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Fair Value Measurements
9 Months Ended
Sep. 30, 2011
Fair Value Measurements [Abstract] 
FAIR VALUE MEASUREMENTS
3. FAIR VALUE MEASUREMENTS
As defined in ASC 820, fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:
  •   Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
 
  •   Level 2: Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.
 
  •   Level 3: Unobservable inputs that are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
Financial assets and liabilities carried at fair value on a recurring basis as of December 31, 2010 are classified in the table below in one of the three categories described above:
                                 
    Level 1     Level 2     Level 3     Total  
    $000     $000     $000     $000  
 
                               
Cash equivalents
    29,066       —       —       29,066  
 
                               
Warrants
    —       —       680       680  
 
                       
 
                               
Total
    29,066       —       680       29,746  
 
                       
Financial assets and liabilities carried at fair value on a recurring basis as of September 30, 2011 are classified in the table below in one of the three categories described above:
                                 
    Level 1     Level 2     Level 3     Total  
    $000     $000     $000     $000  
 
                               
Cash equivalents
    24,014       —       —       24,014  
 
                               
Warrants
    —       —       37       37  
 
                       
 
                               
Total
    24,014       —       37       24,051  
 
                       
Warrants Liability
The Company issued warrants to purchase shares of common stock under the registered direct financing completed in February 2007. These warrants are classified as liabilities for accounting purposes in accordance with ASC 815, “Derivatives and Hedging” (“ASC 815”). At the date of the transaction, the fair value of the warrants of $6.8 million was determined utilizing the Black-Scholes option pricing model utilizing the following assumptions: risk free interest rate — 4.68%, expected volatility — 85%, expected dividend yield — 0%, and a contractual life of 7 years. The fair value of the warrant is being re-measured each reporting period, with a derivative gain or loss recognized in the consolidated statement of operations. Such gains or losses will continue to be reported until the warrants are exercised or expire. The Company used the Black-Scholes option-pricing model with the following assumptions to value the warrants:
                 
    December 31,     September 30,  
    2010     2011  
Exercise price
  $ 8.44     $ 8.44  
Expected term
  3.13 Yrs.     2.38 Yrs.  
Risk free interest rate
    1.02 %     0.32 %
Expected volatility
    121 %     106 %
Expected dividend yield over expected term
    —       —  
During the three months ended September 30, 2010, the Company recognized the increase in the value of warrants of approximately $0.1 million as a loss on the consolidated statement of operations. During the three months ended September 30, 2011, the Company recognized the decrease in the value of warrants of approximately $0.4 million as a gain on the consolidated statement of operations. During the nine months ended September 30, 2010, the Company recognized the $0.4 million increase in the value of warrants as a loss on the consolidated statement of operations. During the nine months ended September 30, 2011, the Company recognized the $0.6 million decrease in the value of warrants as a gain on the consolidated statement of operations. The following table reconciles the beginning and ending balance of Level 3 inputs for the nine months ended September 30, 2011:
         
    Level 3  
    $000  
 
       
Balance as of December 31, 2010
    680  
Gain from change in valuation of warrants liability reported in earnings
    (643 )
 
     
Balance as of September 30, 2011
    37