryforwards of net operating losses and tax credits [Abstract] Carryforwards of net operating losses and tax credits [Abstract] Facility held for store goods and inventories. Warehouse space [Member] Warehouse space [Member] Facility held for productive use. Office and manufacturing space [Member] Office and manufacturing space [Member] Represents term of lease for using the property. Lease term Lease term Element represents the Initial fair value related to the lease liability. Initial fair value Element represents the additional charges to operation related to the lease liability. Additional charges to operations Additional charges to operations Element represents the price paid to purchase per security. Purchase price per security Purchase price per security (in dollars per share) Element represents the percentage of aggregate purchase price paid by inventors which has to be paid by the entity to the investors as a partial liquidated damage in case entity fails to meet certain legal requirements in regards to the registration statement. Percentage Of Purchase Price Which Entity Obligate To Pay If Fails To Meet Legal Requirements Regarding Registration Statement Percentage of purchase price entity is obligated to pay investors if registration becomes ineffective (in hundredths) Element represents the percentage of aggregate purchase price paid by inventors which has to be paid by the entity to the investors as a partial liquidated damage in case entity fails to satisfy the current public information requirement. Percentage of purchase price which entity obligate to pay if fails to meet legal requirements regarding current public information Percentage of purchase price entity is obligated to pay investors upon failure to satisfy current public information requirements (in hundredths) Refers to the Cash inflows from issuance of additional warrants to purchase common shares at predetermined price. Issuance of additional warrants This item represents derivative instrument obligations related to demand note exchange right. Demand Note Exchange Right [Member] This item represents derivative instrument obligations related to convertible note conversion option. Convertible Note Conversion Option [Member] This item represents derivative instrument obligations related to convertible note call option. Convertible Note Call Option [Member] Security that gives the holder the right to purchase shares of stock in accordance with the terms of the instrument, usually upon payment of a specified amount. Two Thousand Eleven Warrants [Member] 2011 Warrants [Member] Tabular disclosure of the significant assumptions used during the year to estimate the aggregate fair value of and net cash settlement value of warrants , including, but not limited to: (a) expected term, (b) expected volatility of the entity's shares, (c) expected dividends, (d) risk-free rate(s). Schedule of fair value and net cash settlement value valuation assumptions [Table Text Block] Aggregate fair values and net cash settlement value Security that gives the holder the right to purchase shares of stock in accordance with the terms of the instrument, usually upon payment of a specified amount. Two Thousand Twelve Warrants [Member] 2012 Warrants [Member] Derivative conversion taken place during the period in relation to liabilities measured at fair value and categorized within Level 3 of the fair value hierarchy. Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Convert Derivative Exercise of exchange right Refers to Tangible personal property used in an office setting. Examples include, but are not limited to, computers, copiers and fax machine and Facility designed for the storage of goods or equipment. Office and warehouse equipment [Member] Office and warehouse equipment [Member] This line item represents the reduction in value of impaired assets acquired. Reduction in value of impaired assets acquired Reduction in value of impaired assets acquired Refers to the components of Accrued compensation and benefits like Severance benefits accrued Compensation. Schedule of accrued compensation and benefits [Table Text Block] Accrued compensation and benefits Table of accrued compensation and benefits. Examples including but not limited to severance benefits, Other accrued compensation and benefits. Accrued compensation and benefits [Table] Represents the restructuring plan related to the restructuring in 2011. 2011 Restructuring Plan [Member] Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table. Accrued compensation and benefits [Line Items] Accrued compensation and benefit [Abstract] Accrued compensation and benefits [Abstract] Element represents the severance agreement provided for the employee to receive monthly severance payments equal to his current monthly salary. Number of monthly severance payments to be received by employee Number of monthly severance payments employee to receive Element represents the liability recorded in connection with severance agreement for expenses incurred. Liability recorded in connection with severance agreement Carrying value as of the balance sheet date of obligations incurred through that date and payable for research and development. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer). Accrued research and development current Represent two types of notes taken by the entity. Equipment note facility is to fund equipment and supplemental working capital note is to fund other assets. Equipment and Supplemental Working Capital Notes [Member] Equipment and Supplemental Working Capital Notes [Member] Represents working capital note facility taken by the entity to fund other assets. Working Capital Note [Member] Working Capital Note [Member] Represents the warrants issued by the entity classified as equity. Equity classified warrants [Member] Equity classified warrants [Member] This line item represents the number of monthly payments of principal and interest for which entity is obligated after January 2012. Number of monthly payments of principal and interest for which entity is obligated Number of monthly payments Represents the warrants issued by the entity classified as liability. Liability classified warrants [Member] Liability classified warrants [Member] Base principal amount considered for conversion of debt instrument. Debt Instrument Convertible, Base Principal Amount Base principal amount considered for conversion Represents the gross carrying amount as of the balance sheet date of loans made to broker-dealers which are generally secured by marketable securities owned by the borrower broker-dealer but held by the lender, are interest-bearing, and payable upon demand. The right to demand payment may be conditioned upon the occurrence of certain events. Secured Demand Notes Gross Demand notes Represents demand note facility, taken by the entity to fund equipment. Demand note [Member] Demand Note [Member] Represents warrants expiration period from the date of issuance or as per the certain conditions specified in warrants agreement. Expiration period Of Warrants Warrants expiration period Represents the warrants issued by the entity which are expired over a period of ten years. Ten Year Warrants [Member] Ten-Year Warrants [Member] Represents the warrants issued by the entity which are expired over a period of five years. Five Year Warrants [Member] Five-Year Warrants [Member] Axis contains members of expiration of warrants. Expiration Of Warrants [Axis] Domain contains members of expiration of warrants. Expiration Of Warrants [Domain] Represents the entity classified warrants issued to vendors, which are expired over a period. Warrants issued to vendors expired from September 2015 through December 2016 [Member] Warrants issued to vendors, expired from September 2015 through December 2016 [Member] Represents the entity classified warrants issued to march 2011 refinancing of working capital note, which are expired over a period. Warrants Issued pursuant to March 2011 refinancing of Working Capital Note in March 2016 [Member] Warrants issued pursuant to refinancing of Working Capital Note, expired in March 2016 [Member] Refers to the number of days following the issuance of convertible notes and warrants. Number of days following the issuance of convertible notes and warrants Refers to number of calendar days following day on convertible notes and warrants. Number of calendar days following day on convertible notes and warrants Refers to maximum percentage of holding on number of outstanding shares. 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Income Taxes (Tables)
12 Months Ended
Dec. 31, 2012
Income Taxes [Abstract]  
Reconciliation of statutory U.S. federal rate to entity's effective tax rate
A reconciliation of the statutory U.S. federal rate to the Company's effective tax rate is as follows:

   
2011
 
2012
Percent of pre-tax income:
               
U.S. federal statutory income tax rate
   
(34.0
)
   
(34.0
)
State taxes, net of federal benefit
   
(7.2
)
   
(4.6
)
Interest expense –revaluation of warrants
   
(25.5
)
   
(2.4
)
Other
   
0.8
     
1.4
 
Valuation allowance
   
65.9
     
39.6
 
Effective income tax expense rate
                 
Deferred tax assets
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows (in thousands):

   
December 31,
   
2011
 
2012
Net operating loss carryforwards
$
56,702
 
$
61,522
 
Research and development credits
 
5,241
 
 
5,636
 
Depreciation and amortization
 
5,198
 
 
5,040
 
Capitalized start-up costs
 
14,703
 
 
16,453
 
Other temporary differences
 
2,384
 
 
1,340
 
Gross deferred tax asset
 
84,228
 
 
89,991
 
Deferred tax assets valuation allowance
 
(84,228
)
 
(89,991
)
 
             
Summary of carryforwards of net operating losses and tax credits
The following table summarizes carryforwards of net operating losses and tax credits as of December 31, 2012 (in thousands).
 
   
Amount
  
Expiration
Federal net operating losses
 $150,936   
2023 to 2032
 
State net operating losses
  167,352   
2019 to 2032
 
Research and development credits
5,636
2024 to 2032
XML 15 R54.htm IDEA: XBRL DOCUMENT v2.4.0.6
Commitments and Contingencies (Details) (USD $)
12 Months Ended 114 Months Ended 12 Months Ended 114 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2010
Dec. 31, 2012
Children's Medical Center Corporation (CMCC) [Member]
Dec. 31, 2011
Children's Medical Center Corporation (CMCC) [Member]
Dec. 31, 2006
Children's Medical Center Corporation (CMCC) [Member]
Dec. 31, 2003
Children's Medical Center Corporation (CMCC) [Member]
Dec. 31, 2012
Children's Medical Center Corporation (CMCC) [Member]
Dec. 31, 2012
Wake Forest University Health Sciences (WFUHS) [Member]
Dec. 31, 2007
Wake Forest University Health Sciences (WFUHS) [Member]
Leases and Letters of Credit [Abstract]                      
Rent expenses under operating lease $ 200,000 $ 700,000                  
Summarizes future minimum lease payments [Abstract]                      
2013 947,000   947,000                
2014 1,055,000   1,055,000                
2015 1,079,000   1,079,000                
2016 278,000   278,000                
Total minimum lease payments 3,359,000 [1]   3,359,000 [1]                
Security and restoration deposits   2,200,000   1,700,000              
Security deposit   1,000,000                  
Remaining security deposit obligation   1,200,000                  
Additional security deposit 1,200,000                    
Number of years for which lease is to be renewed 5 years                    
Extended lease term Oct. 31, 2016                    
Payments for rent   200,000                  
License and Research Agreements [Abstract]                      
Initial license fee               200,000      
Patent costs recorded as general and administrative expense 5,496,000 7,191,000 47,389,000   100,000 200,000     2,400,000    
Number of development milestones achieved             2        
Research and development 10,103,000 13,293,000 127,960,000       400,000        
Number of subfields for specified aggregate payments             4        
Aggregate milestones payments to be paid based on condition             6,900,000        
Sales milestone payment based on specified condition             $ 2,000,000        
Warrants to purchase common stock (in shares) 80,250,702 1,064,616 80,250,702               320
Exercise price (in dollars per share)                     $ 23.20
Period after which license maintenance fees required to be paid                   2 years  
Period for which royalty is to be paid after first sale                   15 years  
Maximum period for payment of royalty after expiration of product                   7 years  
[1] The future minimum lease payments above do not include the impact of any potential sublease income discussed in Note 9 related to the Company's lease liability.
XML 16 R48.htm IDEA: XBRL DOCUMENT v2.4.0.6
Lease liability (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Capital Leased Assets [Line Items]    
Charge related to fair value of liability   $ 1,800,000
Activity related to lease liability [Abstract]    
Balance at January 1, 2011 1,682,000 0
Initial fair value   1,824,000
Charges utilized (787,000) (238,000)
Additional charges to operations 165,000 96,000
Balance at December 31, 2011 1,060,000 1,682,000
Less current portion (536,000) (739,000)
Lease liability 524,000 943,000
Warehouse space [Member]
   
Capital Leased Assets [Line Items]    
Lease term 5 years  
Charge related to fair value of liability   900,000
Activity related to lease liability [Abstract]    
Balance at January 1, 2011 828,000 0
Initial fair value   933,000
Charges utilized (239,000) (193,000)
Additional charges to operations 89,000 88,000
Balance at December 31, 2011 678,000 828,000
Less current portion (233,000)  
Lease liability 445,000  
Office and manufacturing space [Member]
   
Capital Leased Assets [Line Items]    
Charge related to fair value of liability   900,000
Activity related to lease liability [Abstract]    
Balance at January 1, 2011 854,000 0
Initial fair value   891,000
Charges utilized (548,000) (45,000)
Additional charges to operations 76,000 8,000
Balance at December 31, 2011 382,000 854,000
Less current portion (303,000)  
Lease liability $ 79,000  
XML 17 R55.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Percent of pre-tax income [Abstract]    
U.S. federal statutory income tax rate (in hundredths) (34.00%) (34.00%)
State taxes, net of federal benefit (in hundredths) (460.00%) (7.20%)
Interest expense -revaluation of warrants (in hundredths) (240.00%) (25.50%)
Other (in hundredths) 1.40% 0.80%
Valuation allowance (in hundredths) 39.60% 65.90%
Effective income tax expense rate (in hundredths) 0.00% 0.00%
Deferred tax assets [Abstract]    
Net operating loss carryforwards $ 61,522,000 $ 56,702,000
Research and development credits 5,636,000 5,241,000
Depreciation and amortization 5,040,000 5,198,000
Capitalized start-up costs 16,453,000 14,703,000
Other temporary differences 1,340,000 2,384,000
Gross deferred tax asset 89,991,000 84,228,000
Deferred tax assets valuation allowance (89,991,000) (84,228,000)
Total deferred tax assets 0 0
Increase in valuation allowance 5,800,000 13,300,000
Deferred tax asset related to domestic net operating loss carryforwards 8,300,000  
Capitalized start-up cost 42,700,000 35,700,000
Amortization period for capitalized start up costs 15 years  
Carryforwards of net operating losses and tax credits [Abstract]    
Carryforwards of net operating losses, expiration dates 2024 to 2032  
Research and development credits 5,636,000  
Federal Net Operating Losses [Member]
   
Carryforwards of net operating losses and tax credits [Abstract]    
Carryforwards of net operating losses 150,936,000  
Carryforwards of net operating losses, expiration dates 2023 to 2032  
State Net Operating Losses [Member]
   
Carryforwards of net operating losses and tax credits [Abstract]    
Carryforwards of net operating losses $ 167,352,000  
Carryforwards of net operating losses, expiration dates 2019 to 2032  
XML 18 R46.htm IDEA: XBRL DOCUMENT v2.4.0.6
Accrued compensation and benefits (Details) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2011
Dec. 31, 2012
Dec. 31, 2011
Research and development expense [Member]
Dec. 31, 2011
General and administrative expense [Member]
Dec. 31, 2012
Severance Benefits [Member]
Dec. 31, 2011
Severance Benefits [Member]
Dec. 31, 2012
Severance Benefits [Member]
2011 Restructuring Plan [Member]
Dec. 31, 2011
Severance Benefits [Member]
2011 Restructuring Plan [Member]
President And Chief Executive Officer [Member]
Accrued compensation and benefits [Abstract]                
Accrued severance benefits         $ 0 $ 1,774,000 $ 0 $ 200,000
Other accrued compensation and benefits 580,000 716,000            
Accrued compensation and benefits 2,354,000 716,000            
Personnel-related termination costs 1,700,000   800,000 900,000        
Number of monthly severance payments employee to receive   12            
Liability recorded in connection with severance agreement 700,000              
Summarizes activity related to accrued severance benefits [Abstract]                
Balance at beginning of period         0 1,774,000 1,544,000 200,000
Net charges paid             (1,544,000)  
Balance at end of period         0 1,774,000 0 200,000
Accrued bonus included in other accrued compensation and benefits $ 400,000 $ 700,000            
XML 19 R33.htm IDEA: XBRL DOCUMENT v2.4.0.6
Lease liability (Tables)
12 Months Ended
Dec. 31, 2012
Lease liability [Abstract]  
Activity related to lease liability
The following table summarizes the activity related to the lease liability for the year ended December 31, 2011 and 2012 (in thousands).
 
Warehouse
space
Office and manufacturing
space
Total
Balance at January 1, 2011
$
$
$
Initial fair value
933
891
1,824
Charges utilized
(193
)
(45
)
(238
)
Additional charges to operations
88
8
96
Balance at December 31, 2011
828
854
1,682
Charges utilized
(239
)
(548
)
(787
)
Additional charges to operations
89
76
165
Balance at December 31, 2012
678
382
1,060
Less current portion
(233
)
(303
)
(536
)
$
445
$
79
$
524
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Subsequent Events
12 Months Ended
Dec. 31, 2012
Subsequent Events [Abstract]  
Subsequent Events
(18)        Subsequent Events
 
 
 
On January 30, 2013, the Company entered into a Second Consent and Amendment Agreement (the Second Amendment) with investors (the Investors) in the Company's 2012 Financing. Pursuant to the Second Amendment, the Investors agreed to extend the interest payments that were due on February 1, 2013 to February 15, 2013. The aggregate amount of the interest payments is $0.5 million, which amount will continue to accrue interest at the rate of ten percent (10%) per annum.

Additionally, the Second Amendment amends the registration rights agreement between the Company and the Investors entered into in connection with the 2012 Financing, as amended by the First Amendment, to extend the deadline to register the shares underlying the Convertible Notes and 2012 Warrants issued in the 2012 Financing from January 30, 2013 to March 1, 2013, a date that is 150 days following the issuance of the Convertible Notes and 2012 Warrants.

2012 Financing Transaction Document Amendments
 
On February 14, 2013, the Company entered into the Amendment Agreement to the 2012 Warrants and Convertible Notes (the Warrants and Notes Amendment) and the Third Amendment Agreement to the Registration Rights Agreement and Facility Agreement (the Registration Rights and Facility Amendment and together with the 2012 Warrants and the Convertible Notes Amendment, the 2012 Financing Transaction Document Amendments), each by and among the Company and the investors in the 2012 Financing. Pursuant to the 2012 Financing Transaction Document Amendments, the Company and its investors in the 2012 Financing agreed to:
 
·
Limit its registration obligations for the shares underlying the Convertible Notes and the 2012 Warrants, issued in connection with the 2012 Financing to the share limitations imposed by the Securities and Exchange Commission, which requires that the amount of shares registered not exceed one third of its public float;
·
Provide that shares underlying the 2012 Warrants be registered prior to any other securities that the Company is required to register under the 2012 Financing Transaction Document Amendments and extend the deadline for the Company to file an initial registration statement to register shares underlying the securities issued in the 2012 Financing to March 31, 2013, a day that is 180 calendar days following the date on which the Convertible Notes and 2012 Warrants were issued;
·
Extend the additional filing and registration deadlines with respect to additional registration statements that are required to be filed by the Company;
·
Provide for a pro rata allocation amongst the 2012 Financing investors of the shares of Common Stock the Company is able to register in each registration statement it is required to file;
·
Provide for the assumption that resales of shares of its common stock, when eligible, will be under Rule 144 under the Securities Act of 1933, as amended, unless a 2012 Financing investor informs us of a sale under the registration statement;
·
Allow the Company to satisfy its interest obligations under the Convertible Notes through the issuance of shares of restricted common stock or, if such issuance would result in a 2012 Financing investor holding more than 9.985% of the total number of its outstanding shares (the 9.985% Limitation), with warrants to purchase shares of common stock for nominal consideration that would become exercisable only to the extent that such exercise would not result in an investor going over the 9.985% Limitation (the Interest Warrants);
·
Extend the interest payments due April 1, 2013 under the Convertible Notes by one day to April 2, 2013; and
·
Exclude securities that may be issued or issuable pursuant to any financing that it may complete in 2013 with securities with an issuance, conversion price or exercise price greater than $0.75 and gross proceeds of no more than $30 million (the 2013 Financing) from the definition of a Major Transaction and to include the 2013 Financing in the definition of Permitted Liens and Indebtedness under the 2012 Financing Transaction Document Amendments.
XML 22 R50.htm IDEA: XBRL DOCUMENT v2.4.0.6
Capital Structure (Details) (USD $)
In Millions, except Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Capital Structure [Abstract]    
Common stock, shares authorized (in shares) 750,000,000 750,000,000
Common stock, voting rights Each holder of common stock is entitled to one vote for each share held  
Subsidiary, Sale of Stock [Line Items]    
Warrants to purchase common stock (in shares) 80,250,702 1,064,616
Preferred stock, shares authorized (in shares) 10,000,000 10,000,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
March 2011 Equity Financing [Member]
   
Subsidiary, Sale of Stock [Line Items]    
Issuance of common stock (in shares) 1,107,939  
Warrants to purchase common stock (in shares) 1,046,102  
Purchase price per security (in dollars per share) 28.30  
Proceeds from issuance through private placement 28.9  
March 2011 Equity Financing [Member] | Minimum [Member]
   
Subsidiary, Sale of Stock [Line Items]    
Percentage of purchase price entity is obligated to pay investors if registration becomes ineffective (in hundredths) 1.50%  
March 2011 Equity Financing [Member] | Maximum [Member]
   
Subsidiary, Sale of Stock [Line Items]    
Percentage of purchase price entity is obligated to pay investors if registration becomes ineffective (in hundredths) 6.00%  
Percentage of purchase price entity is obligated to pay investors upon failure to satisfy current public information requirements (in hundredths) 12.00%  
XML 23 R42.htm IDEA: XBRL DOCUMENT v2.4.0.6
Summary of Significant Accounting Policies (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Cash and Cash Equivalents [Abstract]    
Cash held at bank collateralizing letters of credit   1,194,000
Restricted cash [Abstract]    
Gross proceeds of Senior Secured Convertible Notes financing into escrow account 1,000,000  
Percentage of aggregate principal amount of notes transfer by escrow agent if milestones not achieved (in hundredths) 40.00%  
Reverse Stock Split [Abstract]    
Reverse stock split conversion ratio (in shares) 10  
Shares underlying warrants outstanding [Member]
   
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding [Abstract]    
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding (in shares) 80,250,702 1,064,616
Shares underlying options outstanding [Member]
   
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding [Abstract]    
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding (in shares) 234,465 174,872
Unvested restricted stock [Member]
   
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding [Abstract]    
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding (in shares) 74,372 13,988
Convertible notes payable [Member]
   
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding [Abstract]    
Potentially dilutive securities have been excluded from computations of diluted weighted-average shares outstanding (in shares) 20,007,002 0
Computer Equipment [Member]
   
Property, Plant and Equipment [Line Items]    
Property and equipment estimated useful life 3 years  
Laboratory, Office and Warehouse Equipment [Member]
   
Property, Plant and Equipment [Line Items]    
Property and equipment estimated useful life 5 years  
Furniture and Fixtures [Member]
   
Property, Plant and Equipment [Line Items]    
Property and equipment estimated useful life 7 years  
XML 24 R37.htm IDEA: XBRL DOCUMENT v2.4.0.6
Stock-based Compensation (Tables)
12 Months Ended
Dec. 31, 2012
Stock-based Compensation [Abstract]  
Stock option activity
The following table summarizes stock option activity under the Plans:
 
   
Number of shares
 
Weighted-average exercise
price
 
Weighted-average remaining contractual term (in years)
 
Aggregate intrinsic
value (in thousands)
 
             
Outstanding at December 31, 2010
 
137,896
   
$
24.88
           
Granted
 
130,569
   
$
11.34
           
Exercised
 
(18,735
)
 
$
4.40
           
Forfeited
 
(74,858
)
 
$
25.36
           
Outstanding at December 31, 2011
 
174,872
   
$
16.76
           
Granted
 
87,184
   
$
5.66
           
Exercised
 
(2,432
)
 
$
4.40
           
Forfeited
 
(25,159
)
 
$
20.45
           
Outstanding at December 31, 2012
 
234,465
   
$
12.37
 
8.5
 
$
 
                        
Vested and expected to vest at December 31, 2012
 
218,118
   
$
12.69
 
8.4
 
$
 
                        
Exercisable at December 31, 2012
 
71,442
   
$
21.45
 
7.6
 
$
 
                        
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Restricted stock activity
During 2011 and 2012, the Company issued options to purchase 129,569, and 87,184 shares of common stock, respectively, to employees and non-employee directors under the Plans. The per-share weighted-average fair value of the options granted to employees during 2011 and 2012 was estimated at $6.10, and $5.66, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
   
Year Ended December 31,
 
   
2011
  
2012
 
        
Volatility
  79%   84% 
Expected term
 
5.5 years
  
6.0 years
 
Risk-free interest rate
  1.4%   1.1% 
Dividend yield
 
None
  
None
 
          
Non-employee consultants [Member]
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Weighted-average assumptions
During 2011, the Company issued options to purchase 1,000 shares of common stock to non-employee consultants under the Plan. No options were granted to non-employees during the year ended December 31, 2012. The per-share weighted-average fair value of the options granted to non-employees during 2011 was estimated at $2.90 on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
   
Year Ended December 31,
 
   
2011
  
2012
 
         
Volatility
  89%  
Not applicable
 
Expected term
 
5 years
  
Not applicable
 
Risk-free interest rate
  0.8%  
Not applicable
 
Dividend yield
 
None
  
Not applicable
 
XML 25 R52.htm IDEA: XBRL DOCUMENT v2.4.0.6
Warrants (Details) (USD $)
12 Months Ended 0 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Five-Year Warrants [Member]
Working Capital Note [Member]
Dec. 31, 2012
Ten-Year Warrants [Member]
Working Capital Note [Member]
Dec. 31, 2012
2011 Warrants [Member]
Dec. 31, 2011
2011 Warrants [Member]
Oct. 02, 2012
2012 Warrants [Member]
Dec. 31, 2012
2012 Warrants [Member]
Dec. 31, 2012
Equity classified warrants [Member]
Dec. 31, 2011
Equity classified warrants [Member]
Dec. 31, 2012
Equity classified warrants [Member]
Warrants issued to vendors, expired from September 2015 through December 2016 [Member]
Dec. 31, 2011
Equity classified warrants [Member]
Warrants issued to vendors, expired from September 2015 through December 2016 [Member]
Dec. 31, 2012
Equity classified warrants [Member]
Warrants issued pursuant to refinancing of Working Capital Note, expired in March 2016 [Member]
Dec. 31, 2011
Equity classified warrants [Member]
Warrants issued pursuant to refinancing of Working Capital Note, expired in March 2016 [Member]
Dec. 31, 2012
Equity classified warrants [Member]
Warrants issued to lenders, expired from August 2013 through December 2016 [Member]
Dec. 31, 2011
Equity classified warrants [Member]
Warrants issued to lenders, expired from August 2013 through December 2016 [Member]
Dec. 31, 2012
Equity classified warrants [Member]
Warrants issued to lenders, expired from October 2015 through September 2019 [Member]
Dec. 31, 2011
Equity classified warrants [Member]
Warrants issued to lenders, expired from October 2015 through September 2019 [Member]
Dec. 31, 2012
Liability classified warrants [Member]
Dec. 31, 2011
Liability classified warrants [Member]
Dec. 31, 2012
Liability classified warrants [Member]
Condition 1 [Member]
Dec. 31, 2012
Liability classified warrants [Member]
Condition 2 [Member]
Dec. 31, 2012
Liability classified warrants [Member]
Condition 3 [Member]
Dec. 31, 2012
Liability classified warrants [Member]
Warrants issued pursuant to March 2011 equity financing, expired in March 2016 [Member]
Dec. 31, 2011
Liability classified warrants [Member]
Warrants issued pursuant to March 2011 equity financing, expired in March 2016 [Member]
Dec. 31, 2012
Liability classified warrants [Member]
Warrants issued pursuant to October 2012 debt financing, expired from October 2014 through October 2022 [Member]
Dec. 31, 2011
Liability classified warrants [Member]
Warrants issued pursuant to October 2012 debt financing, expired from October 2014 through October 2022 [Member]
Dec. 31, 2012
Liability classified warrants [Member]
2011 Warrants [Member]
Dec. 31, 2011
Liability classified warrants [Member]
2011 Warrants [Member]
Dec. 31, 2012
Liability classified warrants [Member]
2012 Warrants [Member]
Dec. 31, 2012
Liability classified warrants [Member]
2012 Warrants [Member]
Five-Year Warrants [Member]
Dec. 31, 2012
Liability classified warrants [Member]
2012 Warrants [Member]
Ten-Year Warrants [Member]
Dec. 31, 2012
Liability classified warrants [Member]
2012 Warrants [Member]
Two-Year Warrants [Member]
Outstanding warrants to purchase common stock [Abstract]                                                                  
Shares Exercisable (in shares) 80,250,702 1,064,616 569,392 1,138,785         18,514 18,514 389 389 7,068 7,068 6,449 6,449 4,608 4,608 80,232,188 1,046,102       27,388,851 [1] 1,046,102 [1] 52,843,337 0       16,672,145 33,344,293 1,118,722
Exercise price (in dollars per share)                     $ 23.20   $ 28.80   $ 234.40   $ 263.90             $ 1.10 [1] $ 28.8 $ 0.75              
Expiration                     September 2015 through December 2016   March 2016   August 2013 through December 2016   October 2015 through September 2019             March 2016 [1]   October 2014 through October 2022              
Fair value of warrants grants (in dollars per share)                 $ 14.9                                                
Closing price per share of common stock (in dollars per share) $ 0.04               $ 27.4                                     $ 0.05   $ 0.04      
Volatility rate (in hundredths)                 64.96%                                                
Expected term                 5 years                                                
Risk free interest rate (in hundredths)         0.30% 0.70% 0.20% 0.30% 2.00%                                                
Dividend yield (in hundredths)         0.00% 0.00% 0.00% 0.00% 0.00%                                                
Number of holders with whom entity executed exchange agreement                                                       2          
Warrants expiration period     5 years 10 years                                                     5 years 10 years 2 years
Number of days to determine volatility                                     30 days                            
Number of days used to determine volatility by taking arithmetic average                                         10 days 30 days 50 days                    
Non-operating income                                                       $ 100,000 $ 14,400,000 $ 1,300,000      
Warrants fair value         2,400,000     3,800,000                                                  
Fair value [Abstract]                                                                  
Calculated aggregate value         2,378,000 2,511,000 4,944,000 3,800,000                                                  
Exercise price per share of warrant (in dollars per share)         $ 1.10 [2] $ 28.80 [2] $ 0.75 $ 0.75                                                  
Closing price per share of common stock (in dollars per share) $ 0.04               $ 27.4                                     $ 0.05   $ 0.04      
Equity volatility (in hundredths)         115.00% 93.80% 115.00% 115.00%                                                  
Asset volatility (in hundredths)         90.00%   90.00% 90.00%                                                  
Probability of Fundamental Transaction (in hundredths)         100.00% 100.00% 100.00% 100.00%                                                  
Weighted average risk-free interest rate (in hundredths)         0.30% 0.70% 0.20% 0.30% 2.00%                                                
Dividend yield (in hundredths)         0.00% 0.00% 0.00% 0.00% 0.00%                                                
Net cash settlement value [Abstract]                                                                  
Calculated aggregate value         $ 16,525,000 [3]     $ 39,900,000 [3]                                                  
Exercise price per share of warrant (in dollars per share)         $ 1.10 [2]     $ 0.75                                                  
Closing price per share of common stock (in dollars per share)         $ 0.99     $ 0.99 [4]                                                  
Equity volatility (in hundredths)         100.00% [5]     76.00% [6]                                                  
Expected term (years)               4 years 2 months 12 days                                                  
Weighted average risk-free interest rate (in hundredths)         0.40%     0.60%                                                  
Dividend yield (in hundredths)         0.00%     0.00%                                                  
Period of volume weighted average price used to calculate net cash settlement value               5 days                                                  
[1] Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Following execution by the holders of the Exchange Agreements and receipt of the Amended and Restated 2011 Warrants, such holders had the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.
[2] Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Following execution by the holders of the Exchange Agreements and receipt of the Amended and Restated 2011 Warrants, such holders had the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10
[3] Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.
[4] Represents the 5 day Tengion stock VWAP used to calculate the net cash settlement value as of December 31, 2012.
[5] Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012 based on the terms of the 2011 warrant agreement.
[6] Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012.
XML 26 R47.htm IDEA: XBRL DOCUMENT v2.4.0.6
Accrued expenses (Details) (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Accrued expenses [Abstract]    
Accrued consulting and professional fees $ 387 $ 119
Accrued research and development current 453 235
Accrued interest on convertible notes 373 0
Other 241 83
Accrued expenses $ 1,454 $ 437
XML 27 R9.htm IDEA: XBRL DOCUMENT v2.4.0.6
Management's Plans to Continue as a Going Concern
12 Months Ended
Dec. 31, 2012
Management's Plans to Continue as a Going Concern [Abstract]  
Management's Plans to Continue as a Going Concern
 (2)           Management's Plans to Continue as a Going Concern
 
 
The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred losses since inception and has a deficit accumulated during the development stage of $247.2 million as of December 31, 2012, including $48.4 million of cumulative accretion on redeemable convertible preferred stock through April 2010. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its therapeutic product candidates currently in development or enters into cash flow positive business development transactions.
 
 
Based upon the Company's current expected level of operating expenditures and debt repayment, and assuming the Company is not required to settle any outstanding warrants in cash or redeem, or pay cash interest on any of its Senior Secured Convertible Notes, it expects to be able to fund operations through May 2013. This period could be shortened if there are any unanticipated significant increases in planned spending on development programs or other unforeseen events. The Company plans to raise additional funds through collaborative arrangements, public or private sales of debt or equity securities, commercial loan facilities, or some combination thereof. There is no assurance that additional financing will be available when needed to allow the Company to continue its operations or if available, on terms acceptable to the Company.
 
 
In the event financing is not obtained, the Company could pursue additional headcount reductions and other cost cutting measures to preserve cash as well as explore the sale of selected assets to generate additional funds. If the Company is required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs, these events could have a material adverse effect on the Company's business, results of operations and financial condition.
 
 
These factors raise significant concerns about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
 
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M;VQD:6YG(&]N(&YU;6)E3QS M<&%N/CPO'0^/'-P86X^/"]S<&%N/CPO M=&0^#0H@("`@("`@(#QT9"!C;&%S&UL/@T*+2TM+2TM/5].97AT4&%R=%\V930S9C$S85\V,F,W7S0Y8SA?8C(P 29E]F86,V.#EB9#5F,S4M+0T* ` end XML 29 R43.htm IDEA: XBRL DOCUMENT v2.4.0.6
Supplemental Cash Flow Information (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 114 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2010
Dec. 31, 2004
Dec. 31, 2012
Noncash investing and financing activities [Abstract]          
Conversion of note principal to redeemable convertible preferred stock $ 0 $ 0   $ 0 $ 3,562
Convertible note issued to initial stockholder for consulting expense 0 0     210
Exchange of Demand Note for Convertible Notes 1,005 0     1,005
Fair value of embedded derivatives and derivatives issued with issuance of long-term debt 3,669 0     3,669
Fair value of warrants issued with issuance of common stock 0 16,947     16,947
Conversion of redeemable convertible preferred stock into 566 shares of common stock 0 0 191,909   191,909
Conversion of warrant liability 0 0 123   123
Noncash property and equipment additions 0 0     0
Cash paid for interest, net of amounts capitalized 515 722     12,793
Cash paid for issuance costs classified as interest expense $ 830 $ 0     $ 830
Conversion of redeemable convertible preferred stock into shares of common stock (in shares) 566       566

XML 30 R29.htm IDEA: XBRL DOCUMENT v2.4.0.6
Short-term Investments and Financial Instruments (Tables)
12 Months Ended
Dec. 31, 2012
Short-term Investments and Financial Instruments [Abstract]  
Financial assets and liabilities measured at fair value on a recurring basis
The following fair value hierarchy table presents information about each major category of the Company's financial assets and liability measured at fair value on a recurring basis as of December 31, 2011 and 2012 (in thousands).
 
Fair value measurement at reporting date using:
Quoted prices in active markets for identical assets (Level 1)
Significant other
observable
inputs
(Level 2)
Significant unobservable
inputs
(Level 3)
Total
At December 31, 2011
Assets:
Cash and cash equivalents
$
9,244
$
$
$
9,244
Short-term investments
U.S. government agency funds.
4,021
4,021
Corporate securities
2,045
2,045
Short-term investments
6,066
6,066
$
15,310
$
$
$
15,310
Liabilities:
Warrant liability
$
$
$
2,511
$
2,511
Fair value measurement at reporting date using:
Quoted prices in active markets for identical assets (Level 1)
Significant other observable
inputs
(Level 2)
Significant unobservable
inputs
(Level 3)
Total
At December 31, 2012:
Assets:
Cash and cash equivalents
$
7,536
$
$
$
7,536
Short-term investments
$
7,536
$
$
$
7,536
Liabilities:
Derivative liability
$
$
$
2,449
$
2,449
Embedded derivative liability
276
276
Warrant liability
6,178
6,178
$
$
$
8,903
$
8,903
Reconciliation of embedded derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3)
The reconciliation of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

Call Option
Balance at January 1, 2012
$
Issuance of derivative
3,181
Change in fair value of derivative liability
(732 )
Balance at December 31, 2012
$2,449

The reconciliation of the Demand Note Exchange Right and the Conversion Option measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

 
Demand Note Exchange
Right
Conversion Option
Total
Embedded Derivatives
Balance at January 1, 2012
$
$
$
Issuance of derivative
310
488
798
Exercise of exchange right
(310
)
(310
)
Change in fair value of derivative liability
(212
)
(212
)
Balance at December 31, 2012
$
$
276
$
276
Reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3)
The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

2011
Warrants
2012
Warrants
Total
Balance at January 1, 2011
$
$
$
Issuance of additional warrants
16,947
16,947
Change in fair value of warrant liability
(14,436
)
(14,436
)
Balance at December 31, 2011
2,511
2,511
Issuance of additional warrants
4,944
4,944
Change in fair value of warrant liability
(133
)
(1,144
)
(1,277
)
Balance at December 31, 2012
$
2,378
$
3,800
$
6,178
XML 31 R28.htm IDEA: XBRL DOCUMENT v2.4.0.6
Supplemental Cash Flow Information (Tables)
12 Months Ended
Dec. 31, 2012
Supplemental Cash Flow Information [Abstract]  
Supplemental Cash Flow Information
The following table contains additional cash flow information for the periods reported (in thousands).

Year Ended
December 31,
Period from
July 10, 2003
(inception)
through
December 31,
201120122012
Supplemental cash flow disclosures:
Noncash investing and financing activities:
Conversion of note principal to redeemable convertible preferred stock
$
$
$
3,562
Convertible note issued to initial stockholder for consulting expense
210
Exchange of Demand Note for Convertible Note for Convertible Notes
1,005
1,005
Fair value of embedded derivatives and derivatives issued with issuance of long-term debt
3,669
3,669
        Fair value of warrants issued with issuance of long-term debt 1054,9447,234
Fair value of warrants issued with issuance of common stock
16,947
16,947
Conversion of redeemable convertible preferred stock into 566 shares of common stock
191,909
Conversion of warrant liability
123
Cash paid for interest, net of amounts capitalized
722
515
12,793
Cash paid for issuance costs classified as interest expense
830830
XML 32 R56.htm IDEA: XBRL DOCUMENT v2.4.0.6
Subsequent Events (Details) (USD $)
12 Months Ended 114 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Subsequent Event [Line Items]      
Aggregate amount of interest payments $ 2,957,000 $ 849,000 $ 17,846,000
Subsequent Event [Member]
     
Subsequent Event [Line Items]      
Aggregate amount of interest payments 500,000    
Interest rate (in hundredths) 10.00%   10.00%
Number of days following the issuance of convertible notes and warrants 150 days    
Number of calendar days following day on convertible notes and warrants 180 days    
Maximum percentage of holding on number of outstanding shares (in hundredths) 9.985%   9.985%
Number of extend period on interest payment 1 day    
Exercise price (in dollars per share) $ 0.75   $ 0.75
Proceeds from exercise of warrants $ 30,000,000    
XML 33 R44.htm IDEA: XBRL DOCUMENT v2.4.0.6
Short-term Investments and Financial Instruments (Details) (USD $)
12 Months Ended 66 Months Ended 114 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2008
Dec. 31, 2012
Short-term Investments and Financial Instruments [Abstract]        
Short-term investments $ 0 $ 6,100,000   $ 0
Assets:        
Cash and cash equivalents 7,536,000 9,244,000   7,536,000
Short-term investments 0 6,066,000   0
Total fair value of assets 7,536,000 15,310,000   7,536,000
Liabilities:        
Total fair value of liabilities 8,903,000     8,903,000
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Impairment of property and equipment 0 7,371,000 0 7,371,000
Charge related to fair value of liability   1,800,000    
Charge related to termination benefits   1,700,000    
U.S. government agency funds [Member]
       
Assets:        
Short-term investments   4,021,000    
Corporate securities [Member]
       
Assets:        
Short-term investments   2,045,000    
Warrant liability [Member]
       
Liabilities:        
Total fair value of liabilities 6,178,000 2,511,000   6,178,000
Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 2,449,000     2,449,000
Embedded Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 276,000     276,000
Quoted prices in active markets for identical assets (Level 1) [Member]
       
Assets:        
Cash and cash equivalents 7,536,000 9,244,000   7,536,000
Short-term investments 0 6,066,000   0
Total fair value of assets 7,536,000 15,310,000   7,536,000
Quoted prices in active markets for identical assets (Level 1) [Member] | U.S. government agency funds [Member]
       
Assets:        
Short-term investments   4,021,000    
Quoted prices in active markets for identical assets (Level 1) [Member] | Corporate securities [Member]
       
Assets:        
Short-term investments   2,045,000    
Quoted prices in active markets for identical assets (Level 1) [Member] | Warrant liability [Member]
       
Liabilities:        
Total fair value of liabilities 0 0   0
Quoted prices in active markets for identical assets (Level 1) [Member] | Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 0     0
Quoted prices in active markets for identical assets (Level 1) [Member] | Embedded Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 0     0
Significant other observable inputs (Level 2) [Member]
       
Assets:        
Cash and cash equivalents 0 0   0
Short-term investments 0 0   0
Total fair value of assets 0 0   0
Liabilities:        
Total fair value of liabilities 0     0
Significant other observable inputs (Level 2) [Member] | U.S. government agency funds [Member]
       
Assets:        
Short-term investments   0    
Significant other observable inputs (Level 2) [Member] | Corporate securities [Member]
       
Assets:        
Short-term investments   0    
Significant other observable inputs (Level 2) [Member] | Warrant liability [Member]
       
Liabilities:        
Total fair value of liabilities 0 0   0
Significant other observable inputs (Level 2) [Member] | Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 0     0
Significant other observable inputs (Level 2) [Member] | Embedded Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 0     0
Significant unobservable inputs (Level 3) [Member]
       
Assets:        
Cash and cash equivalents 0 0   0
Short-term investments 0 0   0
Total fair value of assets 0 0   0
Liabilities:        
Total fair value of liabilities 8,903,000     8,903,000
Significant unobservable inputs (Level 3) [Member] | U.S. government agency funds [Member]
       
Assets:        
Short-term investments   0    
Significant unobservable inputs (Level 3) [Member] | Corporate securities [Member]
       
Assets:        
Short-term investments   0    
Significant unobservable inputs (Level 3) [Member] | Warrant liability [Member]
       
Liabilities:        
Total fair value of liabilities 6,178,000 2,511,000   6,178,000
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Balance 2,511,000 0    
Issuance of additional warrants 4,944,000 16,947,000    
Change in fair value (1,277,000) (14,436,000)    
Balance 6,178,000 2,511,000   6,178,000
Significant unobservable inputs (Level 3) [Member] | Warrant liability [Member] | 2011 Warrants [Member]
       
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Balance 2,511,000 0    
Issuance of additional warrants 0 16,947,000    
Change in fair value (133,000) (14,436,000)    
Balance 2,378,000 2,511,000   2,378,000
Significant unobservable inputs (Level 3) [Member] | Warrant liability [Member] | 2012 Warrants [Member]
       
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Balance 0 0    
Issuance of additional warrants 4,944,000 0    
Change in fair value (1,144,000) 0    
Balance 3,800,000 0   3,800,000
Significant unobservable inputs (Level 3) [Member] | Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 2,449,000     2,449,000
Significant unobservable inputs (Level 3) [Member] | Derivative liability [Member] | Convertible Note Call Option [Member]
       
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Balance 0      
Issuance of derivative 3,181,000      
Change in fair value (732,000)      
Balance 2,449,000     2,449,000
Significant unobservable inputs (Level 3) [Member] | Embedded Derivative liability [Member]
       
Liabilities:        
Total fair value of liabilities 276,000     276,000
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Balance 0      
Issuance of derivative 798,000      
Exercise of exchange right (310,000)      
Change in fair value (212,000)      
Balance 276,000     276,000
Significant unobservable inputs (Level 3) [Member] | Embedded Derivative liability [Member] | Demand Note Exchange Right [Member]
       
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Balance 0      
Issuance of derivative 310,000      
Exercise of exchange right (310,000)      
Change in fair value 0      
Balance 0     0
Significant unobservable inputs (Level 3) [Member] | Embedded Derivative liability [Member] | Convertible Note Conversion Option [Member]
       
Reconciliation of embedded derivative warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) [Abstract]        
Balance 0      
Issuance of derivative 488,000      
Exercise of exchange right 0      
Change in fair value (212,000)      
Balance $ 276,000     $ 276,000
XML 34 R30.htm IDEA: XBRL DOCUMENT v2.4.0.6
Property and equipment (Tables)
12 Months Ended
Dec. 31, 2012
Property and equipment [Abstract]  
Property and equipment
Property and equipment consisted of the following (in thousands):
 
   
December 31,
   
2011
 
2012
Office and warehouse equipment
$
323
 
$
323
 
Computer equipment
   
985
     
978
 
Furniture and fixtures
   
524
     
524
 
Laboratory equipment
   
4,913
     
4,961
 
Leasehold improvements
 
6,898
 
 
6,898
 
 
 
13,643
 
 
13,684
 
Less accumulated depreciation
 
(12,622
)
 
(13,072
)
 
$
1,021
 
$
612
 
XML 35 R31.htm IDEA: XBRL DOCUMENT v2.4.0.6
Accrued compensation and benefits (Tables)
12 Months Ended
Dec. 31, 2012
Accrued compensation and benefits [Abstract]  
Accrued compensation and benefits
Accrued compensation and benefits expenses consist of the following (in thousands):
 
December 31,
2011
2012
Accrued severance benefits
$
1,774
$
Other accrued compensation and benefits
580
716
$
2,354
$
716
Activity related to accrued severance benefits
The following table summarizes the activity related to accrued severance benefits for the year ended December 31, 2012 (in thousands).
 
Balance at December 31, 2011
$1,544
Net charges paid
(1,544 )
Balance at December 31, 2012
$
XML 36 R8.htm IDEA: XBRL DOCUMENT v2.4.0.6
Organization and Nature of Operations
12 Months Ended
Dec. 31, 2012
Organization and Nature of Operations [Abstract]  
Organization and Nature of Operations
(1)           Organization and Nature of Operations
 
 
Tengion, Inc. (the Company) was incorporated in Delaware on July 10, 2003. The Company is a regenerative medicine company focused on discovering, developing, manufacturing and commercializing a range of neo-organs, or products composed of living cells, with or without synthetic or natural materials, implanted or injected into the body to engraft into, regenerate, or replace a damaged tissue or organ. Using its Organ Regeneration Platform, the Company creates these neo-organs using a patient's own cells, or autologous cells. The Company believes its proprietary product candidates harness the intrinsic regenerative pathways of the body to regenerate a range of native-like organs and tissues. The Company's product candidates are intended to delay or eliminate the need for chronic disease therapies, organ transplantation, and the administration of anti-rejection medications. In addition, the Company's neo-organs are designed to replace the need to substitute other tissues of the body for a purpose to which they are poorly suited.
 
Building on its clinical and preclinical experience, the Company is initially leveraging its Organ Regeneration Platform to develop its Neo-Urinary Conduit for bladder cancer patients who are in need of a urinary diversion and its Neo-Kidney Augment for patients with advanced chronic kidney disease. The Company operates as a single business segment. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of product candidate development; technological uncertainty; dependence on collaborative partners; uncertainty regarding patents and proprietary rights; comprehensive government regulations; having no commercial manufacturing experience, marketing or sales capability or experience; and dependence on key personnel.
 
On September 4, 2012, the Company was notified by NASDAQ of its determination to delist the Company's common stock from NASDAQ effective at the open of business on September 6, 2012, due to its failure to comply with the minimum $2.5 million stockholders' equity requirement for continued listing on the Nasdaq Capital Market. Effective at the opening of the market on September 6, 2012, the Company's common stock was transferred from the Nasdaq Capital Market to the OTCQB, which is operated by OTC Markets, Inc., and continues to trade under the symbol "TNGN."
XML 37 R32.htm IDEA: XBRL DOCUMENT v2.4.0.6
Accrued expenses (Tables)
12 Months Ended
Dec. 31, 2012
Accrued expenses [Abstract]  
Accrued expenses
Accrued expenses consist of the following (in thousands):
December 31,
2011
2012
Accrued consulting and professional fees
$
119
$
387
Accrued research and development
235
453
Accrued interest on convertible notes
373
Other
83
241
$
437
$
1,454
XML 38 R40.htm IDEA: XBRL DOCUMENT v2.4.0.6
Organization and Nature of Operations (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2012
Organization and Nature of Operations [Abstract]  
Minimum stockholders equity requirement for continued listing on Nasdaq Capital Market $ 2.5
XML 39 R53.htm IDEA: XBRL DOCUMENT v2.4.0.6
Stock-based Compensation (Details) (USD $)
12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Number of share based compensation plans 2  
Number of shares available for future grants (in shares) 46,652  
Employee [Member]
   
Weighted-average assumptions [Abstract]    
Volatility (in hundredths) 84.00% 79.00%
Expected term 6 years 5 years 6 months
Risk free interest rate (in hundredths) 1.10% 1.40%
Dividend yield (in hundredths) 0.00% 0.00%
Non-employee consultants [Member]
   
Weighted-average assumptions [Abstract]    
Volatility (in hundredths)   89.00%
Expected term   5 years
Risk free interest rate (in hundredths)   0.80%
Dividend yield (in hundredths)   0.00%
Stock Options [Member]
   
Number of shares [Abstract]    
Outstanding (in shares) 174,872 137,896
Granted (in shares) 87,184 130,569
Exercised (in shares) (2,432) (18,735)
Forfeited (in shares) (25,159) (74,858)
Outstanding (in shares) 234,465 174,872
Vested and expected to vest at December 31, 2012 (in shares) 218,118  
Exercisable at December 31, 2012 (in shares) 71,442  
Weighted-average exercise price [Abstract]    
Outstanding (in dollars per share) 16.76 24.88
Granted (in dollars per share) 5.66 11.34
Exercised (in dollars per share) 4.40 4.40
Forfeited (in dollars per share) 20.45 25.36
Outstanding (in dollars per share) 12.37 16.76
Vested and expected to vest at December 31, 2012 (in dollars per share) 12.69  
Exercisable at December 31, 2012 (in dollars per share) 21.45  
Weighted-average remaining contractual term [Abstract]    
Outstanding 8 years 6 months  
Vested and expected to vest at December 31, 2011 8 years 4 months 24 days  
Exercisable at December 31, 2011 7 years 7 months 6 days  
Aggregate intrinsic value [Abstract]    
Outstanding 0  
Vested and expected to vest at December 31, 2012 0  
Exercisable at December 31, 2012 0  
Stock options issued for purchase of common stock (in shares) 87,184 130,569
Stock Options [Member] | Employee [Member]
   
Aggregate intrinsic value [Abstract]    
Fair value of options (in dollars per share) 5.66 6.1
Weighted-average assumptions [Abstract]    
Unrecognized compensation expense 700,000  
Stock Options [Member] | Non-employee consultants [Member]
   
Number of shares [Abstract]    
Granted (in shares)   1,000
Aggregate intrinsic value [Abstract]    
Stock options issued for purchase of common stock (in shares)   1,000
Fair value of options (in dollars per share)   2.90
Weighted-average assumptions [Abstract]    
Stock-based compensation expense 1,000 9,000
Unrecognized compensation expense 0  
Stock Options [Member] | Non-Employee Director [Member]
   
Weighted-average assumptions [Abstract]    
Unrecognized compensation expense 0  
Stock Options [Member] | Employee And Non Employee Director [Member]
   
Number of shares [Abstract]    
Granted (in shares) 87,184 129,569
Aggregate intrinsic value [Abstract]    
Stock options issued for purchase of common stock (in shares) 87,184 129,569
Weighted-average assumptions [Abstract]    
Stock-based compensation expense 400,000 700,000
Restricted Stock [Member]
   
Weighted-average assumptions [Abstract]    
Stock-based compensation expense 200,000 100,000
Weighted average period for recognizing compensation expense 2 years 10 months 24 days  
Number of shares [Abstract]    
Nonvested (in shares) 13,988 0
Granted (in shares) 67,863 31,096
Vested (in shares) (5,047) (2,167)
Forfeited (in shares) (2,432) (14,941)
Nonvested (in shares) 74,372 13,988
Weighted-average grant date fair value [Abstract]    
Nonvested (in dollars per share) 24.20 0
Granted (in dollars per share) 6.00 24.20
Vested (in dollars per share) 24.20 24.20
Forfeited (in dollars per share) 17.36 24.20
Nonvested (in dollars per share) 7.81 24.20
Unrecognized compensation expense related to restricted stock awards 400,000  
2004 Stock Option Plan [Member] | Minimum [Member]
   
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Equity awards granted under plan vesting period 4 years  
2004 Stock Option Plan [Member] | Maximum [Member]
   
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Equity awards granted under plan vesting period 10 years  
2010 Stock Incentive and Option Plan [Member] | Minimum [Member]
   
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Equity awards granted under plan vesting period 4 years  
2010 Stock Incentive and Option Plan [Member] | Maximum [Member]
   
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Equity awards granted under plan vesting period 10 years  
XML 40 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
Balance Sheets (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Current assets:    
Cash and cash equivalents, including $1,194 of cash as of December 31, 2011 collateralizing letters of credit (Note 16) $ 7,536 $ 9,244
Short-term investments 0 6,066
Restricted cash 1,000 0
Prepaid expenses and other 360 408
Total current assets 8,896 15,718
Property and equipment, net of accumulated depreciation of $12,622 and $13,072 as of December 31, 2011 and 2012, respectively 612 1,021
Other assets 2,927 1,078
Total assets 12,435 17,817
Current liabilities:    
Current portion of long-term debt, net of debt discount of $157 as of December 31, 2012 1,786 2,205
Current portion of lease liability 536 739
Accounts payable 644 829
Accrued compensation and benefits 716 2,354
Accrued expenses 1,454 437
Derivative liability 2,449 0
Warrant liability 6,178 2,511
Total current liabilities 13,763 9,075
Long-term debt and embedded derivative, net of debt discount of $7,515 as of December 31, 2012 9,483 2,782
Lease liability 524 943
Other liabilities 8 2
Total liabilities 23,778 12,802
Commitments and contingencies (Note 16) 0 0
Stockholders' equity (deficit):    
Preferred stock, $0.001 par value; 10,000 shares authorized; zero shares issued or outstanding at December 31, 2011 and 2012, respectively 0 0
Common stock, $0.001 par value; 750,000 shares authorized; 2,381 and 2,449 shares issued and outstanding at December 31, 2011 and 2012, respectively 2 2
Additional paid-in capital 235,828 235,257
Deficit accumulated during the development stage (247,173) (230,244)
Total stockholders' equity (deficit) (11,343) 5,015
Total liabilities and stockholders' equity (deficit) $ 12,435 $ 17,817
XML 41 R45.htm IDEA: XBRL DOCUMENT v2.4.0.6
Property and equipment (Details) (USD $)
12 Months Ended 66 Months Ended 114 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2008
Dec. 31, 2012
Property, Plant and Equipment [Line Items]        
Property and equipment, gross $ 13,684,000 $ 13,643,000   $ 13,684,000
Less accumulated depreciation (13,072,000) (12,622,000)   (13,072,000)
Property and equipment, net 612,000 1,021,000   612,000
Impairment of property and equipment 0 7,371,000 0 7,371,000
Reduction in value of impaired assets acquired   17,600,000    
Reduction in value of accumulated depreciation   10,200,000    
Office and warehouse equipment [Member]
       
Property, Plant and Equipment [Line Items]        
Property and equipment, gross 323,000 323,000   323,000
Computer equipment [Member]
       
Property, Plant and Equipment [Line Items]        
Property and equipment, gross 978,000 985,000   978,000
Furniture and fixtures [Member]
       
Property, Plant and Equipment [Line Items]        
Property and equipment, gross 524,000 524,000   524,000
Laboratory equipment [Member]
       
Property, Plant and Equipment [Line Items]        
Property and equipment, gross 4,961,000 4,913,000   4,961,000
Leasehold improvements [Member]
       
Property, Plant and Equipment [Line Items]        
Property and equipment, gross $ 6,898,000 $ 6,898,000   $ 6,898,000
XML 42 R6.htm IDEA: XBRL DOCUMENT v2.4.0.6
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (Parenthetical) (USD $)
Dec. 31, 2008
Dec. 31, 2007
Dec. 31, 2006
Dec. 31, 2005
Dec. 31, 2004
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (unaudited) [Abstract]          
Series A Redeemable Convertible Preferred stock, value per share (in dollars per share)       $ 1.62 $ 1.62
Restricted common stock issued to employees and nonemployees, value per share (in dollars per share)       $ 2.32  
Series B Redeemable Convertible Preferred stock, value per share (in dollars per share)     $ 1.82    
Series C Redeemable Convertible Preferred stock, value per share (in dollars per share) $ 1.82 $ 1.82      
XML 43 R35.htm IDEA: XBRL DOCUMENT v2.4.0.6
Embedded Derivative and Derivative Liability (Tables)
12 Months Ended
Dec. 31, 2012
Embedded Derivative and Derivative Liability [Abstract]  
Aggregate fair values of the Demand Note Exchange Right, the Conversion Option and the Call Option
The following table summarizes the calculated aggregate fair values of the Demand Note Exchange Right, the Conversion Option and the Call Option as of the dates indicated along with assumptions utilized in each calculation.
 
Embedded Derivative and Derivative Liability
Demand
Note
Exchange
Right
Conversion Option
Call Option
September
30, 2012
October
2, 2012
December
31, 2012
October
2, 2012
December
31, 2012
Calculated aggregate value (in thousands)
$
310
$
488
$
276
$
3,181
$
2,449
Equity volatility
115%
115%
115%
115%
115%
Asset volatility
90%
90%
90%
90%
90%
Probability of Fundamental Transaction or Major Transaction
100%
100%
100%
100%
100%
Weighted average risk-free interest rate
0.2%
0.2%
0.3%
0.2%
0.3%
Dividend yield
None
None
None
None
None
XML 44 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
Employee Benefit Plan
12 Months Ended
Dec. 31, 2012
Employee Benefit Plan [Abstract]  
Employee Benefit Plan
(15)          Employee Benefit Plan
 
 
The Company maintains a defined contribution 401(k) plan (the 401(k) Plan) for the benefit of its employees. Employee contributions are voluntary and are determined on an individual basis, limited by the maximum amounts allowable under federal tax regulations. As of December 31, 2012, the Company has not elected to match any of the employee's contributions to the 401(k) Plan.
XML 45 R36.htm IDEA: XBRL DOCUMENT v2.4.0.6
Warrants (Tables)
12 Months Ended
Dec. 31, 2012
Class of Warrant or Right [Line Items]  
Outstanding warrants
The following table summarizes outstanding warrants to purchase common stock:
 
Shares Exercisable as
of December 31,
Exercise
20112012PriceExpiration
Equity-classified warrants
Issued to vendors
389
389
$
23.20
September 2015 through
December 2016
Issued pursuant to refinancing
of Working Capital Note
7,068
7,068
$
28.80
March 2016
Issued to lenders
6,449
6,449
$
234.40
August 2013 through
December 2016
Issued to lenders
4,608
4,608
$
263.90
October 2015 through
September 2019
18,514
18,514
Liability-classified warrants
Issued pursuant to March 2011 equity financing (1)
1,046,102
27,388,851
$
1.10
March 2016
Issued pursuant to October 2012 debt financing
52,843,337
$
0.75
October 2014 through October 2022
1,046,102
80,232,188
Total
1,064,616
80,250,702
 
(1)
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.
2011 Warrants [Member]
 
Class of Warrant or Right [Line Items]  
Aggregate fair values and net cash settlement value
The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2011 Warrants as of the dates indicated along with the assumptions utilized in each calculation.
Fair value as of December 31,Net cash settlement value as of
20112012December 31, 2012
Calculated aggregate value (in thousands)
$2,511$2,378$16,525(2)
Exercise price per share of warrant (1)
$28.80$1.10$1.10
Closing price per share of common stock$ 4.70Not applicable$ 0.99
Equity volatility
93.8%115.0%100.0% (3)
Asset volatility
Not applicable
90.0%
Not applicable
Probability of Fundamental Transaction
28.9%100%
Not applicable
Weighted average risk-free interest rate
0.7%0.3%0.4%
Dividend yield
None
None
None

(1)
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.
(2)
Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.
(3)
Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012 based on the terms of the Amended and Restated Warrant Agreement.
2012 Warrants [Member]
 
Class of Warrant or Right [Line Items]  
Aggregate fair values and net cash settlement value
The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2012 Warrants as of the dates indicated along with the assumptions utilized in each calculation.
Fair value as of:
Net cash settlement value
as of
December 31, 2012
October 2, 2012
December 31, 2012
Calculated aggregate value (in thousands)
$4,944$3,800$39,900(1)
Exercise price per share of warrant
$0.75$0.75$0.75
Closing price per share of common stock
Not applicable
Not applicable
$0.99(2)
Equity volatility
115%115%76% (3)
Asset volatility
90%90%
Not applicable
Probability of Fundamental Transaction
100%100%
Not applicable
Expected term (years)
Not applicable
Not applicable
8.0
Risk-free interest rate
0.2%0.3%1.4%
Dividend yield
None
None
None

(1)
Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model defined in the 2012 Warrant Agreement.
(2)
Represents the 5 day Tengion stock VWAP used to calculate the net cash settlement value as of December 31, 2012.
(3)
Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012, defined in the 2012 Warrant Agreement.
XML 46 R24.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
12 Months Ended
Dec. 31, 2012
Income Taxes [Abstract]  
Income Taxes
(17)        Income Taxes
 
A reconciliation of the statutory U.S. federal rate to the Company's effective tax rate is as follows:

   
2011
 
2012
Percent of pre-tax income:
               
U.S. federal statutory income tax rate
   
(34.0
)
   
(34.0
)
State taxes, net of federal benefit
   
(7.2
)
   
(4.6
)
Interest expense –revaluation of warrants
   
(25.5
)
   
(2.4
)
Other
   
0.8
     
1.4
 
Valuation allowance
   
65.9
     
39.6
 
Effective income tax expense rate
                 

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows (in thousands):

   
December 31,
   
2011
 
2012
Net operating loss carryforwards
$
56,702
 
$
61,522
 
Research and development credits
 
5,241
 
 
5,636
 
Depreciation and amortization
 
5,198
 
 
5,040
 
Capitalized start-up costs
 
14,703
 
 
16,453
 
Other temporary differences
 
2,384
 
 
1,340
 
Gross deferred tax asset
 
84,228
 
 
89,991
 
Deferred tax assets valuation allowance
 
(84,228
)
 
(89,991
)
 
             

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible. Due to the Company's history of losses, the deferred tax assets are fully offset by a valuation allowance at December 31, 2011 and 2012. The valuation allowance in 2011 increased by $13.3 million over 2010 and the valuation allowance in 2012 increased by $5.8 million over 2011, related primarily to additional net operating losses incurred by the Company and additional capitalized start-up expenses.
 
The Company has moved its corporate headquarters to its leased facility in Winston-Salem, North Carolina during the first quarter of 2012. As a result of differences in effective tax rates in North Carolina versus Pennsylvania, the deferred effective state tax rate is anticipated to be reduced. As the Company has a full valuation allowance on its deferred taxes, there is no impact related to the change in the effective state tax rate on the balance sheet and statement of operations. The Company is updating its forecasted effective state tax rate to consider this impact on its deferred taxes and will continue to monitor and update the rate as necessary. Additionally, the Company has approximately $8.3 million of deferred tax asset related to Pennsylvania net operating loss carryforwards. The ultimate use of this deferred tax asset may be impacted by the size of operations remaining in Pennsylvania in the future. This deferred tax asset is currently offset by a full valuation allowance.
 
As of December 31, 2011, and 2012, approximately $35.7 million and $42.7 million, respectively, of the Company's expenses had been capitalized for tax purposes as start-up costs. For tax purposes, capitalized start-up costs will be amortized over fifteen years beginning when the Company commences operations, as defined under the Internal Revenue Code.
 
The following table summarizes carryforwards of net operating losses and tax credits as of December 31, 2012 (in thousands).
 
   
Amount
  
Expiration
Federal net operating losses
 $150,936   
2023 to 2032
 
State net operating losses
  167,352   
2019 to 2032
 
Research and development credits
5,636
2024 to 2032
 
The Tax Reform Act of 1986 (the Act) provides for a limitation on the annual use of net operating loss and research and development tax credit carryforwards following certain ownership changes (as defined by the Act) that could limit the Company's ability to utilize these carryforwards. The Company has not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since its formation, due to the significant costs and complexities associated with such a study. The Company may have experienced various ownership changes, as defined by the Act, as a result of past financings. Accordingly, the Company's ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes; therefore, the Company may not be able to take full advantage of these carryforwards for federal or state income tax purposes.
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XML 48 R7.htm IDEA: XBRL DOCUMENT v2.4.0.6
Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended 66 Months Ended 114 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2008
Dec. 31, 2012
Cash flows from operating activities:        
Net loss $ (16,929) $ (19,061) $ (107,351) $ (198,786)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation 456 3,141 10,212 23,608
Change in fair value of embedded derivative and derivative liability (944) 0 0 (944)
Change in fair value of warrant liability (1,277) (14,436) (47) (17,775)
Charge related to lease liability 165 1,705 0 1,870
Loss on disposition of property and equipment 0 0 16 119
Impairment of property and equipment 0 7,371 0 7,371
Amortization of net discount on short-term investments 0 0 (149) (149)
Noncash interest expense 1,614 162 1,601 4,162
Noncash rent (income) expense 7 (24) 218 224
Stock-based compensation expense 566 834 2,536 5,745
Changes in operating assets and liabilities:        
Prepaid expenses and other assets (1,070) (802) (760) (2,698)
Accounts payable (252) (283) 815 618
Accrued expenses and other (1,797) (495) 4,021 966
Net cash used in operating activities (19,461) (21,888) (88,888) (175,669)
Cash flows from investing activities:        
Purchases of short-term investments 0 (13,066) (260,565) (324,508)
Increase in restricted cash (1,000) 0 0 (1,000)
Sales and redemptions of short-term investments 6,066 7,000 256,057 324,657
Cash paid for property and equipment (48) (81) (31,152) (31,722)
Proceeds from the sale of property and equipment 0 0 4 11
Net cash (used in) provided by investing activities 5,018 (6,147) (35,656) (32,562)
Cash flows from financing activities:        
Proceeds from sale of redeemable convertible preferred stock, net 0 0 139,960 139,960
Proceeds from sales of common stock and warrants, net 5 29,023 99 54,922
Repurchases of common stock 0 0 (94) (94)
Proceeds from long-term debt, net of issuance costs 14,196 4,908 33,768 53,713
Payments on long-term debt (1,466) (8,624) (3,245) (32,734)
Net cash provided by financing activities 12,735 25,307 170,488 215,767
Net (decrease) increase in cash and cash equivalents (1,708) (2,728) 45,944 7,536
Cash and cash equivalents, beginning of period 9,244 11,972 0 0
Cash and cash equivalents, end of period $ 7,536 $ 9,244 $ 45,944 $ 7,536
XML 49 R3.htm IDEA: XBRL DOCUMENT v2.4.0.6
Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Dec. 31, 2012
Dec. 31, 2011
Current assets:    
Collateralizing letters of credit   $ 1,194
Accumulated depreciation, property and equipment 13,072 12,622
Current liabilities:    
Current portion of long-term debt, debt discount 157  
Long-term debt, debt discount $ 7,515  
Stockholders equity:    
Preferred stock, par value ( in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized (in shares) 10,000 10,000
Preferred stock, shares issued (in shares) 0 0
Preferred stock, shares outstanding (in shares) 0 0
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized (in shares) 750,000 750,000
Common stock, shares issued (in shares) 2,449 2,381
Common stock, shares outstanding (in shares) 2,449 2,381
XML 50 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
Debt
12 Months Ended
Dec. 31, 2012
Debt [Abstract]  
Debt
(10)          Debt
 
 
Total debt outstanding consists of the following (in thousands):
December 31,
2011
2012
Senior Secured Convertible Notes
$
$
15,005
Embedded derivative liability
276
Working Capital Note
5,000
3,660
Equipment and Supplemental Working Capital Notes
126
Unamortized debt discount
(139
)
(7,672
)
4,987
11,269
Less current portion
(2,205
)
(1,786
)
Total long-term debt
$
2,782
$
9,483

Principal payments due as of December 31, 2012 are as follows (in thousands):

2013
$
1,943
2014
1,717
2015
15,005
18,665
Less embedded derivative and unamortized debt discount
(7,396
)
$
11,269

The Company recorded interest expense of $0.8 million and $3.0 million for the years ended December 31, 2011 and 2012, respectively. Included in interest expense in 2011 is $.2 million of amortization of deferred financing costs. Included in interest expense in 2012 is $0.8 million of issuance costs related to the 2012 Financing and $1.3 million in amortization of deferred financing costs and debt discount on the Convertible Notes and Working Capital Note.

Senior Secured Convertible Notes
 
On October 2, 2012, the Company completed a private placement of an aggregate principal amount of $15.0 million of Senior Secured Convertible Notes (the Convertible Notes). The aggregate principal amount of the Convertible Notes includes the exchange of the Demand Notes (see below for further discussion). Under the terms of the Agreement, the Convertible Notes bear interest at a rate of 10% per annum and will mature on October 2, 2015. Interest payments are payable quarterly in cash or shares of the Company's common stock (up to certain limits).
 
 The Company issued warrants to the holders of the Convertible Notes (2012 Warrants) to purchase approximately 51.1 million shares of common stock at an initial exercise price of $0.75 per share. The exercise price and number of shares issuable upon exercise of the warrants are subject to adjustment under certain circumstances. See Note 13 for further discussion.
 
The Company also granted the holders of the Convertible Notes the right to require the Company to sell to such holders up to an additional $20 million in securities on the same terms as the Convertible Notes and 2012 Warrants (the Call option). The Call Option may be exercised by the holders of the Convertible Notes at any time or from time to time on or before June 30, 2013. The conversion price of the notes and exercise price of the warrants issued pursuant to the terms of the Call Option will be no greater than $0.75 and, may be lower if the conversion price on the Convertible Notes and the exercise price of the 2012 Warrants are adjusted pursuant to the terms of such instruments.
 
The Company recorded a discount upon issuance of the Convertible Notes of approximately $8.3 million, related to the 2012 Warrants (as discussed further in Note 13) and the Call Option (as discussed further in Note 12), each of which were considered freestanding instruments and are recorded on the balance sheet as a Warrant Liability and Derivative Liability respectively, and the Conversion Option, which was considered an embedded derivative that was required to be bifurcated from the host instrument and recorded at fair value (as discussed further in Note 12). The discount will be accreted over the term of the Convertible Notes and included in interest expense using the effective interest method.
 
In connection with the 2012 Financing, the Company incurred $1.5 million of issuance costs. The issuance costs were allocated to the Convertible Notes, 2012 Warrants, and the Call Option based on the relative carrying values at the date of issuance. The Company allocated $0.8 million to the 2012 Warrants and the Call Option which was charged to interest expense upon issuance. The remaining $0.7 million of issuance costs were allocated to the carrying value of the Convertible Notes and are recorded in other assets as deferred financing costs, which are amortized using the effective interest method over the term of the notes. The Company recorded $0.2 million in interest expense for the amortization of the deferred financing costs related to the Convertible Notes in 2012.

The Convertible Notes are convertible under certain circumstances into shares of the Company's common stock at a conversion rate of 1,333 shares per $1,000 of principal amount of the Convertible Notes. The conversion rate is also subject to adjustment under certain circumstances. The Company may not redeem the Convertible Notes.
 
In connection with the issuance of the Convertible Notes, 2012 Warrants, and Call Option (collectively, the 2012 Financing), the Company entered into a registration rights agreement, securities purchase agreement and facility agreement with the selling stockholders. In connection with those agreements, the Company agreed to file a registration statement covering the resale of the shares of common stock issuable upon the conversion of the Convertible Notes and the exercise of the 2012 Warrants.
 
On December 31, 2012, January 30, 2013, and February 14, 2013, the Company entered into amendment agreements with the holders of the Convertible Notes. Pursuant to these amendments, the holders agreed to extend the interest payments that were due to them on January 1, 2013 to February 15, 2013. The aggregate amount of the interest payment due on January 1, 2013 was $0.4 million, which amount continued to accrue interest at the rate of 10% per annum. Additionally, the amendments extended the deadline required under the registration rights agreement to register the shares underlying the Convertible Notes and 2012 Warrants from December 31, 2012 to March 31, 2013.
 
Demand Notes
 
On September 7, 2012, the Company issued demand notes (the Demand Notes) in the aggregate amount of $1.0 million to certain new and existing investors. The Demand Notes bore interest at a rate of 10% per year and were secured by a lien on substantially all of the Company's assets, other than its intellectual property assets. The outstanding principal balance, with any accrued interest, was payable on demand at any time on or after October 7, 2012. Each holder of a Demand Note, in its sole discretion, could exchange the principal balance of its Demand Note, together with accrued interest, for the first tranche of debt securities and warrants issued by the Company after September 7, 2012 (Exchange Right). On October 2, 2012, the Company issued the Convertible Notes and the holders of the Demand Notes exercised their Exchange Right.
 
Working Capital Note
 
In March 2011, the Company refinanced the outstanding debt owed to one of its lenders. Pursuant to the terms of the refinancing, the Company simultaneously borrowed $5.0 million from the lender and repaid the then outstanding principal amount of $4.5 million. As a result of the amendment, this refinancing was treated as a modification for accounting purposes. The fees paid to the lender were amortized over the remaining term of the debt and any third party fees paid were expensed immediately.

As of December 31, 2011, the outstanding balance of this loan was $5.0 million. The Company was obligated to make interest-only payments through January 2012, followed by 24 monthly payments of principal and interest at an interest rate of 11.75% per annum.

In connection with the 2012 Financing, in October 2012, the Company amended the terms of the working capital note. Retroactively, effective September 1, 2012, the maturity date for the working capital note is extended from January 1, 2014 to May 1, 2014. The Company is now required to make monthly interest payments of approximately $40,000 through June 1, 2013 and monthly interest and principal payments of $0.4 million from July 1, 2013 through and including May 1, 2014. Retroactively, effective September 1, 2012, the interest rate on the Horizon Loan was increased from 11.75% to 13.0% per annum. As a result of the amendment, this refinancing was treated as a modification for accounting purposes. The fees paid to the lender were amortized over the remaining term of the debt and any third party fees paid were expensed immediately. In addition, the Company issued the lender, ten-year warrants to purchase 1,138,785 shares of common stock and five-year warrants to purchase 569,392 shares of common stock in connection with the amendment. See Note 13 for further discussion of the warrant liability.

Borrowings under the working capital note are secured by all of the Company's assets, except for permitted liens that have priority, including liens on certain equipment acquired to secure the purchase price or lease obligation, as defined in the loan agreement. In October 2012, the security was extended to include a lien on the Company's intellectual property.
XML 51 R1.htm IDEA: XBRL DOCUMENT v2.4.0.6
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2012
Mar. 22, 2013
Jun. 30, 2012
Document and Entity Information [Abstract]      
Entity Registrant Name TENGION INC    
Entity Central Index Key 0001296391    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Smaller Reporting Company    
Entity Public Float     $ 5,030,184
Entity Common Stock, Shares Outstanding   3,119,718  
Document Fiscal Year Focus 2012    
Document Fiscal Period Focus FY    
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2012    
XML 52 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
Capital Structure
12 Months Ended
Dec. 31, 2012
Capital Structure [Abstract]  
Capital Structure
(11)           Capital Structure
 
Common Stock
 
 
Since inception, the Company has sold common stock to certain officers, directors, employees, consultants, and Scientific Advisory Board members. As of December 31, 2012, the Company was authorized to issue 750,000,000 shares of common stock. Each holder of common stock is entitled to one vote for each share held. The Company will, at all times, reserve and keep available out of its authorized but unissued shares of common stock sufficient shares to effect the exercise of outstanding stock options and warrants.
 
In March 2011, the Company closed a private placement transaction pursuant to which the Company sold securities consisting of 1,107,939 shares of common stock and warrants to purchase 1,046,102 shares of common stock. The purchase price per security was $28.30. The Company received net proceeds of $28.9 million.

In connection with the March 2011 equity financing, the Company filed a registration statement with the SEC for the registration of the total number of shares sold to the investors and shares issuable upon exercise of the warrants and the registration statement was declared effective by the SEC on May 16, 2011. The Company is required to use commercially reasonable efforts to cause the registration statement to remain continuously effective until such time when all of the registered shares are sold or such shares may be sold by non-affiliates without volume or manner-of-sale restrictions pursuant to Rule 144 of the Securities Act and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144. In the event the Company fails to meet certain legal requirements in regards to the registration statement, it will be obligated to pay the investors, as partial liquidated damages and not as a penalty, an amount in cash equal to 1.5% of the aggregate purchase price paid by investors for each monthly period that the registration statement is not effective, up to a maximum aggregate payment of 6% of the purchase price paid by investors, except that if the Company fails to satisfy the current public information requirement pursuant to Rule 144(c)(1), the maximum aggregate payment would be 12% of the purchase price paid by investors. If the Company determines a registration payment arrangement in connection with the securities issued in March 2011 is probable and can be reasonably estimated, a liability will be recorded. As of December 31, 2011 and 2012, the Company concluded the likelihood of having to make any payments under the arrangements was remote, and therefore did not record any related liability.
 
Preferred Stock
 
As of December 31, 2011, the Company was authorized to issue 10,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. The issuance of the Company's preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control of the Company or other corporate action. There are no shares issued or outstanding as of December 31, 2012.
XML 53 R4.htm IDEA: XBRL DOCUMENT v2.4.0.6
Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended 114 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2012
Statements of Operations [Abstract]      
Revenue $ 0 $ 0 $ 0
Operating expenses:      
Research and development 10,103 13,293 127,960
General and administrative 5,496 7,191 47,389
Depreciation 456 3,141 23,608
Impairment of property and equipment 0 7,371 7,371
Other expense 165 1,705 1,870
Total operating expenses (16,220) (32,701) (208,198)
Interest income 27 53 8,539
Interest expense (2,957) (849) (17,846)
Change in fair value of embedded derivative and derivative liability 944 0 944
Change in fair value of warrant liability 1,277 14,436 17,775
Net loss attributable to common stockholders $ (16,929) $ (19,061) $ (198,786)
Basic and diluted net loss attributable to common stockholders per share (in dollars per share) $ (7.13) $ (8.82)  
Weighted-average common stock outstanding - basic and diluted (in shares) 2,374 2,162  
XML 54 R12.htm IDEA: XBRL DOCUMENT v2.4.0.6
Short-term Investments and Financial Instruments
12 Months Ended
Dec. 31, 2012
Short-term Investments and Financial Instruments [Abstract]  
Short-term Investments and Financial Instruments
(5)            Short-term Investments and Financial Instruments
 
 
As of December 31, 2012, the Company had no short-term investments. As of December 31, 2011, short-term investments consisted of investments in commercial paper and U.S. government agency and corporate securities of $6.1 million. The Company had the ability and intent to hold these investments until maturity and therefore has classified the investments as held-to-maturity. Due to the short-term nature of those investments, unrealized gains and losses had been deemed temporary and therefore not recognized in the accompanying financial statements. Income generated from short-term investments was recorded to interest income.
 
The fair value guidance requires fair value measurements be classified and disclosed in one of the following three categories:
 
·
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
·
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;
 
·
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
The following fair value hierarchy table presents information about each major category of the Company's financial assets and liability measured at fair value on a recurring basis as of December 31, 2011 and 2012 (in thousands).
 
Fair value measurement at reporting date using:
Quoted prices in active markets for identical assets (Level 1)
Significant other
observable
inputs
(Level 2)
Significant unobservable
inputs
(Level 3)
Total
At December 31, 2011
Assets:
Cash and cash equivalents
$
9,244
$
$
$
9,244
Short-term investments
U.S. government agency funds.
4,021
4,021
Corporate securities
2,045
2,045
Short-term investments
6,066
6,066
$
15,310
$
$
$
15,310
Liabilities:
Warrant liability
$
$
$
2,511
$
2,511
Fair value measurement at reporting date using:
Quoted prices in active markets for identical assets (Level 1)
Significant other observable
inputs
(Level 2)
Significant unobservable
inputs
(Level 3)
Total
At December 31, 2012:
Assets:
Cash and cash equivalents
$
7,536
$
$
$
7,536
Short-term investments
$
7,536
$
$
$
7,536
Liabilities:
Derivative liability
$
$
$
2,449
$
2,449
Embedded derivative liability
276
276
Warrant liability
6,178
6,178
$
$
$
8,903
$
8,903
 
The reconciliation of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

Call Option
Balance at January 1, 2012
$
Issuance of derivative
3,181
Change in fair value of derivative liability
(732 )
Balance at December 31, 2012
$2,449

The fair value of the derivative liability is based on Level 3 inputs. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value. See Note 12 for further discussion of the derivative liability.
 
The reconciliation of the Demand Note Exchange Right and the Conversion Option measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

 
Demand Note Exchange
Right
Conversion Option
Total
Embedded Derivatives
Balance at January 1, 2012
$
$
$
Issuance of derivative
310
488
798
Exercise of exchange right
(310
)
(310
)
Change in fair value of derivative liability
(212
)
(212
)
Balance at December 31, 2012
$
$
276
$
276
XML 55 R11.htm IDEA: XBRL DOCUMENT v2.4.0.6
Supplemental Cash Flow Information
12 Months Ended
Dec. 31, 2012
Supplemental Cash Flow Information [Abstract]  
Supplemental Cash Flow Information
(4)       Supplemental Cash Flow Information
 
 
The following table contains additional cash flow information for the periods reported (in thousands).

Year Ended
December 31,
Period from
July 10, 2003
(inception)
through
December 31,
201120122012
Supplemental cash flow disclosures:
Noncash investing and financing activities:
Conversion of note principal to redeemable convertible preferred stock
$
$
$
3,562
Convertible note issued to initial stockholder for consulting expense
210
Exchange of Demand Note for Convertible Note for Convertible Notes
1,005
1,005
Fair value of embedded derivatives and derivatives issued with issuance of long-term debt
3,669
3,669
        Fair value of warrants issued with issuance of long-term debt 1054,9447,234
Fair value of warrants issued with issuance of common stock
16,947
16,947
Conversion of redeemable convertible preferred stock into 566 shares of common stock
191,909
Conversion of warrant liability
123
Cash paid for interest, net of amounts capitalized
722
515
12,793
Cash paid for issuance costs classified as interest expense
830830

 
XML 56 R23.htm IDEA: XBRL DOCUMENT v2.4.0.6
Commitments and Contingencies
12 Months Ended
Dec. 31, 2012
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
(16)          Commitments and Contingencies
 
(a)Leases and Letters of Credit
 
The Company leases office space and office equipment under operating leases, which expire at various times through February 2016. Excluding the lease liability activity described in Note 9, rent expense under these operating leases was $0.7 million and $0.2 million for each of the years ended December 31, 2011 and 2012, respectively.
 
The following table summarizes future minimum lease payments as of December 31, 2012 (in thousands):
         
2013
 
$
947
 
2014
   
1,055
 
2015
   
1,079
 
2016
   
278
 
Total minimum lease payments (1)
$
3,360
 
         
(1)
The future minimum lease payments above do not include the impact of any potential sublease income discussed in Note 9 related to the Company's lease liability.

 
Effective March 2011, the lease agreement for the Company's facility in East Norriton, Pennsylvania required the Company to provide security and restoration deposits totaling $2.2 million to the landlord, an increase from the prior amount of $1.7 million. Until January 2011, the Company obtained letters of credit from a bank in favor of the landlord to satisfy the obligations. In January 2011, the Company deposited $1.0 million with the landlord as a security deposit, which amount is recorded as a non-current other asset on the Company's balance sheet as of December 31, 2011. As of December 31, 2011, an outstanding letter of credit was satisfying the remaining restoration deposit obligation of $1.2 million. At the end of the lease term, the landlord has the right to require us to utilize the funds collateralizing this letter of credit to restore the facility to its original condition. The letter of credit was collateralized by an account held at the bank. The letter of credit expired on December 2, 2012. As a result, the Company has deposited an additional $1.2 million in an account held by the landlord to satisfy its deposit obligation.

In May 2011, the Company exercised the first five-year renewal option under its lease for laboratory space in Winston-Salem, North Carolina. The amended lease extends the lease term to October 2016 and provides for payments of average annual base rent of approximately $0.2 million commencing in October 2011.

(b)
License and Research Agreements
 
In 2003, a license agreement was executed with Children's Medical Center Corporation (CMCC), whereby CMCC granted the Company a license to utilize certain patent rights. In accordance with the license agreement, the Company paid an initial license fee of $0.2 million, which was recorded as research and development expense. Additionally, the license agreement requires the Company to reimburse CMCC for patent costs related to the underlying licensed rights. In, 2011, 2012, and for the period from July 10, 2003 (inception) through December 31, 2012, the Company recorded $0.2 million, $0.1 million, and $2.4 million, respectively, related to the reimbursement of such patent costs as general and administrative expenses in the accompanying statements of operations.
 
The Company is obligated to make payments to CMCC upon the occurrence of various development and sales milestones. During the fourth quarter of 2006, the Company achieved two of its development milestones for the first licensed product launched, as defined in the agreement, and paid $0.4 million, which was recorded as research and development expense for the year ended December 31, 2006. No further milestones payments have been made. If the Company develops and obtains regulatory approval of a licensed product in each of the four subfields covered under the license, it will be required to pay CMCC milestones aggregating approximately $6.9 million, which includes $0.4 million paid to date. Also, if cumulative net sales of all licensed products reach a certain level, the Company will be required to make a one-time sales milestone payment of $2.0 million. The timing and likelihood of such milestone payments are not currently known to the Company. A portion of the milestone payments the Company makes will be credited against its future royalty payments. The Company must pay CMCC royalties in the mid-single digit range based on net sales of licensed products as defined in the agreement by the Company, its affiliates and its sublicensees, which royalties will be reduced for certain amounts the Company is required to pay to license patents or intellectual property from third parties and under certain circumstances if there is a competing product. No royalties will be payable with respect to sales of licensed products in countries where there is no valid patent claim, unless the Company advised CMCC not to file for patent protection in that country and later chose to market and sell licensed products in such country. The license agreement, and the Company's obligation to pay royalties, terminates on the later of the expiration, on a country-by-country basis, of the last patent right and October 2018.
 
In January 2006 the Company entered into a license agreement with Wake Forest University Health Sciences, or WFUHS, which was amended in May 2007, for the license of certain of WFUHS's intellectual property rights. Under the license agreement, the Company issued WFUHS a warrant to purchase 320 shares of the Company's common stock through January 1, 2016 at an exercise of $23.20 per share and is required to pay WFUHS a percentage of certain consideration received from a sublicensee. The Company is not required to make any milestone payments to WFUHS related to the development or commercialization of the licensed products, but the Company is required to pay certain license maintenance fees with respect to each product covered by new development patents, commencing two years after the Company initiates the first animal study conducted under cGLP, with respect to such product. These license maintenance fees, which are in the low six figure range with respect to each product, will be creditable against royalties the Company is obligated to pay to WFUHS for such product. In addition, the Company is required to pay WFUHS royalties in the low- to mid-single digit range based on net sales of licensed products in all countries. With respect to any product covered by an improvement patent, the Company's obligation to pay royalties to WFUHS terminates upon the later of the expiration, on a product-by-product basis, of the last to expire patent covering such product and the date that is 15 years from the first commercial sale of such product, provided that no such royalty is payable more than seven years after expiration of the last-to-expire patent covering such product.
XML 57 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
Embedded Derivative and Derivative Liability
12 Months Ended
Dec. 31, 2012
Embedded Derivative and Derivative Liability [Abstract]  
Embedded Derivative and Derivative Liability
(12)         Embedded Derivative and Derivative Liability
 
 
The Company accounts for the Demand Note Exchange Right and the Conversion Option in accordance with ASC 815, Derivatives and Hedging (ACS 815). Under this accounting guidance, the Company is required to bifurcate the embedded derivative from the host instrument and account for it as a derivative financial instrument. The Company also accounts for the Call Option issued in connection with the 2012 Financing in accordance with ASC 815, as this instrument is considered a free-standing financial instrument that meets the criteria of a derivative under the guidance.
 
Demand Note Exchange Right, Embedded Derivative Conversion Option and Call Option Derivative Liability
 
On October 2, 2012, the Company issued the Convertible Notes and the holders of the Demand Notes exercised their Exchange Right. The Company classified the fair value of the Conversion Option and Call Option as a liability and re-measured the fair value as of December 31, 2012.
 
The fair value of the Demand Note Exchange Right as of the date of issuance, as well as the fair values of the Conversion Option and Call Option as of the date of issuance and as of December 31, 2012, was determined using a risk-neutral framework within a Monte Carlo analysis. The valuation of the Demand Note Exchange Right, Conversion Option, and Call Option is subjective and is affected by changes in inputs to the valuation model including the assumptions regarding the aggregate value of the Company's debt and equity instruments; assumptions regarding the expected amounts and dates of future debt and equity financing activities; assumptions regarding the likelihood and timing of Fundamental Transactions or Major Transactions (as defined in the agreement); the historical and prospective volatility in the value of the company's debt and equity instruments; risk-free rates based on U.S. Treasury security yields; and the Company's dividend yield. In performing the valuation of the Conversion Option and Call Option, the Company believed the common stock price had not fully adjusted for the potential future dilution from this private placement. Therefore, the Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. The valuation resulted in a model-derived common stock value of $0.04 per share as of December 31, 2012 primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of warrants issued in 2011 and 2012. Changes in these assumptions can materially affect the fair value estimate.
 
The following table summarizes the calculated aggregate fair values of the Demand Note Exchange Right, the Conversion Option and the Call Option as of the dates indicated along with assumptions utilized in each calculation.
 
Embedded Derivative and Derivative Liability
Demand
Note
Exchange
Right
Conversion Option
Call Option
September
30, 2012
October
2, 2012
December
31, 2012
October
2, 2012
December
31, 2012
Calculated aggregate value (in thousands)
$
310
$
488
$
276
$
3,181
$
2,449
Equity volatility
115%
115%
115%
115%
115%
Asset volatility
90%
90%
90%
90%
90%
Probability of Fundamental Transaction or Major Transaction
100%
100%
100%
100%
100%
Weighted average risk-free interest rate
0.2%
0.2%
0.3%
0.2%
0.3%
Dividend yield
None
None
None
None
None
XML 58 R15.htm IDEA: XBRL DOCUMENT v2.4.0.6
Accrued expenses
12 Months Ended
Dec. 31, 2012
Accrued expenses [Abstract]  
Accrued expenses
(8)          Accrued expenses
 
 
Accrued expenses consist of the following (in thousands):
December 31,
2011
2012
Accrued consulting and professional fees
$
119
$
387
Accrued research and development
235
453
Accrued interest on convertible notes
373
Other
83
241
$
437
$
1,454
XML 59 R13.htm IDEA: XBRL DOCUMENT v2.4.0.6
Property and equipment
12 Months Ended
Dec. 31, 2012
Property and equipment [Abstract]  
Property and equipment
(6)         Property and equipment
 
Property and equipment consisted of the following (in thousands):
 
   
December 31,
   
2011
 
2012
Office and warehouse equipment
$
323
 
$
323
 
Computer equipment
   
985
     
978
 
Furniture and fixtures
   
524
     
524
 
Laboratory equipment
   
4,913
     
4,961
 
Leasehold improvements
 
6,898
 
 
6,898
 
 
 
13,643
 
 
13,684
 
Less accumulated depreciation
 
(12,622
)
 
(13,072
)
 
$
1,021
 
$
612
 

During the year ended December 31, 2011, the Company recorded a non-cash property and equipment impairment charge of $7.4 million in connection with the restructuring plan described in Note 9. Under the restructuring plan, the Company eliminated plans to use its facility in East Norriton, Pennsylvania as a manufacturing center and centralized its research and development operations in its leased facility in Winston-Salem, North Carolina. The aggregate acquisition value of the impaired assets, most of which were leasehold improvements, was reduced by $17.6 million and the related accumulated depreciation was reduced by $10.2 million as there was no future realizable value related to these assets.

XML 60 R14.htm IDEA: XBRL DOCUMENT v2.4.0.6
Accrued compensation and benefits
12 Months Ended
Dec. 31, 2012
Accrued compensation and benefits [Abstract]  
Accrued compensation and benefits
(7)          Accrued compensation and benefits
 
 
Accrued compensation and benefits expenses consist of the following (in thousands):
 
December 31,
2011
2012
Accrued severance benefits
$
1,774
$
Other accrued compensation and benefits
580
716
$
2,354
$
716

In November 2011, the Company's Board of Directors approved a restructuring plan designed to fund the Company's lead development programs through key milestones in 2012, eliminate plans to use its facility in East Norriton, Pennsylvania as a manufacturing center, and centralize its research and development operations in its leased facility in Winston-Salem, North Carolina. The Company is exploring options to significantly reduce the amount of space it currently rents.

The Company offered severance benefits to the terminated employees, and recorded a $1.7 million charge for personnel-related termination costs in the fourth quarter of 2011, of which $0.8 million was included in research and development expense and $0.9 million was included in general and administrative expense in the accompanying statements of operations. As of December 31, 2012 the Company had completed payment of these severance benefits.

As of December 31, 2011 accrued severance benefits also included $0.2 million related to the severance agreement the Company entered into with its former president and chief executive officer in June 2011. The severance agreement provided for the employee to receive 12 monthly severance payments equal to his current monthly salary and a one-time cash payment equal to his target bonus amount for 2011. During the year ended December 31, 2011, the Company recorded compensation expense within general and administrative expense and a corresponding liability of $0.7 million for the estimated value of the Company's obligations under the severance agreement. As of December 31, 2012, all payments in connection with the severance agreement were made.

The following table summarizes the activity related to accrued severance benefits for the year ended December 31, 2012 (in thousands).
 
Balance at December 31, 2011
$1,544
Net charges paid
(1,544 )
Balance at December 31, 2012
$

Other accrued compensation and benefits for the year ended December 31, 2011 and 2012 consisted primarily of accrued bonus of $0.4 million and $0.7 million, respectively.
XML 61 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
Lease liability
12 Months Ended
Dec. 31, 2012
Lease liability [Abstract]  
Lease liability
(9)        Lease liability
 
 
The Company entered into an agreement in February 2006 to lease warehouse space effective March 1, 2011, at which time the Company determined it was not likely to utilize the space during the five-year lease term. Therefore, the Company recorded a liability as of March 1, 2011, the cease-use date, for the fair value of its obligations under the lease. The most significant assumptions used in determining the amount of the estimated lease liability are the potential sublease revenues and the credit-adjusted risk-free rate utilized to discount the estimated future cash flows. During 2011, the Company recorded a liability and corresponding expense, which is included in other expense on the statement of operations, of $0.9 million, based on the Company's estimate of the fair value of its obligations.
 
In connection with the restructuring described in Note 7, the Company determined it was not likely to utilize substantially all of the leased office and manufacturing space in its East Norriton, Pennsylvania facility during the remainder of the lease term. Therefore, the Company recorded a liability as November 30, 2011, the cease-use date, for the fair value of its obligations under the lease. During 2011, the Company recorded a liability and corresponding expense, which is included in other expense on the statement of operations, of $0.9 million, based on the Company's estimate of the fair value of its obligations.
 
The following table summarizes the activity related to the lease liability for the year ended December 31, 2011 and 2012 (in thousands).
 
Warehouse
space
Office and manufacturing
space
Total
Balance at January 1, 2011
$
$
$
Initial fair value
933
891
1,824
Charges utilized
(193
)
(45
)
(238
)
Additional charges to operations
88
8
96
Balance at December 31, 2011
828
854
1,682
Charges utilized
(239
)
(548
)
(787
)
Additional charges to operations
89
76
165
Balance at December 31, 2012
678
382
1,060
Less current portion
(233
)
(303
)
(536
)
$
445
$
79
$
524

XML 62 R34.htm IDEA: XBRL DOCUMENT v2.4.0.6
Debt (Tables)
12 Months Ended
Dec. 31, 2012
Debt [Abstract]  
Debt outstanding
Total debt outstanding consists of the following (in thousands):
December 31,
2011
2012
Senior Secured Convertible Notes
$
$
15,005
Embedded derivative liability
276
Working Capital Note
5,000
3,660
Equipment and Supplemental Working Capital Notes
126
Unamortized debt discount
(139
)
(7,672
)
4,987
11,269
Less current portion
(2,205
)
(1,786
)
Total long-term debt
$
2,782
$
9,483
Principal payments due
Principal payments due as of December 31, 2012 are as follows (in thousands):

2013
$
1,943
2014
1,717
2015
15,005
18,665
Less embedded derivative and unamortized debt discount
(7,396
)
$
11,269
XML 63 R51.htm IDEA: XBRL DOCUMENT v2.4.0.6
Embedded Derivative and Derivative Liability (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended 66 Months Ended 114 Months Ended 12 Months Ended 9 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended 12 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2008
Dec. 31, 2012
Dec. 31, 2012
Demand Note Exchange Right [Member]
Sep. 30, 2012
Demand Note Exchange Right [Member]
Derivative Liability [Member]
Dec. 31, 2012
Conversion Option [Member]
Oct. 02, 2012
Conversion Option [Member]
Derivative Liability [Member]
Dec. 31, 2012
Conversion Option [Member]
Derivative Liability [Member]
Dec. 31, 2012
Call Option [Member]
Oct. 02, 2012
Call Option [Member]
Derivative Liability [Member]
Dec. 31, 2012
Call Option [Member]
Derivative Liability [Member]
Derivative [Line Items]                        
Common stock value per share (in dollars per share) $ 0.04     $ 0.04                
Total noncash credit due to change in fair value of embedded derivative and derivative liability $ 944 $ 0 $ 0 $ 944 $ 0   $ 212     $ 732    
Summary of aggregate fair values along with assumptions utilized [Abstract]                        
Calculated aggregate value           $ 310   $ 488 $ 276   $ 3,181 $ 2,449
Equity volatility (in hundredths)           115.00%   115.00% 115.00%   115.00% 115.00%
Asset volatility (in hundredths)           90.00%   90.00% 90.00%   90.00% 90.00%
Probability of Fundamental Transaction or Major Transaction (in hundredths)           100.00%   100.00% 100.00%   100.00% 100.00%
Weighted average risk-free interest rate (in hundredths)           0.20%   0.20% 0.30%   0.20% 0.30%
Dividend yield (in hundredths)           0.00%   0.00% 0.00%   0.00% 0.00%
XML 64 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Stock-based Compensation
12 Months Ended
Dec. 31, 2012
Stock-based Compensation [Abstract]  
Stock-based Compensation
(14)            Stock-based Compensation
 
The Company currently maintains two stock-based compensation plans. Under the 2004 Stock Option Plan (the 2004 Plan), stock awards were granted to employees, directors, and consultants of the Company, in the form of restricted stock and stock options. The amounts and terms of options granted were determined by the Company's compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. There are no shares available for future grants under the 2004 Plan, as grants from the 2004 Plan ceased upon the Company's initial public offering in April 2010.
 
The 2010 Stock Incentive and Option Plan (2010 Plan) became effective upon the closing of the Company's initial public offering. Under the 2010 Plan, stock awards may be granted to employees, directors, and consultants of the Company, in the form of restricted or unrestricted stock, stock appreciation rights, cash-based or performance share awards and stock options. The amounts and terms of options granted are determined by the Company's compensation committee. The equity awards granted under the Plan generally vest over four years and have terms of up to ten years after the date of grant, and options are exercisable in cash or as otherwise determined by the board of directors. The 2010 Plan allows for the transfer of forfeited shares from the 2004 Plan. As of December 31, 2012, 46,652 shares of common stock were available for future grants under the Plan.
 
Stock Options
 
The following table summarizes stock option activity under the Plans:
 
   
Number of shares
 
Weighted-average exercise
price
 
Weighted-average remaining contractual term (in years)
 
Aggregate intrinsic
value (in thousands)
 
             
Outstanding at December 31, 2010
 
137,896
   
$
24.88
           
Granted
 
130,569
   
$
11.34
           
Exercised
 
(18,735
)
 
$
4.40
           
Forfeited
 
(74,858
)
 
$
25.36
           
Outstanding at December 31, 2011
 
174,872
   
$
16.76
           
Granted
 
87,184
   
$
5.66
           
Exercised
 
(2,432
)
 
$
4.40
           
Forfeited
 
(25,159
)
 
$
20.45
           
Outstanding at December 31, 2012
 
234,465
   
$
12.37
 
8.5
 
$
 
                        
Vested and expected to vest at December 31, 2012
 
218,118
   
$
12.69
 
8.4
 
$
 
                        
Exercisable at December 31, 2012
 
71,442
   
$
21.45
 
7.6
 
$
 
                        
During 2011 and 2012, the Company issued options to purchase 129,569, and 87,184 shares of common stock, respectively, to employees and non-employee directors under the Plans. The per-share weighted-average fair value of the options granted to employees during 2011 and 2012 was estimated at $6.10, and $5.66, respectively, on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
   
Year Ended December 31,
 
   
2011
  
2012
 
        
Volatility
  79%   84% 
Expected term
 
5.5 years
  
6.0 years
 
Risk-free interest rate
  1.4%   1.1% 
Dividend yield
 
None
  
None
 
          

Total stock-based compensation expense recognized for stock options to employees and non-employee directors for the years ended December 31, 2011 and 2012 was $0.7 million and $0.4 million, respectively. As of December 31, 2012, there was $0.7 million of unrecognized compensation expense, net of forfeitures, related to non-vested employee stock options and remaining incremental expense associated with the modification of stock options and no unrecognized compensation expense related to non-vested non-employee director stock options.
 
During 2011, the Company issued options to purchase 1,000 shares of common stock to non-employee consultants under the Plan. No options were granted to non-employees during the year ended December 31, 2012. The per-share weighted-average fair value of the options granted to non-employees during 2011 was estimated at $2.90 on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
 
   
Year Ended December 31,
 
   
2011
  
2012
 
         
Volatility
  89%  
Not applicable
 
Expected term
 
5 years
  
Not applicable
 
Risk-free interest rate
  0.8%  
Not applicable
 
Dividend yield
 
None
  
Not applicable
 

 
Total stock-based compensation expense recognized for stock options to nonemployees for the years ended December 31, 2011 and 2012 was $9,000 and $1,000, respectively. As of December 31, 2012, there was not any unrecognized compensation expense related to non-vested nonemployee stock options.
 
Restricted Stock
 
The Company has issued restricted stock as compensation for the services of certain employees and other third parties. The grant date fair value of restricted stock was based on the fair value of the common stock on the date of grant, and compensation expense is recognized based on the period in which the restrictions lapse.
 
The following table summarizes restricted stock activity under the Plans:
   
Number
of shares
 
Weighted-average
grant date
fair value
 
Nonvested at December 31, 2010
 
   
$
 
Granted
 
31,096
   
$
24.20
 
Vested
 
(2,167
)
 
$
24.20
 
Forfeited
 
(14,941
)
 
$
24.20
 
Nonvested at December 31, 2011
 
13,988
   
$
24.20
 
Granted
 
67,863
   
$
6.00
 
Vested
 
(5,047
)
 
$
24.20
 
Forfeited
 
(2,432
)
 
$
17.36
 
Nonvested at December 31, 2012
 
74,372
   
$
7.81
 
              
Total stock-based compensation expense for restricted stock was $0.1 million and $0.2 million for the years ended December 31, 2011 and 2012, respectively. As of December 31, 2012, there was $0.4 million of unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted- average period of 2.9 years.
XML 65 R26.htm IDEA: XBRL DOCUMENT v2.4.0.6
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2012
Summary of Significant Accounting Policies [Abstract]  
Use of Estimates
(a)Use of Estimates
 
The preparation of financial statements, in accordance with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
(b)Fair Value of Financial Instruments
 
As of December 31, 2011 and 2012, the carrying amounts of financial instruments held by the Company, which include cash equivalents, short-term investments, prepaid expenses and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments. In addition, the carrying value of the Company's debt instruments, which do not have readily ascertainable market values, approximate fair value, given that the interest rates on outstanding borrowings approximate market rates.
 
Cash and Cash Equivalents
(c)Cash and Cash Equivalents
 
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2011, cash and cash equivalents included government-backed money market funds, commercial paper, and various bank deposit accounts. As of December 31, 2011, $1.2 million of the Company's cash was held in a separate account collateralizing letters of credit issued by a bank in favor of the landlord of its leased facility in East Norriton, Pennsylvania.
Short-term Investments
(d)Short-term Investments
 
The Company classifies investments as held-to-maturity at the time of purchase and reevaluates such designation as of each balance sheet date. Securities are classified as held-to-maturity when the Company has the positive intent and the ability to hold the securities until maturity. Held-to-maturity investments are recorded at amortized cost, adjusted for the accretion of discounts or premiums. Discounts or premiums are accreted into interest income over the life of the related investment using the straight-line method, which approximates the effective-yield method. Dividend and interest income are recognized when earned.
Restricted Cash
(e)Restricted Cash
 
The Company has deposited $1 million of the gross proceeds of its Senior Secured Convertible Notes (the Convertible Notes) (see footnote 10 for discussion of the Convertible Notes) financing into an escrow account pursuant to an Escrow Agreement between the Company, the lenders, and an escrow agent. Upon the achievement of (1) the successful completion of patient implants in the Phase I clinical trial of the Company's Neo-Urinary Conduit and (2) analysis of in-life data from the Company's GLP studies for the Neo-Kidney Augment that demonstrates that continued development is warranted (the Milestones), the lenders will instruct the escrow agent to release the escrowed funds to the Company. If the Milestones are not achieved by March 1, 2013, at the direction of the holders of at least 40% of the aggregate principal amount of the Convertible Notes, including certain specified holders, the escrow agent will transfer to the Company the portion of the escrowed amount that the holders agree is necessary for the orderly disposition of the Company's assets. This deposit is classified as restricted cash as of December 31, 2012.
Property and Equipment
(e)Property and Equipment
 
Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. The Company uses a life of three years for computer equipment, five years for laboratory and office and warehouse equipment, seven years for furniture and fixtures, and the lesser of the useful life of the asset or the remaining life of the underlying facility lease for leasehold improvements. Expenditures for maintenance, repairs, and betterments that do not prolong the useful life of the asset are charged to expense as incurred. The Company capitalizes interest in connection with the construction of property and equipment.
Impairment of Long-Lived Assets
(f)Impairment of Long-Lived Assets
 
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the year ended December 31, 2011, the Company recorded a charge for impairment of property and equipment. See Note 6 for additional information.
Research and Development
(g)Research and Development
 
Research and development costs are charged to expense as incurred. Research and development costs consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, including stock-based compensation; payments made to third party contract research organizations for preclinical studies, investigative sites for clinical trials, and consultants; costs associated with regulatory filings and the advancement of the Company's product candidates through preclinical studies and clinical trials; laboratory and other supplies; manufacturing development costs; and related facility maintenance.
Income Taxes
(h)Income Taxes
 
Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the tax provision in the period that includes the enactment date.
Stock-Based Compensation
(i)Stock-Based Compensation
 
The Company measures and recognizes compensation expense for all employee stock-based payments at fair value, net of estimated forfeitures, over the vesting period of the underlying stock-based awards. In addition, the Company accounts for stock-based compensation to nonemployees in accordance with the accounting guidance for equity instruments that are issued to other than employees.
 
Determining the appropriate fair value of stock-based payment awards require the input of subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility. The Company uses the Black-Scholes option-pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based payment awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different in the future. Since the Company does not have sufficient historical volatility of its stock for the expected term of its options, it uses comparable public companies as a basis for its expected volatility to calculate the fair value of option grants.
 
The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company's current estimates, such amounts will be recorded as an adjustment in the period in which estimates are revised. The Company considers many factors when estimating expected forfeitures for stock awards granted to employees, consultants and directors, including types of awards, employee class, and an analysis of the Company's historical and known forfeitures on existing awards. Under the true-up provisions of the stock based compensation guidance, the Company records additional expense if the actual forfeiture rate is lower than estimated, and a recovery of expense if the actual forfeiture rate is higher than estimated, during the period in which the options vest.
Embedded Derivative and Derivative Liability
(j) Embedded Derivative and Derivative Liability
 
The Company accounts for the Demand Note Exchange Right and the conversion feature embedded in the Convertible Notes (the Conversion Option) in accordance with ASC 815, Derivatives and Hedging (ASC 815). Under this accounting guidance, the Company is required to bifurcate the embedded derivative from the host instrument and account for it as a free-standing derivative financial instrument. The Company classifies these embedded derivatives as part of the carrying value of the debt host instrument. The Company also accounts for the Call Option issued in connection with the 2012 Financing in accordance with ASC 815, as this instrument is considered a free-standing financial instrument that meets the criteria of a derivative under the guidance. The Company classifies the Call Option as a Derivative Liability on the balance sheet. The changes in fair value of the embedded derivative or derivative liability are remeasured at each balance sheet date and recorded in current period earnings.
Warrants
(k)Warrants
 
The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants that allow for cash settlement or provide for modification of the warrant exercise price are accounted for as derivative liabilities. The Company classifies derivative warrant liabilities on the balance sheet as a current liability. The changes in fair value of the derivative warrant liabilities are remeasured at each balance sheet date and recorded in current period earnings.
Net Loss Per Share
(l)Net Loss Per Share
 
Basic and diluted net loss attributable to common stockholders per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding. For all periods presented, the outstanding shares of unvested restricted stock as well as the number of common shares issuable upon exercise of outstanding stock options and warrants and conversion of notes payable have been excluded from the calculation of diluted net loss attributable to common stockholders per share because their effect would be anti-dilutive. Therefore, the weighted-average shares used to calculate both basic and dilutive loss per share are the same.
 
The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as of December 31, 2011, and 2012, as they would be anti-dilutive:
 
   
Year Ended December 31,
 
     
2011
     
2012
 
Shares underlying warrants outstanding
   
1,064,616
     
80,250,702
 
Shares underlying options outstanding
   
174,872
     
234,465
 
Unvested restricted stock
   
13,988
     
74,372
 
Convertible notes payable
   
     
20,007,002
 
Deferred Debt Offering Costs
(m)Deferred Debt Offering Costs
 
Deferred debt offering costs include costs directly attributable to the Company's debt offerings. In accordance with authoritative literature, these costs are deferred and amortized over the term of the debt using the effective interest method.
Reverse Stock Split
(n)Reverse Stock Split
 
On May 25, 2012, the Company's Board of Directors approved a reverse stock split on the basis of one share of common stock for each currently outstanding 10 shares of pre-split common stock that became effective on June 14, 2012. All common share and per-share data included in these financial statements reflect such reverse stock split.
XML 66 R49.htm IDEA: XBRL DOCUMENT v2.4.0.6
Debt (Details) (USD $)
12 Months Ended 66 Months Ended 114 Months Ended
Dec. 31, 2012
Dec. 31, 2011
Dec. 31, 2008
Dec. 31, 2012
Total debt outstanding [Abstract]        
Total debt $ 11,269,000 $ 4,987,000   $ 11,269,000
Unamortized debt discount (7,672,000) (139,000)   (7,672,000)
Less current portion (1,786,000) (2,205,000)   (1,786,000)
Total long-term debt 9,483,000 2,782,000   9,483,000
Principal payments maturity [Abstract]        
2013 1,943,000     1,943,000
2014 1,717,000     1,717,000
2015 15,005,000     15,005,000
Long-term debt including unamortized debt discount 18,665,000     18,665,000
Less embedded derivative and unamortized debt discount (7,396,000)     (7,396,000)
Total debt 11,269,000 4,987,000   11,269,000
Interest expense 2,957,000 849,000   17,846,000
Amortization of deferred financing costs 1,300,000      
Debt issuance costs 1,500,000      
Warrants to purchase common stock (in shares) 80,250,702 1,064,616   80,250,702
Accrued interest on convertible notes 373,000 0   373,000
Demand notes   1,000,000    
Repayment of debt 1,466,000 8,624,000 3,245,000 32,734,000
Call Option [Member] | Ten-Year Warrants [Member]
       
Principal payments maturity [Abstract]        
Debt issuance costs 800,000      
Senior Secured Convertible Notes [Member]
       
Total debt outstanding [Abstract]        
Total debt 15,005,000 0   15,005,000
Unamortized debt discount 8,300,000     8,300,000
Principal payments maturity [Abstract]        
Total debt 15,005,000 0   15,005,000
Amortization of deferred financing costs   200,000    
Debt issuance costs 700,000      
Debt interest rate (in hundredths) 10.00%     10.00%
Debt instrument, maturity date Oct. 02, 2015      
Warrants to purchase common stock (in shares) 51,100,000     51,100,000
Initial exercise price of warrants (in dollars per share) $ 0.75     $ 0.75
Number of shares issuable at conversion (in shares) 1,333      
Base principal amount considered for conversion 1,000     1,000
Accrued interest on convertible notes 400,000     400,000
Senior Secured Convertible Notes [Member] | Call Option [Member]
       
Principal payments maturity [Abstract]        
Warrants to purchase common stock (in shares) 20,000,000     20,000,000
Initial exercise price of warrants (in dollars per share) $ 0.75     $ 0.75
Working Capital Note [Member]
       
Total debt outstanding [Abstract]        
Total debt 3,660,000 5,000,000   3,660,000
Principal payments maturity [Abstract]        
Total debt 3,660,000 5,000,000   3,660,000
Debt interest rate (in hundredths) 13.00% 11.75%   13.00%
Debt instrument, maturity date May 01, 2014      
Repayment of debt 4,500,000      
Number of monthly payments 24      
Monthly interest payments 40,000      
Monthly interest and principal payments 400,000      
Working Capital Note [Member] | Ten-Year Warrants [Member]
       
Principal payments maturity [Abstract]        
Warrants to purchase common stock (in shares) 1,138,785     1,138,785
Warrants expiration period 10 years      
Working Capital Note [Member] | Five-Year Warrants [Member]
       
Principal payments maturity [Abstract]        
Warrants to purchase common stock (in shares) 569,392     569,392
Warrants expiration period 5 years      
Equipment and Supplemental Working Capital Notes [Member]
       
Total debt outstanding [Abstract]        
Total debt 0 126,000   0
Principal payments maturity [Abstract]        
Total debt 0 126,000   0
Demand Note [Member]
       
Principal payments maturity [Abstract]        
Debt interest rate (in hundredths) 10.00%     10.00%
Embedded Derivative liability [Member]
       
Total debt outstanding [Abstract]        
Total debt 276,000 0   276,000
Principal payments maturity [Abstract]        
Total debt $ 276,000 $ 0   $ 276,000
XML 67 R41.htm IDEA: XBRL DOCUMENT v2.4.0.6
Management's Plans to Continue as a Going Concern (Details) (USD $)
In Thousands, unless otherwise specified
12 Months Ended 114 Months Ended
Dec. 31, 2010
Dec. 31, 2009
Dec. 31, 2008
Dec. 31, 2007
Dec. 31, 2006
Dec. 31, 2005
Dec. 31, 2004
Dec. 31, 2012
Dec. 31, 2011
Management's Plans to Continue as a Going Concern [Abstract]                  
Deficit accumulated during the development stage               $ 247,173 $ 230,244
Cumulative accretion on redeemable convertible preferred stock $ 3,993 $ 14,059 $ 11,754 $ 8,742 $ 5,640 $ 3,164 $ 1,035 $ 48,400  
XML 68 R5.htm IDEA: XBRL DOCUMENT v2.4.0.6
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) (USD $)
In Thousands, except Share data, unless otherwise specified
Redeemable Convertible Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Deferred Compensation [Member]
Deficit Accumulated During the Development Stage [Member]
Total
Balance at Jul. 09, 2003 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Balance (in shares) at Jul. 09, 2003 0 0        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Issuance of common stock to initial stockholder 0 0 0 0 0 0
Issuance of common stock to initial stockholder (in shares) 0 138,000        
Effect of June 12 reverse stock split (see Note 3) 0 0 0 0 0 0
Effect of June 12 reverse stock split (see Note 3) (in shares) 0 (124,000)        
Net loss 0 0 0 0 (1,032) (1,032)
Balance at Dec. 31, 2003 0 0 0 0 (1,032) (1,032)
Balance (in shares) at Dec. 31, 2003 0 14,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (2,438) (2,438)
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses 30,126 0 0 0 0 0
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses (in shares) 18,741,000 0        
Conversion of notes payable, including interest 3,562 0 0 0 0 0
Conversion of notes payable, including interest (in shares) 2,203,000 0        
Issuance of restricted common stock to employees and nonemployees 0 1 336 (336) 0 1
Issuance of restricted common stock to employees and nonemployees (in shares) 0 24,000        
Issuance of common stock to consultants 0 0 21 0 0 21
Issuance of common stock to consultants (in shares) 0 14,000        
Issuance of common stock to convertible noteholders 0 0 67 0 0 67
Issuance of common stock to convertible noteholders (in shares) 0 9,000        
Issuance of options to purchase common stock to consultants for services rendered 0 0 14 (14) 0 0
Amortization of deferred compensation 0 0 0 23 0 23
Change in value of restricted common stock subject to vesting 0 0 11 (11) 0 0
Accretion of redeemable convertible preferred stock to redemption value 1,035 0 0 0 (1,035) (1,035)
Balance at Dec. 31, 2004 34,723 1 449 (338) (4,505) (4,393)
Balance (in shares) at Dec. 31, 2004 20,944,000 61,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (9,627) (9,627)
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses 5,223 0 0 0 0 0
Issuance of Series A Redeemable Convertible Preferred stock, net of expenses (in shares) 3,247,000 0        
Issuance of restricted common stock to employees and nonemployees 0 0 140 (139) 0 1
Issuance of restricted common stock to employees and nonemployees (in shares) 0 6,000        
Issuance of warrants to purchase preferred stock to noteholders 0 0 681 0 0 681
Issuance of options to purchase common stock to consultants for services rendered 0 0 7 (7) 0 0
Amortization of deferred compensation 0 0 0 111 0 111
Accretion of redeemable convertible preferred stock to redemption value 3,164 0 0 0 (3,164) (3,164)
Balance at Dec. 31, 2005 43,110 1 1,277 (373) (17,296) (16,391)
Balance (in shares) at Dec. 31, 2005 24,191,000 67,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (20,873) (20,873)
Issuance of Series B Redeemable Convertible Preferred stock, net of expenses 50,040 0 0 0 0 0
Issuance of Series B Redeemable Convertible Preferred stock, net of expenses (in shares) 27,637,000 0        
Issuance of restricted common stock to employees 0 0 0 0 0 0
Issuance of restricted common stock to employees (in shares) 0 0        
Issuance of common stock upon exercise of options 0 0 9 0 0 9
Issuance of common stock upon exercise of options (in shares) 0 0        
Repurchased nonvested restricted stock 0 0 0 0 0 0
Repurchased nonvested restricted stock (in shares) 0 (1,000)        
Reclassification of deferred compensation 0 0 (373) 373 0 0
Reclassification of warrants to purchase preferred stock 0 0 (681) 0 0 (681)
Stock-based compensation expense 0 0 400 0 0 400
Accretion of redeemable convertible preferred stock to redemption value 5,640 0 0 0 (5,640) (5,640)
Balance at Dec. 31, 2006 98,790 1 632 0 (43,809) (43,176)
Balance (in shares) at Dec. 31, 2006 51,828,000 66,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (30,988) (30,988)
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses 33,219 0 0 0 0 0
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses (in shares) 18,333,000 0        
Issuance of common stock upon exercise of options 0 0 60 0 0 60
Issuance of common stock upon exercise of options (in shares) 0 3,000        
Repurchased vested restricted stock 0 0 (94) 0 0 (94)
Repurchased vested restricted stock (in shares) 0 (1,000)        
Stock-based compensation expense 0 0 664 0 0 664
Accretion of redeemable convertible preferred stock to redemption value 8,742 0 0 0 (8,742) (8,742)
Balance at Dec. 31, 2007 140,751 1 1,262 0 (83,539) (82,276)
Balance (in shares) at Dec. 31, 2007 70,161,000 68,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (42,393) (42,393)
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses 21,352 0 0 0 0 0
Issuance of Series C Redeemable Convertible Preferred stock, net of expenses (in shares) 11,793,000 0        
Issuance of common stock upon exercise of options 0 0 28 0 0 28
Issuance of common stock upon exercise of options (in shares) 0 0        
Repurchased vested restricted stock 0 0 0 0 0 0
Repurchased vested restricted stock (in shares) 0 0        
Stock-based compensation expense 0 0 1,317 0 0 1,317
Accretion of redeemable convertible preferred stock to redemption value 11,754 0 0 0 (11,754) (11,754)
Balance at Dec. 31, 2008 173,857 1 2,607 0 (137,686) (135,078)
Balance (in shares) at Dec. 31, 2008 81,954,000 68,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (29,845) (29,845)
Issuance of common stock upon exercise of options 0 0 54 0 0 54
Issuance of common stock upon exercise of options (in shares) 0 2,000        
Stock-based compensation expense 0 0 855 0 0 855
Accretion of redeemable convertible preferred stock to redemption value 14,059 0 0 0 (14,059) (14,059)
Balance at Dec. 31, 2009 187,916 1 3,516 0 (181,590) (178,073)
Balance (in shares) at Dec. 31, 2009 81,954,000 70,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (25,600) (25,600)
Issuance of common stock upon exercise of options 0 0 14 0 0 14
Issuance of common stock upon exercise of options (in shares) 0 3,000        
Stock-based compensation expense 0 0 953 0 0 953
Accretion of redeemable convertible preferred stock to redemption value 3,993 0 0 0 (3,993) (3,993)
Conversion of preferred stock to common stock (191,909) 0 191,909 0 0 191,909
Conversion of preferred stock to common stock (in shares) (81,954,000) 566,000        
Conversion of preferred stock warrants to common stock warrants 0 0 123 0 0 123
Proceeds from initial public offering, net of expenses 0 0 25,727 0 0 25,727
Proceeds from initial public offering, net of expenses (in shares) 0 600,000        
Balance at Dec. 31, 2010 0 1 222,242 0 (211,183) 11,060
Balance (in shares) at Dec. 31, 2010 0 1,239,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (19,061) (19,061)
Proceeds from equity financing, net of expenses 0 1 28,940 0 0 28,941
Proceeds from equity financing, net of expenses (in shares) 0 1,108,000        
Issuance of warrants to purchase common stock issued in connection with equity financing 0 0 (16,947) 0 0 (16,947)
Issuance of common stock upon exercise of options 0 0 83 0 0 83
Issuance of common stock upon exercise of options (in shares) 0 18,000        
Issuance of restricted stock to employees 0 0 0 0 0 0
Issuance of restricted stock to employees (in shares) 0 31,000        
Cancellation of restricted stock to employees 0 0 0 0 0 0
Cancellation of restricted stock to employees (in shares) 0 (15,000)        
Issuance of warrants to purchase common stock in connection with debt financing 0 0 105 0 0 105
Stock-based compensation expense 0 0 834 0 0 834
Conversion of notes payable, including interest           0
Conversion of preferred stock to common stock           0
Conversion of preferred stock warrants to common stock warrants           0
Balance at Dec. 31, 2011 0 2 235,257 0 (230,244) 5,015
Balance (in shares) at Dec. 31, 2011 0 2,381,000        
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Net loss 0 0 0 0 (16,929) (16,929)
Issuance of common stock upon exercise of options 0 0 10 0 0 10
Issuance of common stock upon exercise of options (in shares) 0 3,000        
Issuance of restricted stock to employees 0 0 0 0 0 0
Issuance of restricted stock to employees (in shares) 0 68,000        
Cancellation of restricted stock to employees 0 0 (5) 0 0 (5)
Cancellation of restricted stock to employees (in shares) 0 (3,000)        
Stock-based compensation expense 0 0 566 0 0 566
Conversion of notes payable, including interest           0
Conversion of preferred stock to common stock           0
Conversion of preferred stock warrants to common stock warrants           0
Balance at Dec. 31, 2012 $ 0 $ 2 $ 235,828 $ 0 $ (247,173) $ (11,343)
Balance (in shares) at Dec. 31, 2012 0 2,449,000        
XML 69 R10.htm IDEA: XBRL DOCUMENT v2.4.0.6
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2012
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
(3) Summary of Significant Accounting Policies
 
(a)Use of Estimates
 
The preparation of financial statements, in accordance with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
 
(b)Fair Value of Financial Instruments
 
As of December 31, 2011 and 2012, the carrying amounts of financial instruments held by the Company, which include cash equivalents, short-term investments, prepaid expenses and other current assets, accounts payable, and accrued expenses, approximate fair value due to the short-term nature of those instruments. In addition, the carrying value of the Company's debt instruments, which do not have readily ascertainable market values, approximate fair value, given that the interest rates on outstanding borrowings approximate market rates.
 
(c)Cash and Cash Equivalents
 
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2011, cash and cash equivalents included government-backed money market funds, commercial paper, and various bank deposit accounts. As of December 31, 2011, $1.2 million of the Company's cash was held in a separate account collateralizing letters of credit issued by a bank in favor of the landlord of its leased facility in East Norriton, Pennsylvania.
 
(d)Short-term Investments
 
The Company classifies investments as held-to-maturity at the time of purchase and reevaluates such designation as of each balance sheet date. Securities are classified as held-to-maturity when the Company has the positive intent and the ability to hold the securities until maturity. Held-to-maturity investments are recorded at amortized cost, adjusted for the accretion of discounts or premiums. Discounts or premiums are accreted into interest income over the life of the related investment using the straight-line method, which approximates the effective-yield method. Dividend and interest income are recognized when earned.

(e)Restricted Cash
 
The Company has deposited $1 million of the gross proceeds of its Senior Secured Convertible Notes (the Convertible Notes) (see footnote 10 for discussion of the Convertible Notes) financing into an escrow account pursuant to an Escrow Agreement between the Company, the lenders, and an escrow agent. Upon the achievement of (1) the successful completion of patient implants in the Phase I clinical trial of the Company's Neo-Urinary Conduit and (2) analysis of in-life data from the Company's GLP studies for the Neo-Kidney Augment that demonstrates that continued development is warranted (the Milestones), the lenders will instruct the escrow agent to release the escrowed funds to the Company. If the Milestones are not achieved by March 1, 2013, at the direction of the holders of at least 40% of the aggregate principal amount of the Convertible Notes, including certain specified holders, the escrow agent will transfer to the Company the portion of the escrowed amount that the holders agree is necessary for the orderly disposition of the Company's assets. This deposit is classified as restricted cash as of December 31, 2012.
 
(e)Property and Equipment
 
Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. The Company uses a life of three years for computer equipment, five years for laboratory and office and warehouse equipment, seven years for furniture and fixtures, and the lesser of the useful life of the asset or the remaining life of the underlying facility lease for leasehold improvements. Expenditures for maintenance, repairs, and betterments that do not prolong the useful life of the asset are charged to expense as incurred. The Company capitalizes interest in connection with the construction of property and equipment.
 
(f)Impairment of Long-Lived Assets
 
Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the year ended December 31, 2011, the Company recorded a charge for impairment of property and equipment. See Note 6 for additional information.
 
(g)Research and Development
 
Research and development costs are charged to expense as incurred. Research and development costs consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, including stock-based compensation; payments made to third party contract research organizations for preclinical studies, investigative sites for clinical trials, and consultants; costs associated with regulatory filings and the advancement of the Company's product candidates through preclinical studies and clinical trials; laboratory and other supplies; manufacturing development costs; and related facility maintenance.
 
(h)Income Taxes
 
Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the tax provision in the period that includes the enactment date.
 
(i)Stock-Based Compensation
 
The Company measures and recognizes compensation expense for all employee stock-based payments at fair value, net of estimated forfeitures, over the vesting period of the underlying stock-based awards. In addition, the Company accounts for stock-based compensation to nonemployees in accordance with the accounting guidance for equity instruments that are issued to other than employees.
 
Determining the appropriate fair value of stock-based payment awards require the input of subjective assumptions, including the expected life of the stock-based payment awards and stock price volatility. The Company uses the Black-Scholes option-pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based payment awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different in the future. Since the Company does not have sufficient historical volatility of its stock for the expected term of its options, it uses comparable public companies as a basis for its expected volatility to calculate the fair value of option grants.
 
The estimation of the number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from the Company's current estimates, such amounts will be recorded as an adjustment in the period in which estimates are revised. The Company considers many factors when estimating expected forfeitures for stock awards granted to employees, consultants and directors, including types of awards, employee class, and an analysis of the Company's historical and known forfeitures on existing awards. Under the true-up provisions of the stock based compensation guidance, the Company records additional expense if the actual forfeiture rate is lower than estimated, and a recovery of expense if the actual forfeiture rate is higher than estimated, during the period in which the options vest.
 
(j) Embedded Derivative and Derivative Liability
 
The Company accounts for the Demand Note Exchange Right and the conversion feature embedded in the Convertible Notes (the Conversion Option) in accordance with ASC 815, Derivatives and Hedging (ASC 815). Under this accounting guidance, the Company is required to bifurcate the embedded derivative from the host instrument and account for it as a free-standing derivative financial instrument. The Company classifies these embedded derivatives as part of the carrying value of the debt host instrument. The Company also accounts for the Call Option issued in connection with the 2012 Financing in accordance with ASC 815, as this instrument is considered a free-standing financial instrument that meets the criteria of a derivative under the guidance. The Company classifies the Call Option as a Derivative Liability on the balance sheet. The changes in fair value of the embedded derivative or derivative liability are remeasured at each balance sheet date and recorded in current period earnings.
 
(k)Warrants
 
The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants that allow for cash settlement or provide for modification of the warrant exercise price are accounted for as derivative liabilities. The Company classifies derivative warrant liabilities on the balance sheet as a current liability. The changes in fair value of the derivative warrant liabilities are remeasured at each balance sheet date and recorded in current period earnings.
 
(l)Net Loss Per Share
 
Basic and diluted net loss attributable to common stockholders per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding. For all periods presented, the outstanding shares of unvested restricted stock as well as the number of common shares issuable upon exercise of outstanding stock options and warrants and conversion of notes payable have been excluded from the calculation of diluted net loss attributable to common stockholders per share because their effect would be anti-dilutive. Therefore, the weighted-average shares used to calculate both basic and dilutive loss per share are the same.
 
The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as of December 31, 2011, and 2012, as they would be anti-dilutive:
 
   
Year Ended December 31,
 
     
2011
     
2012
 
Shares underlying warrants outstanding
   
1,064,616
     
80,250,702
 
Shares underlying options outstanding
   
174,872
     
234,465
 
Unvested restricted stock
   
13,988
     
74,372
 
Convertible notes payable
   
     
20,007,002
 

(m)Deferred Debt Offering Costs
 
Deferred debt offering costs include costs directly attributable to the Company's debt offerings. In accordance with authoritative literature, these costs are deferred and amortized over the term of the debt using the effective interest method.
 
(n)Reverse Stock Split
 
On May 25, 2012, the Company's Board of Directors approved a reverse stock split on the basis of one share of common stock for each currently outstanding 10 shares of pre-split common stock that became effective on June 14, 2012. All common share and per-share data included in these financial statements reflect such reverse stock split.
XML 70 R27.htm IDEA: XBRL DOCUMENT v2.4.0.6
Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2012
Summary of Significant Accounting Policies [Abstract]  
Potentially Dilutive Securities
The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding as of December 31, 2011, and 2012, as they would be anti-dilutive:
 
   
Year Ended December 31,
 
     
2011
     
2012
 
Shares underlying warrants outstanding
   
1,064,616
     
80,250,702
 
Shares underlying options outstanding
   
174,872
     
234,465
 
Unvested restricted stock
   
13,988
     
74,372
 
Convertible notes payable
   
     
20,007,002
 
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Commitments and Contingencies (Tables)
12 Months Ended
Dec. 31, 2012
Commitments and Contingencies [Abstract]  
Future minimum lease payments
The following table summarizes future minimum lease payments as of December 31, 2012 (in thousands):
         
2013
 
$
947
 
2014
   
1,055
 
2015
   
1,079
 
2016
   
278
 
Total minimum lease payments (1)
$
3,360
 
         
(1)
The future minimum lease payments above do not include the impact of any potential sublease income discussed in Note 9 related to the Company's lease liability.

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XML 74 R20.htm IDEA: XBRL DOCUMENT v2.4.0.6
Warrants
12 Months Ended
Dec. 31, 2012
Warrants [Abstract]  
Warrants
(13)         Warrants
 
 
The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are accounted for as derivative liabilities if the stock warrants allow for cash settlement or provide for modification of the warrant exercise price in the event subsequent sales of common stock are at a lower price per share than the then-current warrant exercise price. The Company classifies derivative warrant liabilities on the balance sheet as a current liability, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant.

The following table summarizes outstanding warrants to purchase common stock:
 
Shares Exercisable as
of December 31,
Exercise
20112012PriceExpiration
Equity-classified warrants
Issued to vendors
389
389
$
23.20
September 2015 through
December 2016
Issued pursuant to refinancing
of Working Capital Note
7,068
7,068
$
28.80
March 2016
Issued to lenders
6,449
6,449
$
234.40
August 2013 through
December 2016
Issued to lenders
4,608
4,608
$
263.90
October 2015 through
September 2019
18,514
18,514
Liability-classified warrants
Issued pursuant to March 2011 equity financing (1)
1,046,102
27,388,851
$
1.10
March 2016
Issued pursuant to October 2012 debt financing
52,843,337
$
0.75
October 2014 through October 2022
1,046,102
80,232,188
Total
1,064,616
80,250,702
 
(1)
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.

Equity-classified Warrants
 
In March 2011, the Company granted a warrant to a lender to purchase 7,068 shares of common stock in connection with the refinancing of the Company's Working Capital Note. See Note 10 for a discussion of the refinancing. The Company determined the fair value of the warrant as of the date of grant was $14.90 per share by utilizing the Black-Scholes model. In estimating the fair value of the warrant, the Company utilized the following inputs: closing price per share of common stock of $27.40, volatility of 64.96%, expected term of 5 years, risk-free interest rate of 2.0% and dividend yield of zero.
 
Liability-classified Warrants
 
2011 Warrants

In March 2011, the Company issued warrants (2011 Warrants) to purchase 1,046,102 shares of common stock in connection with a private placement transaction. Each warrant was exercisable in whole or in part at any time until March 4, 2016 at a per share exercise price of $28.80, subject to certain adjustments as specified in the warrant agreement. The Company valued the warrants as derivative financial instruments as of the date of issuance (March 4, 2011) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations.

On December 31, 2012, the Company commenced an offer to the holders of 2011 Warrants to amend and restate the 2011 Warrants. The Company subsequently executed exchange agreements (Exchange Agreements) with all of the holders of 2011 Warrants to exchange their 2011 Warrants for amended and restated warrants (2011 Amended and Restated Warrants).

Pursuant and subject to the Exchange Agreements, which generally governed the process of the exchange, the Holders executing the Exchange Agreements exchanged the 2011 Warrants held by each of them for 2011 Amended and Restated Warrants that provide for the following amendments:
 
·
an adjusted exercise price of $1.10, and a proportionate adjustment in the number of shares underlying the 2011 Warrants, which takes into account all adjustments under the 2011 Warrants as a result of the 2012 Financing;
 
·
certain edits to remove a Delisting (as defined in the 2011 Warrants) from qualifying as a fundamental transaction;
 
·
a Black Scholes calculation used to the determine the cash value received by a holder from the Company in connection with a repurchase of the unexercised portion of a warrant after the occurrence of a fundamental transaction that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company's common stock, immediately prior to the closing of a fundamental transaction;
 
·
a Black Scholes calculation for purposes of determining the value of options issued in connection with the sale of other securities that assumes a zero cost of borrow and a price per share equal to the closing market price of the Company's common stock on the date the options are publicly announced, and if not announced, on the date they are issued; and
 
·
excluding the 2012 Financing and exercise of the call option provided under its terms as a trigger for adjustments to the exercise price of the warrants except that adjustments to the exercise price, conversion price or purchase price of the 2012 Financing securities (i) resulting from registration of such securities with the Securities Exchange Commission or the commencements of the Rule 144 Period, as contemplated by the 2012 Financing documents, will result in a proportional adjustment to the exercise price of the warrants and (ii) resulting from additional financings or other events will result in adjustments of the exercise price of the warrants pursuant to the terms of the 2011 Amended and Restated Warrant.
 
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Following execution by the holders of the Exchange Agreements and receipt of the Amended and Restated 2011 Warrants, such holders had the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.
The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price. In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Fundamental Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange). The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Fundamental Transaction.

The net cash settlement value at the time of any future Fundamental Transaction will depend upon the value of the following inputs at that time: the price per share of the Company's common stock, the volatility of the Company's common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company's dividend yield. The warrant requires use of a volatility assumption equal to the greater of (i) 100%, (ii) the 30-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction, or (iii) the arithmetic average of the 10, 30, and 50-day volatility determined as of the trading day immediately following announcement of a Fundamental Transaction. The net cash settlement value at the time of a Fundamental Transaction could exceed the carrying value. For example, as of December 31, 2012, the calculated cash settlement value of $16.5 million exceeded the fair value of $2.4 million.

As of December 31, 2011, the fair value of the warrants is determined using a risk-neutral lattice methodology within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or Delisting into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company's common stock, assumptions regarding the expected amounts and dates of future equity financing activities, assumptions regarding the likelihood and timing of Fundamental Transactions or a Delisting, the historical volatility of the stock prices of the Company's peer group, risk-free rates based on U.S. Treasury security yields, and the Company's dividend yield. Changes in these assumptions can materially affect the fair value estimate.

The fair value of the 2011 Warrants as of December 31, 2012 was determined using a risk-neutral framework within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction or, in the case of the December 31, 2011 valuation, a Delisting into the calculation of fair value. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of the Company's common stock; assumptions regarding the expected amounts and dates of future debt and equity financing activities; assumptions regarding the likelihood and timing of Fundamental Transactions and, the historical volatility of the stock prices of the Company's common stock; risk-free rates based on U.S. Treasury security yields; and the Company's dividend yield.

In connection with the valuation performed on the 2011 Warrants, the Company believed the common stock price had not fully adjusted for the potential future dilution from the private placement completed on October 2, 2012 due to the trading restrictions on the unregistered shares of common stock issued and issuable from the conversion of debt and warrants, the uncertainty of the Company's outcome on its research programs, and the anti-dilution adjustment features of the warrants. Therefore, the Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. The valuation resulted in a model-derived common stock value of $0.05 per share primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of 2011 and 2012 Warrants. Changes in these assumptions can materially affect the fair value estimate. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.

During the year ended December 31, 2011 and 2012, the Company recorded non-operating income of $14.4 million and $0.1 million, respectively due to a decrease in the estimated fair value of these warrants.

 
The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2011 Warrants as of the dates indicated along with the assumptions utilized in each calculation.
Fair value as of December 31,Net cash settlement value as of
20112012December 31, 2012
Calculated aggregate value (in thousands)
$2,511$2,378$16,525(2)
Exercise price per share of warrant (1)
$28.80$1.10$1.10
Closing price per share of common stock$ 4.70Not applicable$ 0.99
Equity volatility
93.8%115.0%100.0% (3)
Asset volatility
Not applicable
90.0%
Not applicable
Probability of Fundamental Transaction
28.9%100%
Not applicable
Weighted average risk-free interest rate
0.7%0.3%0.4%
Dividend yield
None
None
None

(1)
Prior to the 2012 Financing, the holders of 2011 Warrants had the right in the aggregate to purchase 1,046,102 shares of common stock at an exercise price of $28.80 per share. Subsequent to the 2012 Financing, the holders of the 2011 Warrants agreed to amend the terms of the 2011 Warrants and receive Amended and Restated 2011 Warrants to replace the 2011 Warrants. Holders of the Amended and Restated 2011 Warrants have the right in the aggregate to purchase 27,388,851 shares of common stock at an exercise price of $1.10.
(2)
Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model specified in the warrant.
(3)
Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012 based on the terms of the Amended and Restated Warrant Agreement.
 
2012 Warrants

On October 2, 2012, as part of the 2012 Financing, the Company issued the 2012 Warrants to holders of the Convertible Notes. The 2012 Warrants are exercisable at an exercise price of $0.75 per share subject to certain adjustments as specified in the warrant agreement. The Company valued the warrants as derivative financial instruments as of the date of issuance (October 2, 2012) and will continue to do so at each reporting date, with any changes in fair value being recorded on the Statement of Operations.

The 2012 Warrants include (i) five-year warrants to purchase up to 16,672,145 shares of common stock, (ii) ten-year warrants to purchase up to 33,344,293 shares of common stock and (iii) two-year warrants, issued only to holders of the Demand Notes, to purchase up to 1,118,722 shares of common stock.
In addition, the Company issued Horizon, ten-year warrants to purchase 1,138,785 shares of common stock and five-year warrants to purchase 569,392 shares of common stock in connection with the Loan Amendment (see Note 10).

The warrants contain provisions that require the modification of the exercise price and shares to be issued under certain circumstances, including in the event the Company completes subsequent equity financings at a price per share lower than the then-current warrant exercise price. In addition, the warrants contain a net cash settlement provision under which the warrant holders may require the Company to purchase the warrants in exchange for a cash payment following the announcement of specified events defined as Major Transactions involving the Company (e.g., merger, sale of all or substantially all assets, tender offer, or share exchange). The net cash settlement provision requires use of the Black-Scholes model in calculating the cash payment value in the event of a Major Transaction.

The net cash settlement value at the time of any future Major Transaction will depend upon the value of the following inputs at that time: the price per share of the Company's common stock, the volatility of the Company's common stock, the expected term of the warrant, the risk-free interest rate based on U.S. Treasury security yields, and the Company's dividend yield. The warrant requires use of a volatility assumption equal to the Five-Day Volume Weighted Average Price (VWAP) determined as of the trading day immediately following announcement of a Major Transaction. The net cash settlement value at the time of a Fundamental Transaction could exceed the carrying value. For example, as of December 31, 2012, the calculated cash settlement value of $39.9 million exceeded the fair value of $3.8 million.

The fair value of the warrants as of October 2, 2012 and December 31, 2012 was determined using a risk-neutral framework within a Monte Carlo analysis to model the impact of potential modifications to the warrant exercise price and to include the probability of a Fundamental Transaction. In addition, the following inputs were used in the valuation model: assumptions regarding the aggregate value of the Company's debt and equity instruments, the amounts and dates of future debt financing transaction, and the historical and prospective volatility in the value of the Company's debt and equity instruments. The Company used an implied enterprise value considering potential future values for the Company contingent on the outcome of its research programs in conjunction with a Monte Carlo analysis to estimate the range of possible outcomes within each scenario and to allocate value to the securities in accordance with the terms of the agreements. As of December 31, 2012, the valuation resulted in a model-derived common stock value of $0.04 per share primarily due to the preference rights of the debt holders and the anti-dilution and net cash settlement features of the 2011 and 2012 Warrants. Changes in these assumptions can materially affect the fair value estimate. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability.

During the year ended December 31, 2012, the Company recorded non-operating income of $1.3 million, due to a decrease in the estimated fair value of these warrants.

The following table summarizes the calculated aggregate fair values and net cash settlement value for the 2012 Warrants as of the dates indicated along with the assumptions utilized in each calculation.
Fair value as of:
Net cash settlement value
as of
December 31, 2012
October 2, 2012
December 31, 2012
Calculated aggregate value (in thousands)
$4,944$3,800$39,900(1)
Exercise price per share of warrant
$0.75$0.75$0.75
Closing price per share of common stock
Not applicable
Not applicable
$0.99(2)
Equity volatility
115%115%76% (3)
Asset volatility
90%90%
Not applicable
Probability of Fundamental Transaction
100%100%
Not applicable
Expected term (years)
Not applicable
Not applicable
8.0
Risk-free interest rate
0.2%0.3%1.4%
Dividend yield
None
None
None

(1)
Represents the net cash settlement value of the warrant as of December 31, 2012, which value was calculated utilizing the Black-Scholes model defined in the 2012 Warrant Agreement.
(2)
Represents the 5 day Tengion stock VWAP used to calculate the net cash settlement value as of December 31, 2012.
(3)
Represents the volatility assumption used to calculate the net cash settlement value as of December 31, 2012, defined in the 2012 Warrant Agreement.