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Stockholders' Equity
6 Months Ended
Jun. 30, 2012
Stockholders' Equity

Note 9—Stockholders’ Equity

Warrant Liability

On May 9, 2012 the Company issued warrants in connection with a debt exchange transaction between the Company and certain holders of its 2018 Convertible Notes, described more fully in Note7. Pursuant to the terms of the exchange transaction, the Company issued warrants to purchase an aggregate of 4,000,019 shares of the Company’s Common Stock at an exercise price equal to $1.863 per share . The Company may, at its or the warrant-holder’s election, issue net shares in lieu of a cash payment of the exercise price by the warrant-holder upon exercise.

Due to a clause that adjusts the warrants exercise price, in accordance with ASC 815, the Company is required to record the fair value of the warrants as a liability. The Company’s warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other income or expense, net on the Company’s consolidated statement of operations until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument.

The Company determines the fair value of its warrant liability based on the Black-Sholes pricing model. Historical information is the primary basis for the selection of the expected volatility. The risk-free interest rate is selected based upon yields of United States Treasury issues with a term equal to the expected term of the warrants. The expected term is derived from the remaining contractual term of the warrant. At the date of the transaction, the fair value of the warrant liability was $5.3 million. At June 30, 2012 the fair value of the warrant liability was $1.5 million.

During the three and six-month periods ended June 30, 2012, the Company recorded an unrealized gain of $3.8 million within Other Income (Expense), net on its consolidated statement of operations to reflect the decrease in the fair vaue of the warrants.