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Fair Value Measurement
 3 Months Ended
Mar. 31, 2012
Fair Value Measurement [Abstract]  
Fair Value Measurement

Note 3. Fair Value Measurement

The following tables present our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Directly or indirectly observable inputs other than in Level 1, that include quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 — Unobservable inputs which are supported by little or no market activity that reflects the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Our cash equivalents, marketable securities and bonds payable are classified within Level 1 or Level 2. This is because our cash equivalents and marketable securities are valued primarily using quoted market prices and our bonds payable are valued using alternative pricing sources and models utilizing market observable inputs. Our warrant liability is valued using pricing models that include the Monte Carlo simulation model. In addition to using observable inputs such as risk-free interest rates that are derived from the yield on U.S. Treasury debt securities, and volatility and price based on our common stock as traded on NASDAQ, the use of the Monte Carlo simulation model requires the input of additional subjective assumptions including the progress of our R&D programs and its affect on potential future financings.

The following table presents financial assets and liabilities measured at fair value:

 

                                 
    Fair Value Measurement
at Report Date Using		              
    Quoted Prices
in Active  Markets
for
Identical Assets
(Level 1)		     Significant
Other
Observable
Inputs
(Level 2)		     Unobservable
Inputs
(Level 3)		     As of
March 31,
2012		  

Financial assets

                                

Cash equivalents:

                                

Money market funds

   $ 1,370,103       0       0     $ 1,370,103  

U.S. Treasury debt obligations

     7,589,917       0       0       7,589,917  

Marketable securities:

                                

Debt securities

     2,147,699       0       0       2,147,699  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total financial assets

   $ 11,107,719     $ 0     $ 0     $ 11,107,719  
   

 

 

    

 

 

    

 

 

    

 

 

  

Financial liabilities:

                                

Bond obligation

   $ 0     $ 476,250       0     $ 476,250  

Warrant liabilities

     0       19,183       11,004,124       11,023,307  
   

 

 

    

 

 

    

 

 

    

 

 

  

Total financial liabilities

   $ 0     $ 495,433     $ 11,004,124     $ 11,499,557  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

Level 3 Reconciliation

The following table presents a roll forward for liabilities measured at fair value using significant unobservable inputs (Level 3) for 2012.

 

         
    Warrant
Liabilities		  

Balance at December 31, 2011

   $ 6,011,120  

Less fair value of warrants exercised

     (568,003 ) 
   

 

 

  

Add fair value of warrants issued

     607,818  
   

 

 

  

Add change in fair value of warrants

     4,953,189  
   

 

 

  

Balance at March 31, 2012

   $ 11,004,124