Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2012

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

Under current accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) 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 current accounting guidance also establishes a hierarchy to categorize how fair value is measured and 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 or 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.

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011:

	September 30, 2012		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	230,069	$	230,069	$	—	$	—

	December 31, 2011		Quoted Price in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Cash equivalents – money market fund	$	59,860	$	59,860	$	—	$	—

The change in the valuation of preferred stock warrants for the nine months ended September 30, 2011 is summarized below.

	Nine Months Ended September 30,
	2011
Fair value, beginning of year	$	12
Change in fair value		183
Fair value, end of period	$	195

The Company accounted for the warrants outstanding to purchase 31 shares of Series C-2 convertible preferred stock according to accounting standards regarding freestanding financial instruments with the characteristics of both liabilities and equities. Due to the redemption feature of the Series C-2 convertible preferred stock, these warrants were classified as liabilities. The warrants were revalued at each balance sheet date and any change in fair value was recorded as a component of other income or other expense. In connection with the Reverse Merger, the Series C-2 convertible preferred stock warrants were converted to common stock warrants, and a final mark to market calculation was performed. The common stock warrants were subsequently exercised in a net settlement transaction in the fourth quarter of fiscal 2011, resulting in the issuance of 10 shares of common stock.