Fair Value Measurements

12 Months Ended

Dec. 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 4 – Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.  The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

· Level 1 – Quoted prices in active markets for identical assets and liabilities.

· Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are categorized in the table below as of December 31, 2012 and 2011:

	Fair Value		Fair value measurement using
	December 31, 2012		Level 1		Level 2		Level 3
Assets:
Money markets	$	23,377	$	23,377	$	–	$	–
Certificate of deposit		400		400		–		–
Total Assets	$	23,777	$	23,777	$	–	$	–
Liabilities:
Common stock warrants	$	6,305	$	$ –	$	–	$	6,305

	Fair Value		Fair value measurement using
(in thousands)	December 31, 2011		Level 1		Level 2		Level 3
Assets:
Money markets	$	9,377	$	9,377	$	–	$	–
Certificate of deposit		400		400		–		–
Total Assets	$	9,777	$	9,777	$	–	$	–
Liabilities:
Common stock warrants	$	6,996	$	$ –	$	–	$	6,996

The following table summarizes changes in the fair value of the common stock warrants measured on a recurring basis using Level 3 inputs for 2011 and 2012:

(in thousands)
Balance at January 1, 2011	$	2,469
Issuance of common stock warrants		8,087
Change in fair value of common stock warrant liability		(3,560	)
Balance at December 31, 2011	$	6,996
Exercise of warrants (1)		(136	)
Change in fair value of common stock warrant liability		(555	)
Balance at December 31, 2012	$	6,305

(1)See, Note 8 – Common Stock Warrant Liability.

The significant unobservable inputs used in the fair value measurement of the May 2009 and February 2010 common stock warrants are the historical volatility of our common stock market price, expected term of the applicable warrants, and the risk-free interest rate based on the U.S. Treasury yield curve in effect at the measurement date.  In addition to the significant unobservable inputs noted above, the fair value measurement of the February 2011 five-year warrants also takes into account an assumption of the likelihood and timing of the occurrence of an event that would result in an adjustment to the exercise price in accordance with the anti-dilutive pricing provisions in the warrant.  Any significant increases or decreases in the unobservable inputs, with the exception of the risk-free interest rate, would result in significantly higher or lower fair value measurements.

	December 31,
Significant Unobservable Input Assumptions of Level 3 Valuations	2012			2011
Historical Volatility		56% -80	%		98% - 117	%
Expected Term (in years)		1.4 – 3.2			2.4 - 4.2
Risk-free interest rate		0.16% - 0.36	%		0.31% - 0.60	%