Convertible Notes and Warrant Liabilities (Tables)

12 Months Ended

Dec. 31, 2012

Convertible Notes and Warrant Liabilities

Summary of assets and liabilities measured at fair value

The following summarizes the Company’s assets and liabilities measured at fair value as of December 31, 2011:

			Fair Value Measurements at Reporting Date Using:
			Quoted
			Prices
			in Active		Significant
			Markets for		Other		Significant
	Balance as of		Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
Description	2011		(Level 1)		(Level 2)		(Level 3)
Liabilities
Convertible notes	$	5,327,000	$	—	$	—	$	5,327,000
Warrant liabilities	$	1,600,000	$	—	$	—	$	1,600,000
Total Liabilities	$	6,927,000	$	—	$	—	$	6,927,000

The following summarizes the Company’s assets and liabilities measured at fair value as of December 31, 2012:

			Fair Value Measurements at Reporting Date Using:
			Quoted
			Prices
			in Active		Significant
			Markets for		Other		Significant
	Balance as of		Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
Description	2012		(Level 1)		(Level 2)		(Level 3)
Liabilities
Convertible notes	$	8,098,000	$	—	$	—	$	8,098,000
Warrant liabilities	$	3,800,000	$	—	$	—	$	3,800,000
Total Liabilities	$	11,898,000	$	—	$	—	$	11,898,000

Schedule of changes in the Convertible Notes, Second Tranche Convertible Notes, Investor Warrants and 2012 Warrants

	Fair Value of Convertible Notes		Fair Value of Warrant Liabilities		Fair Value of Second Tranche Convertible Notes			Fair Value of 2012 Warrant Liabilities			Total
Allocation of initial proceeds	$	3,208,000	$	792,000	$	—		$	—		$	4,000,000
Initial fair value adjustment	$	469,000	$	116,000	$	—		$	—		$	585,000
February 22, 2011	$	3,677,000	$	908,000	$	—		$	—		$	4,585,000
Amortization of debt discount	$	225,000	$	—	$	—		$	—		$	225,000
Fair value adjustment	$	1,425,000	$	692,000	$	—		$	—		$	2,117,000
Balance December 31, 2011	$	5,327,000	$	1,600,000	$	—		$	—		$	6,927,000
Allocation of initial proceeds	$	—	$	—	$	417,000		$	583,000		$	1,000,000
Initial fair value adjustment	$	—	$	—	$	1,656,000		$	2,317,000		$	3,973,000
July 2, 2012	$	—	$	—	$	2,073,000		$	2,900,000		$	11,900,000
Amortization of debt discount	$	265,000	$	—	$	66,000		$	—		$	331,000
Fair value adjustment	$	918,000	$	400,000	$	(551,000	)	$	(1,100,000	)	$	(333,000	)
Balance December 31, 2012	$	6,510,000	$	2,000,000	$	1,588,000		$	1,800,000		$	11,898,000

Convertible Notes and Warrant Liabilities

Summary of Warrants outstanding

	Warrants	Exercise Price
Beginning balance — December 31, 2011	40,000,000	$	0.15
Add: Adjustments (pursuant to warrants agreement)	—	n/a
Less: Exercised	—	n/a
Ending balance — December 31, 2012	40,000,000	$	0.15

Convertible Notes

Convertible Notes and Warrant Liabilities

Schedule of key inputs required to estimate fair value

Input	February 22, 2011			December 31, 2011			December 31, 2012
Stock Price	$	0.0755		$	0.1075		$	0.15
Strike Price	$	0.10		$	0.10		$	0.10
Expected remaining term (in years)	3.00			2.15			1.15
Stock Volatility	95		%	100		%	105		%
Risk-Free Rate	1.22		%	0.27		%	0.17		%
Dividend Rate	0		%	0		%	0		%
Outstanding Shares of Common Stock	30,351,092			30,351,092			32,434,430
Effective discount rate	20.3		%	13.2		%	13.1		%
Probability of forced redemption	20		%	20		%	20		%

Convertible Notes | Second Tranche

Convertible Notes and Warrant Liabilities

Schedule of key inputs required to estimate fair value

Input	July 2, 2012			December 31, 2012
Stock Price	$	0.20		$	0.15
Exercise Price	$	0.10		$	0.10
Expected remaining term (in years)	3			2.50
Stock Volatility	100		%	100		%
Risk-Free Rate	0.39		%	0.31		%
Dividend Rate	0		%	0		%
Outstanding Shares of Common Stock	30,976,092			32,434,430
Effective discount rate	10		%	13.2		%
Probability of forced redemption	20		%	20		%

Warrant Liabilities

Convertible Notes and Warrant Liabilities

Schedule of key inputs required to estimate fair value

Input	February 22, 2011			December 31, 2011			December 31, 2012
Stock Price	$	0.0755		$	0.1075		$	0.15
Exercise Price	$	0.15		$	0.15		$	0.15
Expected Life (in years)	5.00			4.15			3.15
Stock Volatility	90		%	95		%	100		%
Risk-Free Rate	2.16		%	0.63		%	0.39		%
Dividend Rate	0		%	0		%	0		%
Outstanding Shares of Common Stock	30,351,092			30,351,092			32,434,430

$0.15 Warrants

Convertible Notes and Warrant Liabilities

Summary of Warrants outstanding

$0.15 Warrants	Warrants	Exercise  Price
Beginning balance at December 31, 2011	—	$	—
Add: Second Tranche Agreement	10,000,000	0.15
Add: Adjustments (pursuant to warrants agreement)	—	n/a
Less: Exercised	—	n/a
Ending balance at December 31, 2012	10,000,000	$	0.15

Schedule of key inputs required to estimate fair value

Input	July 2, 2012			December 31, 2012
Stock Price	$	0.20		$	0.15
Exercise Price	$	0.15		$	0.15
Expected Life (in years)	5			4.50
Stock Volatility	110		%	100		%
Risk-Free Rate	0.67		%	0.63		%
Dividend Rate	0		%	0		%
Outstanding Shares of Common Stock	30,976,092			32,434,430

$0.25 Warrants

Convertible Notes and Warrant Liabilities

Summary of Warrants outstanding

$0.25 Warrants	Warrants	Exercise  Price
Beginning balance at December 31, 2011	—	$	—
Add: Second Tranche Agreement	10,000,000	0.25
Add: Adjustments (pursuant to warrants agreement)	—	n/a
Less: Exercised	—	n/a
Ending balance at December 31, 2012	10,000,000	$	0.25

Schedule of key inputs required to estimate fair value

Input	July 2, 2012			December 31, 2012
Stock Price	$	0.20		$	0.15
Exercise Price	$	0.25		$	0.25
Expected Life (in years)	5			4.50
Stock Volatility	110		%	100		%
Risk-Free Rate	0.67		%	0.63		%
Dividend Rate	0		%	0		%
Outstanding Shares of Common Stock	30,976,092			32,434,430