12. WARRANTS

As more fully described in Note 10, the Company completed a series of equity financing transactions in 2011.

In connection with the January 2011 Preferred Stock Offering, the Company issued warrants to purchase up to 2,083,333 shares of common stock with an exercise price of $3.25 per whole share of common stock and Placement Agent Warrants to purchase up to 350 shares of the convertible preferred stock. These Placement Agent Warrants are equivalent to 145,833 shares of common stock at an exercise price of $2.40 per whole share.

In connection with the June 2, 2011 Private Placement Offering, the Company issued warrants to purchase up to 3,218,612 shares of common stock with an exercise price of $2.77 per whole share of common stock.

In connection with the July 6, 2011 Registered Direct Offering, the Company issued warrants to purchase up to 628,668 shares of common stock with an exercise price of $3.13 per whole share of common stock.

In connection with the July 25, 2011 Registered Direct Offering, the Company issued warrants to purchase up to 914,305 shares of common stock with an exercise price of $4.22 per whole share of common stock.

In connection with the July 25, 2011 Private Placement Offering, the Company issued warrants to purchase up to 512,412 shares of common stock with an exercise price of $4.22 per whole share of common stock.

In connection with the December 6, 2011 Private Placement Offering, the Company issued warrants to purchase up to 3,243,244 shares of common stock with an exercise price of $2.36 per whole share of common stock.

The following is a summary of all warrant activity for 2011:

Warrants	Number Issued			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value

Outstanding at December 31, 2010		1,009,076		$	5.24	3.25		$ –
Common stock warrants granted in connection with the January 2011 Preferred Stock Offering		2,083,333			3.25	4.54		–
Placement Agent Warrants granted (as if exercised and converted to common stock)		145,833			2.40	4.54		–
Common stock warrants granted in connection with the June 2, 2011 Private Placement Offering		3,218,612			2.77	5.91		–
Common stock warrants granted in connection with the July 6, 2011 Registered Direct Offering		628,668			3.13	4.52		–
Common stock warrants granted in connection with the July 25, 2011 Registered Direct Offering		914,305			4.22	4.57		–
Common stock warrants granted in connection with the July 25, 2011 Private Placement Offering		512,412			4.22	4.57		–
Common stock warrants granted in connection with the December 6, 2011 Private Placement Offering		3,243,244			2.36	4.94		–
Exercise of common stock warrants		(156,866	)		2.73	4.53		–
Outstanding and exercisable at December 31, 2011		11,598,617		$	3.15		4.92	$	–

Common Stock Warrant Liability

In September 2009, the Company closed a registered direct offering with a select group of institutional investors that raised gross proceeds of $7.1 million and net proceeds of $6.3 million. In connection with this registered direct offering, the Company issued 2,018,153 shares of its common stock and warrants to purchase 1,009,076 shares of common stock. The warrants have an exercise price of $5.24 per share and are exercisable at any time on or after the six month anniversary of the date of issuance and on or prior to 66 months after the date of issuance. Under the terms of the warrants, upon certain transactions, including a merger, tender offer or sale of all or substantially all of the assets of the Company, each warrant holder may elect to receive a cash payment in exchange for the warrant, in an amount determined by application of the Black-Scholes option valuation model. Accordingly, pursuant to ASC 815.40, Derivative Instruments and Hedging - Contracts in Entity's Own Equity, the warrants are recorded as a liability and then marked to market each period through the Statement of Operations in other income or expense. At the end of each subsequent quarter, the Company will revalue the fair value of the warrants and the change in fair value will be recorded as a change to the warrant liability and the difference will be recorded through the Statement of Operations in other income or expense.

As of December 31, 2011 and 2010, the Company recorded a common stock warrant liability of $0.2 million. The fair value of the warrants at December 31, 2011 was calculated using the Black-Scholes option-pricing model with the following assumptions:

	December 31, 2011
Risk-free interest rate		0.83	%
Expected volatility		75.2	%
Expected life (in years)		1.6
Expected forfeiture rate		0	%
Expected dividend yield		0.00	%