Note 10 – Stockholders' Equity

Registered Public Offerings and Private Placements

On February 22, 2011, we completed a registered public offering of 10 million shares of our common stock, 15-month warrants to purchase five million shares of our common stock, and five-year warrants to purchase five million shares of our common stock. The securities were sold as units, with each unit consisting of one share of common stock, a 15-month warrant to purchase one half share of common stock, and a five-year warrant to purchase one half share of common stock, at a public offering price of $2.35 per unit, resulting in gross proceeds to us of $23.5 million ($21.6 million net). The 15-month warrants expire in May 2012 and are exercisable at a price per share of $2.94. The five-year warrants expire in February 2016 and were initially exercisable at a price per share of $3.20. The exercise price of the five-year warrants is subject to adjustment if we issue or sell common stock or securities convertible into common stock (in each case, subject to certain exceptions) at a price (determined as set forth in the warrant) that is less than the exercise price of the warrant. In connection with the closing of our public offering on March 21, 2012, the exercise price of the five-year warrants has been adjusted downward to a price per share of $2.80. See, Note 17 – Subsequent Events.

On October 12, 2010, we entered into a Securities Purchase Agreement with PharmaBio, as the sole purchaser, pursuant to which PharmaBio agreed to purchase 158,730 shares of our common stock and warrants to purchase an aggregate of 79,365 shares of common stock, sold as units with each unit consisting of one share of common stock and one warrant to purchase one-half of a share of common stock, at an offering price of $3.15 per unit. The offering resulted in gross proceeds to us of $0.5 million. The warrants generally will expire in October 2015 and are immediately exercisable, subject to an aggregate beneficial ownership limitation, at an exercise price per share of $4.10 per share. If exercised in full, the warrants would result in additional proceeds to us of approximately $0.325 million. In addition, upon 20 days' written notice to the holder of the warrant, we may redeem any or all of the warrants at any time within 20 days following the occurrence of a “trading threshold” (as defined below) at a per-warrant redemption price of $0.001. A “trading threshold” will be deemed to have occurred on any date that the reported volume weighted average price (VWAP) for five of the immediately preceding seven consecutive trading days exceeds $6.75, provided that the minimum average daily trading volume of our common stock during the seven-day period is at least 33,333 shares (the price and volume criteria being adjusted to take into account any share dividend, share split or other similar transaction that may occur on or after the issuance).

On June 22, 2010, we completed a public offering of 2,380,952 shares of our common stock, five-year warrants to purchase 1,190,474 shares of our common stock, and nine-month warrants to purchase 1,190,474 shares of our common stock. The securities were sold as units, with each unit consisting of one share of common stock, a five-year warrant to purchase one half share of common stock, and a nine-month warrant to purchase one half share of common stock, at a public offering price of $4.20 per unit, resulting in gross proceeds to us of $10 million ($9.1 million net). The five-year warrants expire on June 22, 2015 and are immediately exercisable, subject to an aggregate beneficial ownership limitation, at a price per share of $6.00. The nine-month warrants, which were immediately exercisable, subject to an aggregate beneficial ownership limitation, at a price per share of $4.20, expired on March 22, 2011.

On April 27, 2010, we entered into a Securities Purchase Agreement with PharmaBio, as the sole purchaser, pursuant to which PharmaBio agreed to purchase 270,154 shares of common stock and warrants to purchase an aggregate of 135,077 shares of common stock, sold as units with each unit consisting of one share of common stock and one warrant to purchase one-half share of common stock, at an offering price of $8.14 per unit. The offering resulted in gross proceeds to us of $2.2 million ($2.1 million net). The warrants generally expire in April 2015 and have been exercisable since October 28, 2010, subject to an aggregate beneficial ownership limitation of 9.9%, at a price per share of $10.59.

In February 2010, we completed a public offering of 1,833,333 shares of our common stock and warrants to purchase 916,669 shares of our common stock, sold as units, with each unit consisting of one share of common stock and a warrant to purchase one-half share of common stock, at a public offering price of $9.00 per unit, resulting in gross proceeds to us of $16.5 million ($15.1 million net). The warrants expire in February 2015 and are immediately exercisable, subject to an aggregate share ownership limitation, at a price per share of $12.75.

The foregoing offerings were issued pursuant to our 2008 Universal Shelf. See, this Note – Common Shares Reserved for Future Issuance – Universal Shelf Registration Statements – 2008 Universal Shelf. With respect to the warrants issued in connection with the foregoing offerings, the exercise price and number of shares of common stock issuable upon exercise are subject to adjustment in the event of any stock split, reverse stock split, stock dividend, recapitalization, reorganization or similar transaction. The exercise price and the amount and/or type of property to be issued upon exercise of the warrants are also subject to adjustment if we engage in a “Fundamental Transaction” (such as consolidation or merger, sale or disposal of substantially all of our assets, and among others as defined in the form of the warrant). The warrants are exercisable for cash only, except that if the related registration statement or an exemption from registration is not otherwise available for the resale of the warrant shares, the holder may exercise on a cashless basis.

Committed Equity Financing Facility (CEFF)

Since 2004, we have maintained one or more Committed Equity Financing Facilities (CEFFs) with Kingsbridge Capital Limited (Kingsbridge), a private investment group, under which Kingsbridge is committed to purchase, subject to certain conditions, newly-issued shares of our common stock. The CEFFs have allowed us, at our discretion, to raise capital, at the time and in amounts deemed suitable to us, to support our business plans. We are not obligated to utilize any of the funds available under any CEFF and our ability to access funds at any time is subject to certain conditions, including stock price and volume limitations.

As of December 31, 2011, we had one CEFF dated June 11, 2010 (2010 CEFF). Two prior CEFF agreements, dated May 22, 2008 (May 2008 CEFF) and December 12, 2008 (December 2008 CEFF), expired in June 2011 and February 2011, respectively.

2010 CEFF

The 2010 CEFF related Stock Purchase Agreement originally provided for up to 2.1 million shares, up to a maximum of $35 million, and expires in June 2013. As of December 31, 2011, there were 1.1 million shares remaining under 2010 CEFF, up to a maximum of $32.3 million. The shares issuable under the 2010 CEFF are registered under the 2011 Universal Shelf. See, this Note – Universal Shelf Registration Statements.

Each draw down extends for an eight-day trading period. To initiate a draw down, the closing price of our common stock on the trading day immediately preceding the first trading day must be at least equal to $0.20 per share. If on any trading day during the trading period, if the daily volume-weighted average price of our common stock (VWAP) is less than the Threshold Price (defined below), Kingsbridge has the right to purchase shares at the Threshold Price; otherwise no shares are purchased on that trading day and the aggregate amount that we originally designated for the overall draw down is reduced for each such day by 1/8th. The Threshold Price is either (i) 90% of the closing market price of our common stock on the trading day immediately preceding the first trading day of the draw down period or (ii) a price that we specify at our sole discretion; but not less than $0.20 per share. Unless Kingsbridge and we agree otherwise, a minimum of three trading days must elapse between the expiration of any draw-down period and the beginning of the next draw-down period.

With respect to each draw down, Kingsbridge is obligated to purchase (“Obligated Amount”) the amount determined under one of two methodologies that we choose at our discretion, subject to a maximum of the lesser of 3.5% of the closing market value of the outstanding shares of our common stock at the time of the draw down or $15 million. The methodologies for determining the Obligated Amount are:

Methodology 1 – based on Threshold Price	Obligated Amount
Threshold Price is:
Greater than $90.00 per share	$	7,250,000
Greater than or equal to $75.00 but less than $90.00 per share	$	6,500,000
Greater than or equal to $60.00 but less than $75.00 per share	$	4,250,000
Greater than or equal to $45.00 but less than $60.00 per share	$	3,500,000
Greater than or equal to $30.00 but less than $45.00 per share	$	2,750,000
Greater than or equal to $18.75 but less than $30.00 per share	$	2,000,000
Greater than or equal to $11.25 but less than $18.75 per share	$	1,350,000
Greater than or equal to $7.50 but less than $11.25 per share	$	1,000,000
Greater than or equal to $3.75 but less than $7.50 per share	$	500,000
Greater than or equal to $3.00 but less than $3.75 per share	$	350,000

Methodology 2

Under this method, the Obligated Amount is equal to: 8 (the trading days in the draw down period) multiplied by the adjusted average trading volume of our common stock (calculated as the average daily trading volume of the prior 40 trading days excluding the 5 trading days with the highest trading volume and the 5 trading days with the lowest trading volume) multiplied by the Threshold Price multiplied by 0.1985.

In addition, the 2010 CEFF provides that in connection with any draw down notice we may, in our sole discretion, include a request that Kingsbridge purchase an additional amount over the calculated Obligated Amount (a supplemental amount). Kingsbridge may in its sole discretion choose to purchase all or a portion of any supplemental amount that we designate. If we designate a supplemental amount, we may also designate a separate threshold price for that supplemental amount, provided that the supplemental amount, when aggregated with all other amounts drawn under the 2010 CEFF, may not exceed the total commitment amount available under the 2010 CEFF. If Kingsbridge elects to purchase any of the supplemental amount, we will sell to Kingsbridge the corresponding number of shares at a price equal to the greater of (i) the daily VWAP of our common stock on the applicable trading day, or (ii) the supplemental amount threshold price designated by us, in either case less the applicable discount determined in the same manner as for the Obligated Amount.

The purchase price of shares sold to Kingsbridge under the 2010 CEFF is at a discount to the VWAP (as defined in the agreement) for each of the trading days in the draw down period as follows:

Daily VWAP	% of VWAP			Applicable Discount
Greater than $6.00 per share		95.62	%		4.38	%
Greater than or equal to $5.00 but less than $6.00 per share		95.25	%		4.75	%
Greater than or equal to $4.00 but less than $5.00 per share		94.75	%		5.25	%
Greater than or equal to $3.00 but less than $4.00 per share		94.25	%		5.75	%
Greater than or equal to $2.00 but less than $3.00 per share		94.00	%		6.00	%
Greater than or equal to $1.25 but less than $2.00 per share		92.50	%		7.50	%
Greater than or equal to $0.75 but less than $1.25 per share		91.50	%		8.50	%
Greater than or equal to $0.50 but less than $0.75 per share		90.50	%		9.50	%
Greater than or equal to $0.25 but less than $0.50 per share		85.00	%		15.00	%
Greater than or equal to $0.20 but less than $0.25 per share		82.50	%		17.50	%

Kingsbridge may terminate the 2010 CEFF under certain circumstances, including if a material adverse event relating to our business continues for 10 trading days after notice of the material adverse event.

In connection with the 2010 CEFF and prior CEFFs, we issued the following warrants to Kingsbridge, all of which are exercisable, in whole or in part, for cash, except in limited circumstances:

On June 11, 2010, a warrant to purchase up to 83,333 shares of our common stock at an exercise price of $6.69 per share. The warrant expires in December 2015 and is exercisable, in whole or in part, for cash, except in limited circumstances.

On December 22, 2008, a warrant to purchase up to 45,000 shares of our common stock at an exercise price of $22.70 per share, expiring in May 2014.

On May 22, 2008, a warrant to purchase up to 55,000 shares of our common stock at an exercise price of $37.59 per share, expiring in November 2013.

On April 17, 2006, a warrant to purchase up to 32,667 shares of our common stock at an exercise price equal to $84.29 per share. This warrant expired unexercised in October 2011.

In 2004, a warrant to purchase up to 25,000 shares of our common stock at an exercise price equal to $181.12 per share. This warrant expired unexercised in January 2010.

CEFF Financings

Financings that we completed under the 2010 CEFF are as follows:

(in thousands, except per share data)

Completion Date	Shares Issued		Gross Proceeds		Discounted Average Price Per Share

October 4, 2010		351	$	973	$	2.77
November 4, 2010		166		432		2.60
January 24, 2011		314		991		3.16
October 10, 2011		35		69		1.97
October 24, 2011		37		63		1.71
November 8, 2011		129		218		1.69
		1,032	$	2,746

There were no financings under the May 2008 CEFF or December 2008 CEFF during 2010 and 2011.

ATM Program

On December 14, 2011, we entered into a Sales Agency Agreement (Agency Agreement) with Lazard Capital Markets LLC (Lazard), under which Lazard, as our exclusive agent, may, at our discretion and at such times that we may determine from time to time, sell over a two year period up to a maximum of $15,000,000 of shares of our common stock (Shares) through an “at-the-market” program (ATM Program). We are not required to sell any Shares at any time during the term of the ATM Program.

If we issue a sale notice to Lazard, we may designate the minimum price per share at which Shares may be sold and the maximum number of Shares that Lazard is directed to sell during any selling period. As a result, prices are expected to vary as between purchasers and during the term of the offering. Lazard may sell the Shares by any method deemed to be an “at-the-market” equity offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, which may include ordinary brokers' transactions on The Nasdaq Capital Market, or otherwise at market prices prevailing at the time of sale or prices related to such prevailing market prices, or as otherwise agreed by Lazard and us. Either party may suspend sales under Agency Agreement by notice to the other party.

The Agency Agreement will terminate upon the earliest of: (1) the sale of all Shares subject to Agency Agreement, (2) December 14, 2013 or (3) the earlier termination of Agency Agreement in accordance with its terms. Either party may terminate Agency Agreement at any time upon written notification to the other party. We have agreed to pay Lazard a commission equal to 3.0% of the gross proceeds of any sales of Shares. We also agreed to reimburse Lazard for certain expenses incurred in connection with entering into Agency Agreement and have provided Lazard with customary representations and warranties, and indemnification rights.

The Shares to be issued under the ATM Program have been registered pursuant to a prospectus supplement dated December 14, 2011 to our 2011 Universal Shelf. See, Note 17 – Subsequent Events.

As of December 31, 2011, $15.0 million remained available under the ATM Program.

ATM Financings

On March 12, 2012, we completed an offering of 350,374 shares of our common stock for an aggregate purchase price of approximately $1.56 million, resulting in net proceeds to us of approximately $1.52 million, after deducting commissions due to Lazard under the Sales Agency Agreement.

401(k) Employer Match

We have a voluntary 401(k) savings plan covering eligible employees that allows for periodic discretionary company matches equal to a percentage of each participant's contributions (up to the maximum deduction allowed, excluding “catch up” amounts). We provide for the company match in the form of newly-issued shares of common stock, which are registered pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (SEC) on Form S-8. For the years ended December 31, 2011 and 2010, the match resulted in the issuance of 265,185 and 61,158, shares of common stock, respectively.

Common Shares Reserved for Future Issuance

Common shares reserved for potential future issuance upon exercise of warrants

The chart below summarizes shares of our common stock reserved for future issuance upon the exercise of warrants.

(in thousands, except price per share data)	December 31,				Exercise Price		Expiration Date
	2011		2010		Exercise Price		Expiration Date

Former Employee Warrant		30		-	$	3.20	3/18/2016
Investor Warrants – February 2011 Financing		5,000		-	$	3.20	2/22/2016
Investor Warrants – February 2011 Financing		5,000		-	$	2.94	5/22/2012
PharmaBio – October 2010 Financing		79		79	$	4.10	10/13/2015
Investor Warrants – June 2010 Financing		1,190		1,190	$	4.20	6/22/2015
Investor Warrants – June 2010 Financing		-		1,190	$	6.00	3/22/2011
Kingsbridge – 2010 CEFF		83		83	$	6.69	12/11/2015
PharmaBio – April 2010 Financing		135		135	$	10.59	4/30/2015
Investor Warrants – February 2010 Financing		917		917	$	12.75	2/23/2015
Investor Warrants – May 2009 Financing		467		467	$	17.25	5/13/2014
Kingsbridge – December 2008 CEFF		45		45	$	22.70	6/12/2014
Kingsbridge – May 2008 CEFF		55		55	$	37.59	11/22/2013
Private Placement – 2006		-		154	$	47.70	11/22/2011
Class C Investor Warrants – 2006 CEFF		-		33	$	84.29	10/17/2011
Total		13,001		4,348

Common shares reserved for potential future issuance upon exercise of stock options or granting of additional equity incentive awards

In October 2011, our stockholders approved the adoption of the 2011 Equity Incentive Plan (the 2011 Plan). The 2011 Plan provides for the grant of long-term equity and cash incentive compensation awards and replaces the 2007 Long-Term Incentive Plan (the 2007 Plan). The 2011 Plan continues many of the features of the 2007 Plan, but is updated to reflect changes to Nasdaq rules regarding equity compensation, other regulatory changes and market and corporate governance developments. Awards outstanding under the 2007 and 1998 Plan will continue to be governed by the terms of the respective plans and the agreements under which they were granted, although any shares returnable to the 2007 Plan as a result of cancellations, expirations and forfeitures will be returned to, and become available for issuance under, the 2011 Plan.

Stock options and awards outstanding and available for future issuance as of December 31, 2011 and 2010 are as follows:

(in thousands)	As of December 31,
	2011		2010

2011 Plan(1)
Outstanding		1,709		–
Available for Future Grants		2,106		–
Total		3,815		–

2007 Plan
Outstanding		297		564
Available for Future Grants		–		3
Total		297		567

1998 Plan
Outstanding		432		533
Available for Future Grants		–		–
Total		432		533

Total Outstanding		2,438		1,097
Total Available for Future Grants		2,106		3
Total		4,544		1,100

(1)	See, Note 11 – Stock Options and Stock-based Employee Compensation – Long-Term Incentive Plans.

Universal Shelf Registration Statements

2011 Universal Shelf

In June 2011, we filed a universal shelf registration statement on Form S-3 (No. 333-174786) (2011 Universal Shelf) with the SEC for the proposed offering from time to time of up to $200 million of our securities, including common stock, preferred stock, varying forms of debt and warrant securities, or any combination of the foregoing, on terms and conditions that will be determined at that time. The 2011 Universal Shelf was declared effective by the SEC on June 21, 2011. As of December 31, 2011, $199.7 million remained unissued under the 2011 Universal Shelf.

2008 Universal Shelf

In June 2008, we filed a universal shelf registration statement on Form S-3 (No. 333-151654) (2008 Universal Shelf) with the SEC for the proposed offering from time to time of up to $150 million of our securities, including common stock, preferred stock, varying forms of debt and warrant securities, or any combination of the foregoing, on terms and conditions that will be determined at that time. Upon effectiveness of the 2011 Universal Shelf, the 2008 Universal Shelf expired. See, in this note – Registered Public Offering and Private Placements, for offerings made pursuant to the 2008 Universal Shelf.

Common shares reserved for potential future issuance under CEFF arrangements

Common shares reserved for potential future financings under our CEFF arrangements are as follows:

(in thousands)		Potential future issuance as of December 31,
	Expiration	2011		2010

2010 CEFF	June 11, 2013		1,074		1,589
May 2008 CEFF	June 18, 2011		-		851
December 2008 CEFF	February 6, 2011		-		475

Common shares reserved for potential future issuance under our 401(k) Plan

As of December 31, 2011 and 2010, we had 342,833 and 58,018 shares, respectively, reserved for potential future issuance under the 401(k) Plan.