0001427925 2011-03-31 0001427925 2010-12-31 0001427925 2012-05-01 0001427925 2011-01-01 2011-03-31 0001427925 2005-07-13 2012-03-31 0001427925 2012-01-01 2012-03-31 0001427925 2012-03-31 0001427925 2011-12-31 iso4217:USD xbrli:shares xbrli:shares iso4217:USD 232000 171000 <div> <p style="margin-top: 0px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>5. Convertible Notes </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>2010 Convertible Notes </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">On September 14, 2010, the Company sold convertible promissory notes, or the 2010 Convertible Notes, to certain existing investors for an aggregate purchase price of $8.0 million, with an option for the holders of the 2010 Convertible Notes to purchase an additional $4.0 million of the 2010 Convertible Notes. This option was determined to be a call option that was recorded at its fair value of $476,000 as a debt discount that would have been amortized to interest expense over the one-year term of the 2010 Convertible Notes. The fair value of the call option was determined by evaluating multiple potential outcomes using a market approach and an income approach depending on the scenario and discounting these values back to the appropriate date while applying estimated probabilities to each scenario value. The call option was revalued to its fair value as of the IPO date and was written off upon its expiration with a benefit of $596,000 being recognized through other income (expense) during the three months ended March 31, 2011. In addition, the unamortized debt discount in the amount of $1.1 million at the time of the IPO was recognized as interest expense in connection with the conversion of the notes. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In connection with the IPO, the outstanding principal and accrued interest under the 2010 Convertible Notes automatically converted into 2,034,438 shares of common stock immediately prior to the closing of the IPO.</font></p> </div> <div> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>2. Investments and Fair Value Measurement </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Investments </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company classifies its marketable securities as available-for-sale and records its investments at fair value. Available-for-sale securities are carried at estimated fair value based on quoted market prices, with the unrealized holding gains and losses included in accumulated other comprehensive income. Marketable securities which have maturities beyond one year as of the end of the reporting period are classified as non-current. </font></p> <p style="margin-top: 12px; margin-bottom: 0px; font-size: 1px;">&nbsp;</p> <p style="margin-top: 0px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The table below summarizes the Company's cash, cash equivalents and investments (in thousands): </font></p> <p style="margin-top: 0px; margin-bottom: 0px; font-size: 12px;">&nbsp;</p> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr><td width="58%">&nbsp;</td> <td valign="bottom" width="7%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="7%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="7%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="7%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>As of March&nbsp;31, 2012</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Amortized&nbsp;Cost</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Gross&nbsp;Unrealized<br />Gains</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Gross&nbsp;Unrealized<br />Losses</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Fair<br />Value</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Cash and cash equivalents:</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Cash</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">717</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">717</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Money market funds</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,300</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,300</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">U.S.&nbsp;government&nbsp;agency&nbsp;securities</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">1,452</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">1,452</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total cash and cash equivalents</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">4,469</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">4,469</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Marketable securities:</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">U.S.&nbsp;government&nbsp;agency&nbsp;securities</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">23,104</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">(2</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">)</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">23,102</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total marketable securities</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">23,104</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">23,102</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total cash, cash equivalents and investments</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">27,573</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">27,571</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td height="16">&nbsp;</td> <td height="16" colspan="16">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>As of December&nbsp;31, 2011</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Amortized&nbsp;Cost</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Gross&nbsp;Unrealized<br />Gains</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Gross&nbsp;Unrealized<br />Losses</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Fair<br />Value</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Cash and cash equivalents:</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Cash</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">641</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">641</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Money market funds</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">6,883</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">6,883</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">U.S.&nbsp;government&nbsp;agency&nbsp;securities</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">270</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">270</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total cash and cash equivalents</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">7,794</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">7,794</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Marketable securities:</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">U.S.&nbsp;government&nbsp;agency&nbsp;securities</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">27,991</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">27,991</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total marketable securities</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">27,991</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">27,991</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total cash, cash equivalents and investments</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">35,785</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">35,785</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr></table> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">As of March 31, 2012, none of the available-for-sale securities held by the Company had material unrealized losses and there were no realized losses for the three months ended March 31, 2012. There were no other-than-temporary impairments for these securities at March 31, 2012. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">As of March 31, 2012, the contractual maturity of all investments held was less than one year. </font></p> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Fair Value Measurement </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company's financial instruments consist of Level I and Level II assets and Level III liabilities. Level I securities include highly liquid money market funds and are valued based on quoted market prices. For Level II instruments, the Company estimates fair value by utilizing third party pricing services in developing fair value measurements where fair value is based on valuation methodologies such as models using observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers and other reference data. Such Level II instruments typically include U.S. treasury and U.S. government agency obligations. As of March 31, 2012 and December 31, 2011, the Company held, in addition to Level I and Level II assets, a contingent put option liability associated with the Company's loan and security agreement with Hercules Technology II, L.P. and Hercules Technology Growth Capital, Inc., collectively referred to as Hercules, which was classified as a Level III liability. As of March 31, 2012 and December 31, 2011, the estimated fair value of the contingent put option liability was $171,000 and $232,000, respectively, which was determined by using a risk-neutral valuation model, wherein the fair value of the underlying debt facility is estimated both with and without the presence of the default provisions, holding all other assumptions constant. The resulting difference between the two estimated fair values is the estimated fair value of the default provisions, or the contingent put option. The fair value of the underlying debt facility is estimated by calculating the expected cash flows in consideration of an estimated probability of default and expected recovery rate in default, and discounting such cash flows back to the reporting date using a risk-free rate. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The following table sets forth the fair value of the Company's financial assets and liabilities by level within the fair value hierarchy (in thousands): </font></p> <p style="margin-top: 0px; margin-bottom: 0px; font-size: 12px;">&nbsp;</p> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="67%">&nbsp;</td> <td valign="bottom" width="4%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="4%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="4%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="4%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="4%">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>As of March&nbsp;31, 2012</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Fair&nbsp;Value</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Level&nbsp;I</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Level&nbsp;II</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Level&nbsp;III</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><u>Assets</u></b></font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Money market funds</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,300</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,300</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">U.S. government agency obligations</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">24,554</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">24,554</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total assets measured at fair value</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">26,854</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,300</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">24,554</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><u>Liabilities</u></b></font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Contingent put option liability</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">171</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">171</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total liabilities measured at fair value</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">171</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">171</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td height="16">&nbsp;</td> <td height="16" colspan="16">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="14" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>As of December&nbsp;31, 2011</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Fair&nbsp;Value</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Level&nbsp;I</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Level&nbsp;II</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Level&nbsp;III</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><u>Assets</u></b></font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Money market funds</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">6,883</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">6,883</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">U.S. government agency obligations</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">28,261</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">28,261</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total assets measured at fair value</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">35,144</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">6,883</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">28,261</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><u>Liabilities</u></b></font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Contingent put option liability</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">232</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">232</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total liabilities measured at fair value</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">232</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">&#8212;&nbsp;&nbsp;</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">232</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr></table> <p style="margin-top: 12px; margin-bottom: 0px; font-size: 1px;">&nbsp;</p> <p style="margin-top: 0px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The following table sets forth a summary of the changes in the fair value of the Company's Level III financial liabilities (in thousands): </font></p> <p style="margin-top: 0px; margin-bottom: 0px; font-size: 12px;">&nbsp;</p> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="76%" align="center"> <tr><td width="85%">&nbsp;</td> <td valign="bottom" width="13%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Three&nbsp;Months<br />Ended<br />March&nbsp;31,<br />2012</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Fair value&#8212;beginning of period</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">232</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Change in fair value of Level III liabilities</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">(61</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">)&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Fair value&#8212;end of period</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">171</font></td> <td valign="bottom" nowrap="nowrap">&nbsp;</td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td style="margin-top: 0px; margin-bottom: 0px;">&nbsp;</td></tr></table> </div> 476000 1223000 967000 62000 906000 906000 -145000 -1682000 -61000 <div> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>6. Warrants </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Series A Warrants </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In March 2007, the Company entered into an equipment financing agreement in which the Company issued immediately exercisable and fully vested warrants to purchase 2,500 shares of its Series A convertible preferred stock, or the Series A warrants, with an exercise price of $10.00 per share. The fair value of the Series A warrants on the date of issuance was $1,000, as determined using the Black-Scholes option-pricing model. This fair value was recorded as a convertible preferred stock warrant liability and as a deferred financing cost in other assets. The fair value was remeasured at the end of each reporting period. In connection with the IPO, the Series A warrants were automatically converted into warrants to purchase 3,425 shares of common stock. As a result of the conversion, these common stock warrants were no longer recorded as liabilities and were, therefore, no longer remeasured as of the end of each reporting period. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">As of March 31, 2012, warrants to purchase 3,425 shares of common stock had not been exercised and were outstanding. These warrants expire in March 2017. </font></p> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Series B and Series C Warrants </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">Upon the closing of the Series C convertible preferred stock financing during the year ended December 31, 2009, the Series B warrants underlying the loan and security agreement with Pinnacle Ventures became exercisable for 228,264 shares of Series C convertible preferred stock with an exercise price of $3.94 per share, or the Series C warrants. The Company revalued the convertible preferred stock warrant liability related to the Series B warrants and Series C warrants during each reporting period using the Black-Scholes option-pricing model and the fair value was estimated to be $894,000 as of the IPO date in February 2011. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In connection with the Company's IPO in February 2011, the Series C warrants were automatically converted into warrants to purchase 228,264 shares of common stock. Immediately before the conversion to common stock warrants, the Series C warrants were remeasured to fair value with the change in the fair value of these warrants of $323,000 being recorded as a benefit through other income (expense), net during the three months ended March 31, 2011. Immediately after the conversion to common stock warrants, the remaining liability of $894,000 was reclassified to additional paid-in capital. As a result of the conversion, these common stock warrants were no longer recorded as liabilities and were therefore no longer remeasured as of the end of each reporting period. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">As of March 31, 2012, warrants to purchase 228,264 shares of common stock had not been exercised and were outstanding. These warrants expire in September 2018. </font></p> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>2010 Warrants </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company issued warrants in connection with the 2010 Convertible Notes in September 2010, or the 2010 Warrants. The 2010 Warrants were exercisable into shares of convertible preferred stock. The 2010 Warrants would have terminated if not exercised immediately prior to the IPO. The 2010 Warrants allowed for cashless exercises. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company determined the fair value of the 2010 Warrants to be $1.2 million upon issuance, as determined using the Black-Scholes option-pricing model which was recorded as a convertible preferred stock warrant liability and a debt discount. As of December 31, 2010, the related warrant liability was $1.3 million. In connection with the IPO, the 2010 Warrants were net exercised into shares of Series C convertible preferred stock, which shares were automatically converted to 107,246 shares of common stock immediately prior to the IPO. Immediately before the exercise into Series C convertible preferred stock, the 2010 Warrants were remeasured to fair value with the change in the fair value of these warrants of $796,000 being recorded as a benefit through other income (expense), net during the three months ended March 31, 2011. Immediately after the exercise into Series C convertible preferred stock, the remaining liability of $536,000 was reclassified to additional paid-in capital. </font></p> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Hercules Warrants </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In connection with the loan and security agreement with Hercules, the Company issued to Hercules warrants to purchase an aggregate of 274,508 shares of common stock at a price of $3.06 per share. The warrants may be exercised on a cashless basis. The warrants are exercisable for a term beginning on the date of issuance and ending on the earlier to occur of seven years from the date of issuance or the consummation of certain acquisitions of the Company as set forth in the warrants. The Company estimated the fair value of these warrants as of the issuance date to be $967,000, which was recorded as a debt discount to the loan and consequently a reduction to the carrying value of the loan. The fair value of the warrants was calculated using the Black-Scholes option valuation model. The Company also recorded fees paid to Hercules as a debt discount, which further reduced the carrying value of the loan. The debt discount is being amortized to interest expense. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">As of March 31, 2012, warrants to purchase 274,508 shares of common stock issued to Hercules had not been exercised and were outstanding.</font></p> </div> 10742182 19607483 false --12-31 Q1 2012 2012-03-31 10-Q 0001427925 19692150 Smaller Reporting Company ACELRX PHARMACEUTICALS INC 1530000 1135000 -332000 -137000 2511000 2132000 -2000 106110000 106740000 40835000 33990000 38146000 31070000 <div> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>1. Organization and Summary of Significant Accounting Policies </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>The Company </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">AcelRx Pharmaceuticals, Inc., or AcelRx or the Company, is a development stage company that was incorporated in Delaware on July 13, 2005 as SuRx, Inc. In January 2006, the Company changed its name to AcelRx Pharmaceuticals, Inc. The Company's operations are based in Redwood City, California. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for the treatment of acute and breakthrough pain. Since incorporation, primary activities have consisted of establishing facilities, recruiting personnel, conducting research and development of its product candidates, developing intellectual property and raising capital. To date, the Company has not yet commenced primary operations or generated any significant revenues and, accordingly, the Company is considered to be in the development stage. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company has one business activity, which is the development and commercialization of product candidates for the treatment of pain, and a single reporting and operating unit structure. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company has incurred recurring operating losses and negative cash flows from operating activities since inception through March 31, 2012. In addition, the Company had an accumulated deficit of $95.7 million and $88.7 million as of March 31, 2012 and December 31, 2011. Through March 31, 2012, the Company has relied primarily on the proceeds from equity offerings and loan proceeds to finance its operations. Management believes that the Company's current cash, cash equivalents and investments will be sufficient to fund the Company's current operations through the first quarter of 2013. The Company will need to raise additional funding or otherwise enter into collaborations to fund future operations. However, there is no assurance that additional funding will be available to the Company on acceptable terms on a timely basis, if at all, or that the Company will achieve profitable operations. If the Company is unable to raise additional capital to fund its operations, it will need to curtail planned activities to reduce costs. Doing so may affect the Company's ability to operate effectively. The accompanying financial statements do not include any adjustments that might result from the outcome of these uncertainties. </font></p> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Basis of Presentation </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission, or SEC. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. The condensed balance sheet as of December 31, 2011 was derived from the Company's audited financial statements as of December 31, 2011, included in the Company's Annual Report on Form 10-K filed with the SEC. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2011, which include a broader discussion of the Company's business and the risks inherent therein. </font></p> <p style="margin-top: 18px; margin-bottom: 0px; font-size: 1px;">&nbsp;</p> <p style="margin-top: 0px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Initial Public Offering </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">On February 10, 2011, the Company sold 8,000,000 shares of common stock at a price of $5.00 per share in its initial public offering, or the IPO. The shares began trading on the NASDAQ Global Market on February 11, 2011. The Company received $34.9 million in net proceeds from the IPO, after deducting an estimated $5.1 million in underwriting discounts and commissions and other offering-related expenses payable by the Company. Upon the closing of the offering, all outstanding shares of convertible preferred stock converted into common stock. The convertible preferred stock converted into 8,555,713 shares of common stock. In addition, the principal and accrued interest under the 2010 Convertible Notes, as defined in Note 5 "Convertible Notes," converted into 2,034,438 shares of common stock immediately prior to the closing of the Company's IPO and the 2010 Warrants, as defined in Note 6 "Warrants," were net exercised for 107,246 shares of Series C convertible preferred stock, which shares were converted to common stock immediately prior to the closing of the Company's IPO. All other outstanding warrants to purchase convertible preferred stock became exercisable for shares of common stock. </font></p> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Use of Estimates </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including critical accounting policies. Estimates are based on historical experience and on various other market specific and other relevant assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates. </font></p> <p style="margin-top: 18px; margin-bottom: 0px; font-size: 1px;">&nbsp;</p> <p style="margin-top: 0px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Newly Adopted Accounting Pronouncements </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In June of 2011, Accounting Standards Codification Topic 220, <i>Comprehensive Income</i> was amended to increase the prominence of items reported in other comprehensive income. Accordingly, a company can present all non-owner changes in stockholders' equity either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The Company adopted this guidance as of January 1, 2012 on a retrospective basis and this adoption did not have a material effect on the Company's financial statements. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In May of 2011, Accounting Standards Codification Topic 820, <i>Fair Value Measurement</i> was amended to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles and International Financial Reporting Standards. The Company adopted this guidance as of January 1, 2012 on a retrospective basis and this adoption did not have a material effect on the Company's financial statements.</font></p> </div> 3055000 33206000 7794000 4469000 4469000 30151000 -3325000 0.001 0.001 100000000 100000000 19567778 19692150 19567778 19692150 22000 22000 -95731000 -3204000 -7067000 8137000 8137000 1699000 15000 343000 2242000 117000 164000 <div> <p style="margin-top: 0px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>7. Stock-Based Compensation </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The Company recorded total stock-based compensation expense for stock options, stock awards and the 2011 Employee Stock Purchase Plan as follows (in thousands): </font></p> <p style="margin-top: 0px; margin-bottom: 0px; font-size: 12px;">&nbsp;</p> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="69%"> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td> <td valign="bottom" width="7%"> </td> <td> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"><font class="_mt" size="1">&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Three&nbsp;Months&nbsp;Ended<br />March 31,</b></font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" rowspan="2" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Period&nbsp;from&nbsp;July&nbsp;13,<br />2005 (Inception)<br />Through&nbsp;March 31,</b></font><br /><font style="font-family: Times New Roman;" class="_mt" size="1"><b>2012</b></font></td> <td valign="bottom" rowspan="2"><font class="_mt" size="1">&nbsp;</font></td></tr> <tr><td valign="bottom"><font class="_mt" size="1">&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>2012</b></font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>2011</b></font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Expenses:</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 3em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Research and development</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">251</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">120</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,630</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 3em;"><font style="font-family: Times New Roman;" class="_mt" size="2">General and administrative</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">291</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">203</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,258</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 1px solid;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 5em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Total stock-based compensation expense</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">542</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">323</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">4,888</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr></table> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">As of March 31, 2012 there were 922,258 shares available for grant, 3,285,942 options outstanding and 171,912 restricted stock units outstanding under the Company's 2011 Equity Incentive Plan.</font></p> </div> -0.30 -0.36 <div> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>8. Net Loss per Share of Common Stock </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The following table sets forth the computation of the Company's basic and diluted net loss per share of common stock during the three months ended March 31, 2012 and 2011 (in thousands, except for share and per share amounts): </font></p> <p style="margin-top: 0px; margin-bottom: 0px; font-size: 12px;">&nbsp;</p> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="76%">&nbsp;</td> <td valign="bottom" width="7%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="7%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>Three&nbsp;Months&nbsp;Ended<br />March 31,</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>2012</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>2011</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Net loss</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">(7,065</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">)&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">(3,204</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">)&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Shares used in computing net loss per share of common stock, basic and diluted</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">19,607,483</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">10,742,182</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Net loss per share of common stock, basic and diluted</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">(0.36</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">)&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font style="font-family: Times New Roman;" class="_mt" size="2">$</font></td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">(0.30</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">)&nbsp;</font></td></tr> <tr style="font-size: 1px;"><td valign="bottom">&nbsp;</td> <td valign="bottom">&nbsp;&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td> <td valign="bottom">&nbsp;</td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td valign="bottom"> <p style="border-top: #000000 3px double;">&nbsp;</p></td> <td>&nbsp;</td></tr></table> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been antidilutive: </font></p> <p style="margin-top: 0px; margin-bottom: 0px; font-size: 12px;">&nbsp;</p> <table style="border-collapse: collapse;" border="0" cellspacing="0" cellpadding="0" width="92%" align="center"> <tr><td width="80%">&nbsp;</td> <td valign="bottom" width="2%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td valign="bottom" width="2%">&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td> <td>&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="6" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>March&nbsp;31,</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr><td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>2012</b></font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center"><font style="font-family: Times New Roman;" class="_mt" size="1"><b>2011</b></font></td> <td valign="bottom">&nbsp;</td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Stock options to purchase common stock</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">3,285,942</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">2,442,997</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Restricted stock units</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">171,912</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">343,815</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td></tr> <tr bgcolor="#cceeff"><td valign="top"> <p style="text-indent: -1em; margin-left: 1em;"><font style="font-family: Times New Roman;" class="_mt" size="2">Common stock warrants</font></p></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">506,197</font></td> <td valign="bottom" nowrap="nowrap"><font style="font-family: Times New Roman;" class="_mt" size="2">&nbsp;&nbsp;</font></td> <td valign="bottom"><font class="_mt" size="1">&nbsp;&nbsp;</font></td> <td valign="bottom">&nbsp;</td> <td valign="bottom" align="right"><font style="font-family: Times New Roman;" class="_mt" size="2">231,689</font></td></tr></table> </div> 21398000 1589000 2104000 -92189000 -3535000 -6546000 1135000 765000 -395000 437000 -224000 -441000 403000 -44000 334000 2123000 -1339000 1140000 205000 6033000 1359000 594000 2991000 1235000 164000 3241000 82000 339000 1622000 8000 15000 23367000 22959000 40835000 33990000 7845000 8949000 3804000 5682000 15275000 13496000 <div> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>4. Long-Term Debt </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Hercules Loan and Security Agreement </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">On June 29, 2011, AcelRx entered into a loan and security agreement with Hercules, under which AcelRx borrowed $20.0 million in two tranches of $10.0 million each, represented by secured convertible term promissory notes. The Company's obligations associated with the agreement are secured by a security interest in substantially all of its assets, other than its intellectual property. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">The interest rate for each tranche is 8.50% and the Company will make interest only payments until June 30, 2012 followed by equal monthly payments of principal and interest through the scheduled maturity date on December 1, 2014. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">Upon an event of default, including a change of control, Hercules has the option to accelerate repayment of the loan, including payment of any applicable prepayment charges, which range from 1%-3% of the outstanding loan balance and accrued interest, as well as a final payment fee of $0.2 million. This option is considered a contingent put option liability as the holder of the loan may exercise the option in the event of default and, is considered an embedded derivative which must be valued and separately accounted for in the Company's financial statements. The contingent put option liability was recorded as a debt discount to the loan and consequently a reduction to the carrying value of the loan. The contingent put option liability will be revalued at the end of each reporting period and any change in the fair value will be recognized in the statement of operations. As of March 31, 2012, the estimated fair value of the continent put option liability was $171,000. See Note 2 "Investments and Fair Value Measurement" for further description of the contingent put option liability. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In connection with the loan, the Company issued Hercules seven-year warrants to purchase an aggregate of 274,508 shares of common stock at a price of $3.06 per share. See Note 6 "Warrants" for further description. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">As of March 31, 2012, the Company had outstanding borrowings under the Hercules loan and security agreement of $19.2 million, net of debt discounts of $0.9 million. Amortization of the debt discounts, which was recorded as Interest Expense, was $134,000 for the three months ended March 31, 2012. </font></p> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b><i>Pinnacle Loan and Security Agreement </i></b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In September 2008, the Company entered into a $12.0 million loan and security agreement with Pinnacle. In November 2008, the Company drew down all $12.0 million of the loan facility. On June 29, 2011, upon execution of the Hercules loan and security agreement, the Pinnacle agreement was terminated and the outstanding balance of $2.8 million was repaid. The unamortized portions of the final payment and deferred financing costs were recorded to interest expense upon termination of the agreement.</font></p> </div> 118430000 33963000 89000 -28177000 -2437000 4347000 -85784000 -1375000 -7761000 -95729000 -3204000 -7065000 536000 536000 871000 1682000 60000 93590000 3535000 6875000 178000 170000 -2000 -2000 10000 -21815000 95107000 3041000 10440000 4791000 32000 403000 2361000 3499000 34939000 35208000 388000 89000 54941000 32383000 9000000 49906000 636000 15190000 2306000 2545000 13221000 1245000 72192000 1946000 4771000 <div> <p style="margin-top: 18px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2"><b>3. Research Grant Agreement </b></font></p> <p style="margin-top: 6px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">In May 2011, AcelRx entered into an award contract with the US Army Medical Research and Material Command, or USAMRMC, in which the USAMRMC granted $5.6 million to the Company in order to support the development of a new product candidate, ARX-04, a Sufentanil NanoTab for the treatment of moderate-to-severe acute pain. Under the terms of the grant, the USAMRMC will reimburse the Company for development, manufacturing and clinical costs necessary to prepare for and complete the planned Phase 2 dose-finding trial in a study of acute moderate-to-severe pain, and to prepare to enter Phase 3 development. The period of research under the grant ends on August 31, 2012, with a final report due on September 30, 2012. The grant gives the USAMRMC the option to extend the term of the grant and provide additional funding for the research. </font></p> <p style="margin-top: 12px; margin-bottom: 0px;"><font style="font-family: Times New Roman;" class="_mt" size="2">Revenue is recognized based on expenses incurred by AcelRx in conducting research and development activities set forth in the agreement. Revenue attributable to the research and development performed under the USAMRMC grant was $329,000 for the three months ended March 31, 2012.</font></p> </div> 205000 205000 -88664000 -95729000 1401000 329000 4888000 323000 542000 27991000 23102000 17468000 11031000 The condensed balance sheet as of December 31, 2011 has been derived from the audited financial statements as of that date included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.