Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2012

Assets and liabilities measured at fair value

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

Common stock warrants measured at Level 3 inputs on recurring basis

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.

Significant unobservable input assumption used for valuation

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	%

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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