Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 5—Fair Value Measurements

The Company adopted the accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring basis. The 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 September 30, 2011 and December 31, 2010:

	Fair value measurement using
			Significant		Significant
	Quoted prices in		other		unobservable
	active markets		observable		inputs
	(Level 1)		inputs (Level 2)		(Level 3)		Total
Balance at September 30, 2011
Assets
Cash and cash equivalents	$	14,840,392	$	—	$	—	$	14,840,392
Liabilities
Warrant liability	$	—	$	—	$	7,509,630	$	7,509,630
Derivative liability		—		—		1,056,920		1,056,920
Total	$	—	$	—	$	8,566,550	$	8,566,550

	Fair value measurement using
			Significant		Significant
	Quoted prices in		other		unobservable
	active markets		observable		inputs
	(Level 1)		inputs (Level 2)		(Level 3)		Total
Balance at December 31, 2010
Assets
Cash and cash equivalents	$	867,738	$	—	$	—	$	867,738
Liabilities
Warrant liability	$	—	$	—	$	8,171,518	$	8,171,518
Derivative liability		—		—		2,120,360		2,120,360
Total	$	—	$	—	$	10,291,878	$	10,291,878

The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:

	Warrant
	Liability
Balance at December 31, 2010	$	8,171,518
Issuance of additional warrants		4,994,307
Exercise of warrants		(4,841,519	)
Change in fair value of warrant liability		(814,676	)
Balance at September 30, 2011	$	7,509,630

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 9 for further discussion of the warrant liability.

The reconciliation of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:

	Derivative
	Liability
Balance at December 31, 2010	$	2,120,360
Issuance of additional preferred stock and other		308,060
Conversion of preferred stock		(7,237,210	)
Change in fair value of derivative liability		5,865,710
Balance at September 30, 2011	$	1,056,920

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 8 for further discussion of the derivative liability.