Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2012
Fair Value of Financial Instruments [Abstract]  
Fair Value of Financial Instruments

4. Fair Value of Financial Instruments

Our available-for-sale securities are typically in United States government obligations, including government-backed agencies.

The inputs used to measure fair value are classified into the following hierarchy:

 

     
Level 1   Unadjusted quoted prices in active markets for identical assets or liabilities.
   
Level 2   Adjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or significant inputs other than quoted prices that are observable for the asset or liability.
   
Level 3   Unobservable inputs for the asset or liability.

The following table provides a summary of the fair values of our assets and liabilities measured at fair value on a recurring basis as of June 30, 2012 (in thousands):

 

                                 
          Fair Value Measurements at June 30, 2012 Using  

Description

   Balance as of
June 30, 2012		     Quoted Prices in Active
Markets for Identical
Assets (Level 1)		     Significant Other
Observable Inputs
(Level 2)		     Significant Unobservable
Inputs (Level 3)		  

Warrant liabilities

   $ 4,634     $ —       $ —       $ 4,634  

The estimated fair value of warrants accounted for as liabilities, representing a level 3 fair value measure, was determined on the issuance date and subsequently marked to market at each financial reporting date. The fair value of the warrants is estimated using the expected volatility based on the historical volatilities of comparable companies from a representative peer group selected based on industry and market capitalization, using the Black-Scholes pricing model with the following inputs at June 30, 2012:

 

                 
    Warrants Issued
February 2011		     Warrants Issued
March 2012		  

Exercise price

   $ 3.55     $ 2.07  

Market value of stock at end of period

   $ 1.61     $ 1.61  

Expected volatility

     75.7 %      78.5 % 

Risk-free interest rate

     0.41 %      0.72 % 

Expected life (in years)

     3.59       4.70  
     

Fair value at June 30, 2012

   $ 721,000     $ 3,913,000  

 

A rollforward of fair value measurements using significant unobservable inputs (Level 3) for the warrants is as follows (in thousands):

 

                     
    Three months ended
June 30, 2012		         Six months ended
June 30, 2012		  
            Balance January 1, 2012   $ 983  
           

Issuance of warrants March 2012

     4,130  

Balance April 1, 2012

   $ 4,538              

Loss (gain) included in other expense for the period

     96    

(Gain) loss included in other expense for the period

     (479 ) 
   

 

 

        

 

 

  

Balance June 30, 2012

   $ 4,634     Balance June 30, 2012   $ 4,634  
   

 

 

        

 

 

  

We review and reassess the fair value hierarchy classifications on a quarterly basis. Changes from one quarter to the next related to the observability of inputs in a fair value measurement may result in a reclassification between hierarchy levels. There were no reclassifications for all periods presented.

The following is a summary of available-for-sale securities (in thousands) at June 30, 2012 and December 31, 2011, respectively:

 

                                 
    Amortized
Cost		     Gross
Unrealized
Losses		     Gross
Unrealized
Gains		     Estimated
Fair
Value		  

June 30, 2012:

                                

U.S. government obligations, including government-backed agencies

   $ —       $ —       $ —       $ —    
   

 

 

    

 

 

    

 

 

    

 

 

  

December 31, 2011:

                                

U.S. government obligations, including government-backed agencies

   $ 3,999     $ —       $ —       $ 3,999  
   

 

 

    

 

 

    

 

 

    

 

 

  

We had no realized gains or losses during the first six months of 2012 and 2011 on our available-for-sale securities. Unrealized gains and losses on our available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders’ equity within accumulated other comprehensive income until realized. When available-for-sale securities are sold in the future, the cost of the securities will be specifically identified and used to determine any realized gain or loss. There were no net unrealized gains or losses on available-for-sale securities as of June 30, 2012 and December 31, 2011.