Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

Note 9 — Fair Value Measurements

Fair value is the amount at a measurement date that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. The Company categorizes financial assets and liabilities into the three-tiered levels of the fair value hierarchy. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value and bases the categorization within the hierarchy on the lowest level of input that is available and significant to the fair value measurement.

• Level 1 – Quoted prices in active markets for identical assets or liabilities;

• Level 2 – Observable inputs other than Level 1, 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; and

• Level 3 – Significant unobservable inputs that are supported by little or no market activity or that are based upon the reporting entity's assumptions about the inputs.

Liabilities Measured at Fair Value on a Recurring Basis

Liabilities required to be measured at fair value on a recurring basis, including identification of the fair value hierarchy of the valuation techniques used by the Company to determine these fair values, are as follows (in thousands):

	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Common stock warrants, June 30, 2011 (1)	$	—	$	—	$	15,386	$	15,386
Common stock warrants, December 31, 2010 (1)	$	—	$	—	$	26,193	$	26,193

(1) The fair value of common stock warrants is estimated using a Black-Scholes option-pricing model. See Note 12- Convertible Preferred Stock and Stock Warrants for additional information.

There were no significant transfers in or out of either Level 1 or Level 2 fair value measurements during the six months ended June 30, 2011. During the first half of 2011, $10.8 million of non-cash gain was recognized as a fair value adjustment within Level 3 of the fair value measurement hierarchy. The change was primarily due to the exercise of 1.0 million Exercisable Warrants and 2.8 million Contingent Warrants (as defined below) at a fair value of $7.39 and $7.41 per warrant, respectively.

During the year ended December 31, 2010, $21.5 million of non-cash fair value loss adjustment was recognized within Level 3 of the fair value measurement hierarchy. The fluctuation was primarily driven by an increase in the price and volatility of the Company's common stock partially offset by the conversion of 1.0 million Exercisable Warrants and 3.6 million Contingent Warrants at a weighted average fair value of $1.30 and $1.30 per warrant, respectively. The fair value per each Exercisable and Contingent Warrant for each period presented ranged from $0.61 to $4.46 (June 30, 2011 year to date) and from $0.63 to $4.48 (December 31, 2010 year to date) per warrant, respectively.

As of the periods presented there were no new issuances of warrants or transfers in or out of the Level 3 hierarchy.

Warrant Liability	Six Months Ended June 30,  2011			Year Ended December 31, 2010
Balance, beginning of period	$	26,193		$	4,729
Fair value adjustments, net		(10,807	)		21,464
Balance, end of period	$	15,386		$	26,193

Fair Value of Other Financial Instruments

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short-term nature of these accounts. The Company had no cash equivalents at June 30, 2011 or December 31, 2010.

The carrying value and estimated fair value of the Company's convertible notes and long-term debt were as follows (in thousands):

	June 30, 2011				December 31, 2010
	Carrying Value		Fair Value		Carrying Value		Fair Value
Convertible senior notes (2008 Notes) (1)	$	63,702	$	68,385	$	65,858	$	64,688
Convertible senior secured notes (2010 Notes) (1)		33,398		36,757		32,697		32,684
Term loan		—		—		33,621		33,875
Capital lease obligations		1,075		1,073		960		942

(1) The carrying values of the 2008 and 2010 Notes are representative of bifurcated debt components only, while the fair values are based on the market value of the respective notes, including convertible equity components.

The estimated fair value of the 2008 Notes is based on the quoted market price of the 2008 Notes. The estimated fair value of the 2010 Notes and term loan are based on rates available for instruments with similar risks and maturities. The fair value of capital lease obligations is based upon current lease rates adjusted for applicable risk premiums. The estimated fair value of the convertible notes and long-term debt are measured using Level 2 inputs.

Assets Measured at Fair Value on a Nonrecurring Basis

Non-financial assets, including property and equipment, goodwill and other intangible assets are measured at fair value on a non-recurring basis and are subject to annual and interim fair value adjustment. No fair value adjustment was deemed necessary for the three or six months ended June 30, 2011 or 2010.