Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
 3 Months Ended
Mar. 31, 2013
Fair Value Measurements [Abstract]  
Fair Value Measurements
4.  Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or the amount that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies ASC 820, which establishes a framework for measuring fair value and a fair value hierarchy that prioritizes the inputs used in valuation techniques. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

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

Level 2 – Observable inputs other than quoted prices in active markets for similar assets or liabilities.

Level 3 – Unobservable inputs.

The following tables set forth the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2013 and December 31, 2012.

Financial assets and liabilities carried at fair value as of March 31, 2013 and December 31, 2012 were classified as follows (in thousands):
 
Fair Value Measurements at March 31, 2013 Using
 
 
 
 
 
Quoted Prices in
Active Markets for
Identical Assets
 
 
Significant
Other
Observable
Inputs
 
 
Significant
Unobservable
Inputs
 
 
 
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
Total
 
             Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds (1)
 
$
37,951
 
 
$
-
 
 
$
-
 
 
$
37,951
 
U.S. treasury securities (2)
 
 
19,996
 
 
 
-
 
 
 
-
 
 
 
19,996
 
Foreign exchange options (3)
 
 
-
 
 
 
299
 
 
 
-
 
 
 
299
 
Total
 
$
57,947
 
 
$
299
 
 
$
-
 
 
$
58,246
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Contingent warrant liabilities
 
$
-
 
 
$
-
 
 
$
27,841
 
 
$
27,841
 
 
 
Fair Value Measurements at December 31, 2012 Using
 
 
 
 
 
Quoted Prices in
Active Markets for
Identical Assets
 
 
Significant
Other
Observable
Inputs
 
 
Significant
Unobservable
Inputs
 
 
 
 
 
(Level 1)
 
 
(Level 2)
 
 
(Level 3)
 
 
Total
 
             Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds (1)
 
$
37,461
 
 
$
-
 
 
$
-
 
 
$
37,461
 
U.S. treasury securities (2)
 
 
39,987
 
 
 
-
 
 
 
-
 
 
 
39,987
 
Foreign exchange options (3)
 
 
-
 
 
 
488
 
 
 
-
 
 
 
488
 
Total
 
$
77,448
 
 
$
488
 
 
$
-
 
 
$
77,936
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
             Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Contingent warrant liabilities
 
$
-
 
 
$
-
 
 
$
15,001
 
 
$
15,001
 
 
(1)  Included in cash and cash equivalents
(2)  Included in short-term investments
(3)  Included in other assets
 
The fair value of the foreign exchange options at March 31, 2013 and December 31, 2012 was determined using readily observable market inputs from actively quoted markets obtained from various third-party data providers. These inputs, such as spot rate, forward rate and volatility have been derived from readily observable market data, meeting the criteria for Level 2 in the fair value hierarchy.

The fair value of the contingent warrant liabilities was determined at March 31, 2013 and December 31, 2012 using the Black-Scholes Model, which requires inputs such as the expected term of the warrants, volatility and risk-free interest rate. These inputs are subjective and generally require significant analysis and judgment to develop.

The fair value of the contingent warrant liabilities was estimated using the following range of assumptions at March 31, 2013 and December 31, 2012:
 
March 31,
2013
 
 
December 31,
2012
 
Expected volatility
 
 
40
 %
 
 
40
 %
Risk-free interest rate
 
 
 0.3% - 0.4 %
 
 
 0.3% - 0.7 %
Expected term
 
1.7 - 3.9 years
 
 
1.9 - 4.2 years
 
 
The following table provides a summary of changes in the fair value of the Company's Level 3 financial liabilities for the three months ended March 31, 2013 (in thousands):

Contingent warrant liabilities
 
March 31,
2013
 
Balance at December 31, 2012
 
$
15,001
 
Net increase in fair value of contingent warrant liabilities upon revaluation
 
 
12,840
 
Balance at March 31, 2013
 
$
27,841
 

The net increase of $12.8 million in the estimated fair value of the contingent warrant liabilities was recognized as a loss in the revaluation of contingent warrant liabilities line of the condensed consolidated statements of comprehensive loss for the three months ended March 31, 2013.

For the three months ended March 31, 2012, the Company recognized a net increase of $14.4 million in the estimated fair value of the contingent warrant liabilities as a loss in the revaluation of contingent warrant liabilities line of the condensed consolidated statements of comprehensive loss.