Warrant Liability

6 Months Ended

Jun. 30, 2012

Warrant Liability [Abstract]

Warranty Liability

Note 4. Warrant Liability

In July 2011, the Company completed a private placement financing transaction in which it sold shares of its common stock and warrants to purchase shares of its common stock. The Company sold a total of 36,978,440 shares of common stock, at a price of $0.60 per share, and issued warrants to purchase up to 14,791,376 shares of common stock. The warrants are exercisable at $0.75 per share and expire five years from the date of issuance. The private placement resulted in $22.2 million in gross proceeds and approximately $20.4 million in net proceeds to the Company after deducting placement agent fees, legal, accounting and other costs associated with the transaction. The Company intends to use the net proceeds of the transaction to fund clinical trials and for general corporate purposes, including working capital.

As discussed in Note 1, the warrants issued in July 2011 include a provision that provides the warrant holders with an option to require the Company (or its successor) to purchase the warrants for cash in an amount equal to the Black-Scholes value in the event of a “Fundamental Transaction” (as defined in the warrant agreements). Accordingly, the fair value of the warrants at the issuance date was estimated using the Black-Scholes Model, as determined in accordance with the terms of the warrant agreements, and the Company recorded a warrant liability of $6.4 million in July 2011 and remeasured to $4.2 million at December 31, 2011. The Company remeasured the warrant liability to $2.9 million at June 30, 2012 and recorded a decrease to the warrant liability of approximately $1.3 million, which was recognized as income in the Company’s Condensed Consolidated Statement of Operations for the six months ended June 30, 2012. Additional disclosures regarding assumptions used in calculating the fair value of the warrant liability are included in Note 1.