View Filing Data

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2012	Apr. 27, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	MANNKIND CORP
Entity Central Index Key	0000899460
Document Type	10-Q
Document Period End Date	Mar. 31, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		167,821,957

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 56,355	$ 2,681
Available for sale securities	350	515
Prepaid expenses and other current assets	3,004	2,625
Total current assets	59,709	5,821
Property and equipment - net	190,916	193,029
State research and development credit exchange receivable	565	473
Other assets	230	230
Total	251,420	199,553
Current liabilities:
Accounts payable	2,661	4,624
Accrued expenses and other current liabilities	31,746	20,736
Total current liabilities	34,407	25,360
Senior convertible notes	210,946	210,642
Note payable to related party	283,453	277,203
Total liabilities	528,806	513,205
Commitments and contingencies
Stockholders' deficit:
Undesignated preferred stock, $0.01 par value - 10,000,000 shares authorized; no shares issued or outstanding at March 31, 2012 and December 31, 2011
Common stock, $0.01 par value - 250,000,000 shares authorized at March 31, 2012 and December 31, 2011, respectively; 167,815,783 and 131,522,945 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively	1,678	1,315
Additional paid-in capital	1,694,658	1,620,535
Accumulated other comprehensive income	(3)	44
Deficit accumulated during the development stage	(1,973,719)	(1,935,546)
Total stockholders' deficit	(277,386)	(313,652)
Total	$ 251,420	$ 199,553

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Undesignated preferred stock, par value	$ 0.01	$ 0.01
Undesignated preferred stock, shares authorized	10,000,000	10,000,000
Undesignated preferred stock, shares issued
Undesignated preferred stock, shares outstanding
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	167,815,783	167,815,783
Common stock, shares outstanding	131,522,945	131,522,945

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		254 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
Condensed Consolidated Statements of Operations [Abstract]
Revenue		$ 50	$ 3,131
Operating expenses:
Research and development	$ 24,156	26,289	1,390,207
General and administrative	9,777	11,762	390,008
In-process research and development costs			19,726
Goodwill impairment			151,428
Total operating expenses	33,933	38,051	1,951,369
Loss from operations	(33,933)	(38,001)	(1,948,238)
Other income (expense)	1,382	1,350	306
Interest expense on note payable to related party	(3,048)	(2,476)	(31,382)
Interest expense on senior convertible notes	(2,575)	(2,413)	(31,369)
Interest income	1	15	36,990
Loss before provision for income taxes	(38,173)	(41,525)	(1,973,693)
Income taxes			(26)
Net loss	(38,173)	(41,525)	(1,973,719)
Deemed dividend related to beneficial conversion feature of convertible preferred stock			(22,260)
Accretion on redeemable convertible preferred stock			(952)
Net loss applicable to common stockholders	$ (38,173)	$ (41,525)	$ (1,996,931)
Net loss per share applicable to common stockholders - basic and diluted	$ (0.27)	$ (0.34)
Shares used to compute basic and diluted net loss per share applicable to common stockholders	143,154	121,057

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		254 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
Condensed Consolidated Statements of Comprehensive Loss [Abstract]
Net Loss	$ (38,173)	$ (41,525)	$ (1,973,719)
Other comprehensive loss:
Cumulative translation (loss) gain	(1)	(5)	(2)
Unrealized gain (loss) on investments:
Unrealized holding gain (loss) during the period		(7)	(48)
Less: reclassification adjustment for gains (losses) included in net loss	48		48
Net unrealized (loss) gain on investments	48	(7)	0
Comprehensive loss	$ (38,126)	$ (41,537)	$ (1,973,717)

- Definition

The change in equity [net assets] of a business enterprise during a period from transactions and other events and circumstances from non-owner sources which are attributable to the reporting entity. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners, but excludes any and all transactions which are directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent.

+ References

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- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

- Definition

Gross appreciation or the gross loss in value of the total unsold securities. While for technical reasons this element has no balance attribute, the default assumption is a credit balance consistent with its label.

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+ Details

- Definition

Change in the balance sheet adjustment that results from the process of translating subsidiary financial statements and foreign equity investments into functional currency of the reporting entity for the period being reported, net of tax. If an entity's functional currency is a foreign currency, translation adjustments result from the process of translating that entity's financial statements into the reporting currency. Includes gain (loss) on foreign currency forward exchange contracts. Includes foreign currency transactions designated as hedges of net investment in a foreign entity and intercompany foreign currency transactions that are of a long-term nature, when the entities to the transaction are consolidated, combined, or accounted for by the equity method in the reporting enterprise's financial statements. Includes the gain (loss) on a derivative instrument or nonderivative financial instrument that may give rise to a foreign currency transaction gain (loss) and that have been designated and have qualified as hedging instruments for hedges of the foreign currency exposure of a net investment in a foreign operation.

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+ Details

- Definition

Reclassification adjustment for unrealized gains or losses realized upon the sale of securities, after tax.

+ References

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- Definition

Appreciation or loss in value (before reclassification adjustment) of the total of unsold securities during the period being reported on, net of tax. Reclassification adjustments include: (1) the unrealized holding gain (loss), net of tax, at the date of the transfer for a debt security from the held-to-maturity category transferred into the available-for-sale category. Also includes the unrealized gain (loss) at the date of transfer for a debt security from the available-for-sale category transferred into the held-to-maturity category; (2) the unrealized gains (losses) realized upon the sale of securities, after tax; and (3) the unrealized gains (losses) realized upon the write-down of securities, after tax.

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+ Details

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended		254 Months Ended
	Mar. 31, 2012	Mar. 31, 2011	Mar. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (38,173)	$ (41,525)	$ (1,973,719)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,696	4,119	116,071
Stock-based compensation expense	2,878	2,708	127,504
Stock expense for shares issued pursuant to research agreement			3,018
(Gain) loss on sale, abandonment/disposal or impairment of property and equipment	(32)		23,539
Accrued interest on investments, net of amortization of discounts			(191)
In-process research and development			19,726
Goodwill impairment			151,428
Loss on available-for-sale securities	117		990
Fair value adjustment of warrant liability	284		284
Fair value of forward purchase contract	(1,705)		(1,705)
Other, net	1	5	1,102
Changes in assets and liabilities:
State research and development credit exchange receivable	(92)	(100)	(565)
Prepaid expenses and other current assets	365	370	(660)
Other assets		87	(230)
Accounts payable	(1,713)	(218)	2,661
Accrued expenses and other current liabilities	1,888	3,850	21,862
Other liabilities			(2)
Net cash used in operating activities	(32,486)	(30,704)	(1,508,887)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities			(796,779)
Sales and maturities of marketable securities		3,828	796,393
Purchase of property and equipment	(323)	(1,993)	(327,432)
Proceeds from sale of property and equipment	32		409
Net cash (used in) provided by investing activities	(291)	1,835	(327,409)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and warrants, net of issuance costs	80,598	9,746	1,310,619
Collection of Series C convertible preferred stock subscriptions receivable			50,000
Issuance of Series B convertible preferred stock for cash			15,000
Cash received for common stock to be issued			3,900
Repurchase of common stock			(1,028)
Put shares sold to majority stockholder			623
Borrowings under lines of credit			4,220
Proceeds from notes receivables			1,742
Borrowings on notes payable to related party	6,250		381,250
Principal payments on notes payable to principal stockholder			(70,000)
Borrowings on notes payable			3,460
Principal payments on notes payable			(1,667)
Proceeds from senior convertible notes			207,050
Payment of employment taxes related to vested restricted stock units	(397)	(26)	(12,518)
Net cash provided by financing activities	86,451	9,720	1,892,651
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	53,674	(19,149)	56,355
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	2,681	66,061
CASH AND CASH EQUIVALENTS, END OF PERIOD	56,355	46,912	56,355
SUPPLEMENTAL CASH FLOWS DISCLOSURES:
Cash paid for income taxes			26
Interest paid in cash, net of amounts capitalized	2,595	5,504	51,992
Accretion on redeemable convertible preferred stock			(952)
Issuance of common stock upon conversion of notes payable			3,331
Increase in additional paid-in capital resulting from merger			171,154
Issuance of common stock for notes receivable			2,758
Issuance of put option by stockholder			(2,949)
Put option redemption by stockholder			1,921
Issuance of Series C convertible preferred stock subscriptions			50,000
Issuance of Series A redeemable convertible preferred stock			4,296
Conversion of Series A redeemable convertible preferred stock			(5,248)
Non-cash construction in progress and property and equipment	921	4,321	921
Cancellation of principal on note payable to related party		$ 1,116	27,797
Warrant liability	$ 7,631		$ 7,631

Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) $ in Millions	1 Months Ended
	Aug. 31, 2004 USD ($)
Series B Convertible Preferred Stock
Converted to Common Stock	$ 15.0
Series C Convertible Preferred Stock
Converted to Common Stock	$ 50.0

Description of business and basis of presentation

3 Months Ended

Mar. 31, 2012

Description of business and basis of presentation [Abstract]

Description of business and basis of presentation

1. Description of business and basis of presentation

The accompanying unaudited condensed consolidated financial statements of MannKind Corporation and its subsidiaries (the “Company”), have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest audited annual financial statements. The audited statements for the year ended December 31, 2011 (which includes disclosures regarding the Company’s ability to continue as a going concern) are included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on March 15, 2012 (the “Annual Report”).

In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three months ended March 31, 2012 may not be indicative of the results that may be expected for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates or assumptions. The more significant estimates reflected in these accompanying financial statements involve assessing long-lived assets for impairment, accrued expenses including the valuation of warrant liabilities, the valuation of stock-based compensation and the determination of the provision for income taxes and corresponding deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets.

Business — The Company is a biopharmaceutical company focused on the discovery and development of therapeutic products for diseases such as diabetes and cancer. The Company’s lead product candidate, AFREZZA (insulin human [rDNA origin]) inhalation powder, is an ultra rapid-acting insulin therapy in late-stage clinical investigation for the treatment of adults with type 1 or type 2 diabetes for the control of hyperglycemia.

AFREZZA consists of the Company’s proprietary Technosphere particles onto which insulin molecules are loaded. These loaded particles are then aerosolized and inhaled deep into the lung using the Company’s AFREZZA inhaler.

Basis of Presentation — The Company is considered to be in the development stage as its primary activities since incorporation have been establishing its facilities, recruiting personnel, conducting research and development, business development, business and financial planning, and raising capital. It is costly to develop therapeutic products and conduct clinical trials for these products. Since its inception through March 31, 2012 the Company has reported accumulated net losses of $2.0 billion, which include a goodwill impairment charge of $151.4 million, and cumulative negative cash flow from operations of $1.5 billion. At March 31, 2012, the Company’s capital resources consisted of cash, cash equivalents, and marketable securities of $56.7 million and $38.8 million of available borrowings under the loan agreement with an entity controlled by the Company’s principal stockholder (see Note 11 — Related-party arrangements). Based upon the Company’s current expectations, management believes the Company’s existing capital resources will enable it to continue planned operations into the fourth quarter of 2012. However, the Company cannot provide assurances that its plans will not change or that changed circumstances will not result in the depletion of its capital resources more rapidly than it currently anticipates. The Company will need to raise additional capital, whether through the sale of equity or debt securities, a strategic business collaboration with a pharmaceutical company, the establishment of other funding facilities, licensing arrangements, assets sales or other means, or an increase in the borrowings available under the loan arrangement with its related party, in order to continue the development and commercialization of AFREZZA and other product candidates and to support its other ongoing activities. This raises substantial doubt about the Company’s ability to continue as a going concern.

Fair Value of Financial Instruments — The carrying amounts of financial instruments, which include cash equivalents, marketable securities and accounts payable, approximate their fair values due to their relatively short maturities. The fair value of the note payable to related party cannot be reasonably estimated as the Company would not be able to obtain a similar credit arrangement in the current economic environment.

Cash equivalents consist of highly liquid investments, with original or remaining maturities of 90 days or less at the time of purchase, that are readily convertible into cash. As of March 31, 2012 and December 31, 2011, the Company held $50.6 million and $55,000, respectively of cash equivalents, consisting entirely of money market funds. The fair value of these investments was determined by using quoted prices for identical investments in an active market (Level 1 in the fair value hierarchy).

The Company’s marketable securities consist principally of a certificate of deposit with a maturity greater than 90 days, held as collateral for the Company’s commercial credit card programs and a common stock investment that are classified as available-for-sale securities. The certificate of deposit is stated at fair value based on quoted prices for similar instruments in an active market (Level 2 in the fair value hierarchy) and the common stock investment is stated at fair value based on quoted prices in an active market (Level 1 in the fair value hierarchy). As of March 31, 2012 and December 31, 2011, there were marketable securities of $350,000 and $515,000, respectively.

The following is a summary of the carrying values and estimated fair values of the Company’s senior convertible notes due in 2013 and 2015 (in millions).


	March 31, 2012				December 31, 2011
	Carrying value		Estimated fair value		Carrying value		Estimated fair value
Notes due 2013	$	114.0	$	64.0	$	113.9	$	61.0
Notes due 2015	$	97.0	$	58.6	$	96.8	$	60.8

The estimated fair value of the senior convertible notes due 2013 was calculated based on quoted prices in an active market. The estimated fair value of the senior convertible notes due 2015 was calculated based on model-derived valuations whose inputs are observable. As there is no current observable market for the senior convertible notes due 2015, the Company determined the estimated fair value using a convertible bond valuation model within a lattice framework. The convertible bond valuation model combined expected cash outflows with market-based assumptions regarding risk-adjusted yields, stock price volatility and recent price quotes and trading information regarding Company issued debt instruments and shares of common stock into which the notes are convertible.

The estimated fair value of the warrant liability was calculated based on the Black-Scholes option pricing model (Level 3 in the fair value hierarchy). See Note 9 – Warrant Liability for further discussion.

The estimated fair value of Mann Purchase Agreement was based on a forward purchase contract valuation (Level 3 in the fair value hierarchy). See Note 8- Common and Preferred Stock for further discussion.

The following roll-forward provides a summary of changes in fair value of the Company’s Level 3 financial assets and liabilities (in thousands):


	Three months ended March 31, 2012
	Forward Purchase Contract			Warrant Liability
Beginning Balance	$	-		$	-
Transfers to Level 3		1,080			(7,631	)
Realized gain/(loss) included in expense		-			-
Unrealized gain/(loss) included in other income (expense)		(336	)		(284	)
Settlements		-			-

Ending Balance	$	744		$	(7,915	)

Recently Issued Accounting Standards — In June 2011, the FASB issued Accounting Standards Update No. 2011-05 (“ASU 2011-05”) for Comprehensive Income (Topic 220): “Presentation of Comprehensive Income”. This update improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. This update is effective for interim and annual periods beginning after December 15, 2011. The Company has adopted all current required provisions of ASU 2011-05 on a retrospective basis.

In May 2011, the FASB issued Accounting Standards Update No. 2011-04 (“ASU 2011-04”) for Fair Value Measurement (Topic 820): “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. This update addresses how to measure fair value and requires new disclosures about fair value measurements. The amendments in this update are effective for interim and annual periods beginning after December 15, 2011. The Company has adopted all current required provisions of ASU 2011-04.

- Definition

The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Research Bulletin (ARB)
-Number 51
-Paragraph 2-6
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Name Statement of Position (SOP)
-Publisher AICPA
-Number 94-6
-Paragraph 10
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
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-Number 46R
-Paragraph 4, 14, 15
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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Reference 16: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

Investment in securities

3 Months Ended

Mar. 31, 2012

Investment in securities [Abstract]

Investment in securities

2. Investment in securities

The following is a summary of the available-for-sale securities classified as current assets (in thousands).


	March 31, 2012						December 31, 2011
	Cost Basis		Gross Unrealized Gain		Fair Value		Cost Basis		Gross Unrealized Gain		Fair Value
Available-for-sale securities	$	350	$	—	$	350	$	467	$	48	$	515

The Company’s available-for-sale securities at March 31, 2012 consist of a $350,000 certificate of deposit with a maturity greater than 90 days, held as collateral for the Company’s commercial credit card programs. The Company’s available-for-sale securities at December 31, 2011 consist principally of a $350,000 certificate of deposit with a maturity greater than 90 days, held as collateral primarily for the Company’s commercial credit card programs, and a common stock investment. During the quarter ended March 31, 2012, the Company evaluated its common stock investment to be other than temporarily impaired and recorded the $117,000 realized loss for available-for-sale securities as “Other income (expense)” in the condensed consolidated statements of operations. Gross unrealized gains and losses are included in “Other comprehensive gain (loss)”.

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 3, 19, 20, 21, 22, 137
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-Paragraph 2
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Debt Security
-URI http://asc.fasb.org/extlink&oid=6509901
-Topic 320

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Equity Security
-URI http://asc.fasb.org/extlink&oid=6511694
-Topic 320

+ Details

Accrued expenses and other current liabilities

3 Months Ended

Mar. 31, 2012

Accrued expenses and other current liabilities [Abstract]

Accrued expenses and other current liabilities

3. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities are comprised of the following (in thousands):


	March 31, 2012		December 31, 2011
Salary and related expenses	$	5,289	$	8,997
Research and clinical trial costs		5,449		2,383
Accrued interest		10,950		8,262
Construction in progress		891		—
Warrant liability		7,933		—
Other		1,234		1,094

Accrued expenses and other current liabilities	$	31,746	$	20,736

Accounting for stock-based compensation

3 Months Ended

Mar. 31, 2012

Accounting for Stock-Based Compensation [Abstract]

Accounting for stock-based compensation

4. Accounting for stock-based compensation

Total stock-based compensation expense recognized in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2012 and 2011 was as follows (in thousands):


	Three months ended March 31,
	2012		2011
Stock-based compensation	$	2,878	$	2,708

The Company issued stock awards to employees during the three months ended March 31, 2012 primarily with a four-year vesting schedule. The grant date fair value of the 10,100 restricted stock units issued during the three months ended March 31, 2012 was $24,000 with a grant date fair value per share of $2.41.

As of March 31, 2012, there was $9.7 million and $13.2 million of unrecognized compensation cost related to options and restricted stock units, respectively, which are expected to be recognized over the remaining weighted average vesting period of 2.1 years. As of March 31, 2012, there was $128,000 and $3.7 million of unrecognized expenses related to performance options and restricted stock units, respectively, for milestones not considered probable of achievement.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 64, 65, A240
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 93-6
-Paragraph 53
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 50
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

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-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

+ Details

Net loss per common share

3 Months Ended

Mar. 31, 2012

Net loss per common share [Abstract]

Net loss per common share

5. Net loss per common share

Basic net loss per share excludes dilution for potentially dilutive securities and is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period excluding the shares loaned under the share lending arrangement (see Note 8 — Common and preferred stock). As of March 31, 2012, 9,000,000 shares of the Company’s common stock, which were loaned to a share borrower pursuant to the terms of a share lending agreement as described in Note 12, were issued and are outstanding, and holders of the borrowed shares have all the rights of a holder of the Company’s common stock. However, because the share borrower must return all borrowed shares to the Company (or, in certain circumstances, the cash value thereof), the borrowed shares are not considered outstanding for the purpose of computing and reporting basic or diluted earnings (loss) per share. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from the computation of diluted net loss per share for all of the periods presented in the accompanying condensed consolidated statements of operations because the reported net loss in each of these periods results in their inclusion being antidilutive. Antidilutive securities, which consist of stock options, restricted stock units, warrants, and shares that could be issued upon conversion of the senior convertible notes, that are not included in the diluted net loss per share calculation consisted of an aggregate of 54,310,177 shares and 33,334,623 shares as of March 31, 2012 and 2011, respectively, and exclude the 9,000,000 shares loaned under the share lending arrangement.

State research and development credit exchange receivable

3 Months Ended

Mar. 31, 2012

State research and development credit exchange receivable [Abstract]

State research and development credit exchange receivable

6. State research and development credit exchange receivable

The State of Connecticut provides certain companies with the opportunity to exchange certain research and development income tax credit carryforwards for cash in exchange for forgoing the carryforward of the research and development income tax credits. The program provides for an exchange of research and development income tax credits for cash equal to 65% of the value of corporation tax credit available for exchange. Estimated amounts receivable under the program are recorded as a reduction of research and development expenses. At March 31, 2012 and December 31, 2011, the estimated amounts receivable under the program were $565,000 and $473,000, respectively.

Property and equipment - net

3 Months Ended

Mar. 31, 2012

Property and equipment - net [Abstract]

Property and equipment - net

7. Property and equipment — net

Property and equipment — net consist of the following (dollar amounts in thousands):


	Estimated Useful Life (Years)	March 31, 2012			December 31, 2011
Land	—	$	5,273		$	5,273
Buildings	39-40		54,948			54,948
Building improvements	5-40		114,225			114,247
Machinery and equipment	3-15		82,190			83,476
Furniture, fixtures and office equipment	5-10		5,244			5,249
Computer equipment and software	3		12,177			13,049
Leasehold improvements			48			53
Construction in progress			9,743			8,498

			283,848			284,793
Less accumulated depreciation and amortization			(92,932	)		(91,764	)

Property and equipment — net		$	190,916		$	193,029

Leasehold improvements are amortized over four years which is the shorter of the term of the lease or the service lives of the improvements.

Depreciation and amortization expense related to property and equipment for the three months ended March 31, 2012 and 2011 was as follows (in thousands):


	Three months ended March 31,
	2012		2011
Depreciation and amortization expense	$	3,357	$	3,799

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

+ References + Details

Common and preferred stock

3 Months Ended

Mar. 31, 2012

Common and preferred stock [Abstract]

Common and preferred stock

8. Common and preferred stock

On February 8, 2012, the Company sold 35,937,500 units in an underwritten public offering, including 4,687,500 units, sold pursuant to the full exercise of an over-allotment option granted to the underwriters, with each unit consisting of one share of common stock and a warrant to purchase 0.6 of a share of common stock. All of the securities were offered by the Company at a combined price to the public of $2.40 per unit and the underwriters purchased the units at a price of $2.256 per unit. Net proceeds from this offering were approximately $80.6 million, excluding any warrant exercises. The 21,562,500 warrants are exercisable at $2.40 per share and expire four years from the date of the issuance (See Note 9 – Warrant liability). The shares of common stock and warrants are immediately separable and were issued separately. Concurrent with the underwritten public offering, The Mann Group LLC (“The Mann Group”) agreed to purchase $77.2 million worth of restricted shares of common stock which will be paid, at the discretion of the Company, by cash or by cancellation of principal indebtedness under the amended loan arrangement, subject to stockholder approval to increase the number of our authorized shares (see Note 11 — Related-party arrangements). As indicated in the Company’s Proxy Statement first distributed to the stockholders of the Company on April 6, 2012 in connection with the 2012 Annual Meeting of Stockholders, the Company has included a proposal to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 250,000,000 shares to 350,000,000 shares.

The Company concluded that the Mann Group common stock purchase agreement represented a contingent forward purchase contract that met the definition of a derivative instrument in accordance with ASC 815 Derivatives and Hedging. Of the 31,250,000 shares pursuant to the common stock purchase agreement, the portion of the derivative instrument representing 14.7 million shares were recorded as equity as they met the criteria for equity classification under ASC 815-40 Derivatives and Hedging, Contracts in an Entity’s Own Stock. The remaining portion of the derivative instrument required classification outside of equity as the Company does not have sufficient available shares at the time of issuance and at March 31, 2012. The fair value of the forward purchase contract was $2.0 million at the time of issuance and was recorded in other income. The fair value of the portion classified as equity was $0.9 million and the remaining portion was recorded as $1.1 million in prepaid and other current assets. The portion of the contract recorded as an asset within prepaid expenses and other current assets has been adjusted to fair value as of March 31, 2012 and the Company recorded an expense of $0.3 million to other expense during the three months ended March 31, 2012. The value of the derivative instrument was calculated using a forward contract valuation formula in which the forward contract is estimated to be equal to the valuation date stock price minus the strike price discounted to the valuation date using a risk-free rate of 0.08% at issuance and 0.06% at March 31, 2012. As the shares which would be received upon settlement are currently unregistered, the Company applied a discount for lack of marketability of 10.27% at issuance and 6.57% at March 31, 2012 to reflect this lack of marketability based on quantitative put models, adjusted to take into account qualitative factors, including the fact that the Company’s stock is publicly traded and the fact that there is no contractual restriction on the unregistered shares being registered. The fair value of the forward purchase contract is highly sensitive to the discount applied for lack of marketability and an increase in this discount would cause the value of the forward purchase contract to increase the asset position of the Company.

In June 2011, the Company’s stockholders approved an increase in its authorized shares of common stock from 200,000,000 to 250,000,000. As such, the Company is authorized to issue 250,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of undesignated preferred stock, par value $0.01 per share, issuable in one or more series designated by the Company’s board of directors. No other class of capital stock is authorized. As of March 31, 2012 and December 31, 2011, 167,815,783 and 131,522,945 shares of common stock, respectively, were issued and outstanding. Included in the common stock outstanding as of March 31, 2012 are 9,000,000 shares of common stock loaned to Bank of America under a share lending agreement in connection with the offering of the $100.0 million aggregate principal amount of 5.75% Senior Convertible Notes due 2015 (see Note 12 — Senior convertible notes). Bank of America is obligated to return the borrowed shares (or, in certain circumstances, the cash value thereof) to the Company on or about the 45th business day following the date as of which the entire principal amount of the notes ceases to be outstanding, subject to extension or acceleration in certain circumstances or early termination at Bank of America’s option. The Company did not receive any proceeds from the sale of the borrowed shares by Bank of America, but the Company did receive a nominal lending fee of $0.01 per share from Bank of America for the use of borrowed shares. As of March 31, 2012 the Company had not issued any shares of undesignated preferred stock.

In August 2010, the Company entered into an agreement with Seaside 88, LP (“Seaside”) for the sale of up to 18,200,000 shares of common stock in increments of 700,000 shares on a bi-weekly basis with the first closing date scheduled for September 22, 2010 provided that certain conditions are met, including for a particular closing to take place, the ten-day volume weighted average trading price for the Company’s common stock immediately prior to such closing must meet or exceed a minimum price set by the Company at $6.50 per share. If the 10-day volume weighted average trading price for a particular closing was below $6.50 per share, then that closing would not occur and the aggregate number of shares to be purchased would be reduced by 700,000 shares. The purchase price per share at each closing was equal to 92% of that 10-day volume weighted average price. The agreement with Seaside terminated during the quarter ended September 30, 2011. During the agreement, the Company issued and sold a total of 3,500,000 shares of common stock to Seaside for net proceeds of $23.8 million.

In conjunction with the Seaside agreement, in August 2010, the Company entered into a common stock purchase agreement with The Mann Group, an entity controlled by the Company’s principal stockholder. Under this common stock purchase agreement, the Company was required to issue and sell, and The Mann Group was obligated to purchase at a price equal to the greater of $7.15 per share (the closing bid price of the Company’s common stock on August 10, 2010) and the closing bid price of common stock on the trading day immediately preceding the applicable closing date, the same number of shares of the Company’s common stock that Seaside purchased on each closing date under its agreement with the Company (see Note 11 — Related-party arrangements). The agreement with The Mann Group terminated during the quarter ended September 30, 2011. During the agreement, the Company issued and sold a total of 3,500,000 shares of common stock to The Mann Group that had resulted in total reduction in the note payable to related party of $27.8 million.

Warrant liability

3 Months Ended

Mar. 31, 2012

Warrant liability [Abstract]

Warrant liability

9. Warrant liability

In connection with the sale of units in February 2012, the Company issued separable warrants representing 21,562,500 shares of common stock which are exercisable at $2.40 per share and are exercisable any time prior to February 8, 2016. No warrants have been exercised as of March 31, 2012.

Of the 21,562,500 shares represented by warrants, 16,145,833 shares were recorded as equity as they met the criteria for equity classification under ASC 815-40 Derivatives and Hedging, Contracts in an Entity’s Own Stock. The remaining warrants representing 5,416,667 shares require liability classification in accordance with ASC 480, Distinguishing Liabilities from Equity, as the Company did not have sufficient registered shares available at the time of issuance. The fair value of these shares was recorded in accrued expenses and other current liabilities in the condensed consolidated balance sheet. The warrants will be reported as a liability until they are exercised, or at the time that the Company has sufficient registered shares available, at which time the warrants will be adjusted to fair value and reclassified from liabilities to stockholders’ equity.

The warrants requiring liability classification were recorded at fair value at issuance and will be adjusted to fair value at each reporting period until exercised or expiration. The fair value of the warrant liability at the date of issuance was $7.6 million and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 93%; risk free interest rate of 0.59%; and contractual term of 4.0 years. The fair value of the warrant liability is highly sensitive to the volatility rate used in the option pricing model and an increase in the volatility rate would cause an increase in the warranty liability. The volatility assumption is calculated based on historical activity.

As of March 31, 2012, the fair value of the warrant liability was $7.9 million and was estimated using the Black-Scholes option pricing model based on the following assumptions: expected dividend yield of 0%; expected volatility of 93%; risk-free interest rate of 0.59%; and contractual term of 4 years. Any change in fair value between reporting periods is recorded as other income (expense) in the condensed consolidated statements of operations. During the quarter ended March 31, 2012, a loss of $284,000 was recognized from the fair value adjustment of the warrant liability.

Commitments and contingencies

3 Months Ended

Mar. 31, 2012

Commitments and contingencies [Abstract]

Commitments and contingencies

10. Commitments and contingencies

Guarantees and Indemnifications — In the ordinary course of its business, the Company makes certain indemnities, commitments and guarantees under which it may be required to make payments in relation to certain transactions. The Company, as permitted under Delaware law and in accordance with its Bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s lifetime. The maximum amount of potential future indemnification is unlimited; however, the Company has a director and officer insurance policy that may enable it to recover a portion of any future amounts paid. The Company believes the fair value of these indemnification agreements is minimal. The Company has not recorded any liability for these indemnities in the accompanying condensed consolidated balance sheets. However, the Company accrues for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount can be reasonably estimated. No such losses have been recorded to date.

Litigation — The Company is involved in various legal proceedings and other matters. In accordance with ASC 450 Contingencies, the Company would record a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

Following the receipt of the Complete Response letter from the FDA regarding the NDA for AFREZZA in January 2011 and the subsequent decline of the price of the Company’s common stock, several complaints were filed in the U.S. District Court for the Central District of California against the Company and certain of its officers and directors on behalf of certain purchasers of the Company’s common stock. The complaints include claims asserted under Sections 10(b) and 20(a) of the Exchange Act, and have been brought as purported shareholder class actions. In general, the complaints allege that the Company and certain of its officers and directors violated federal securities laws by making materially false and misleading statements regarding the Company’s business and prospects for AFREZZA, thereby artificially inflating the price of its common stock. The plaintiffs are seeking unspecified monetary damages and other relief. The complaints have been transferred to a single court and consolidated for all purposes. The court has appointed a lead plaintiff and lead counsel and a consolidated complaint was filed on June 27, 2011. On August 12, 2011, the Company filed a motion to dismiss the consolidated complaint. On December 16, 2011, the court denied the motions. On January 27, 2012, defendants filed a motion to stay the action and certify the court’s December 16 order for interlocutory appeal, or in the alternative to reconsider. On March 2, 2012, the court denied both motions. On April 30, 2012, the parties participated in a mediation before the Honorable Layn Phillips. While the cases did not settle at that mediation, settlement negotiations are currently ongoing. At this time, the amount or range of reasonable possible losses to which the Company may be exposed is not expected to have a material impact on the financial statements.

Starting in February 2011, shareholder derivative complaints were filed in the Superior Court of California for the County of Los Angeles and in the U.S. District Court for the Central District of California against the Company’s directors and certain of its officers. The complaints in the shareholder derivative actions allege breaches of fiduciary duties by the defendants and other violations of law. In general, the complaints allege that the Company’s directors and certain of its officers caused or allowed for the dissemination of materially false and misleading statements regarding the Company’s business and prospects for AFREZZA, thereby artificially inflating the price of its common stock. The plaintiffs are seeking unspecified monetary damages and other relief, including reforms to the Company’s corporate governance and internal procedures.

The Superior Court of California for the County of Los Angeles has consolidated the actions pending before it and appointed lead counsel. The Superior Court of California for the County of Los Angeles has stayed the litigation until September 5, 2012, consistent with the parties’ stipulation. A status conference is set for September 5, 2012. At this time, the amount or range of reasonable possible losses to which the Company may be exposed is not expected to have a material impact on the financial statements.

Likewise, the U.S. District Court for the Central District of California has consolidated the actions pending before it. The U.S. District Court for the Central District of California has also appointed lead plaintiffs and lead counsel. On August 12, 2011, the federal lead plaintiffs filed a consolidated complaint. On September 26, 2011, the Company and the individual defendants filed a motion to dismiss the consolidated complaint, and the parties subsequently stipulated to stay the litigation. That stay has expired, and the parties are now negotiating a briefing and hearing schedule on defendants’ motion to dismiss the consolidated derivative complaint. The parties are negotiating a stipulation to stay the litigation pending the outcome of the mediation. At this time, the amount or range of reasonable possible losses to which the Company may be exposed is not expected to have a material impact on the financial statements.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 14
-Paragraph 3
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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-URI http://asc.fasb.org/extlink&oid=6449706&loc=d3e16207-108621

+ Details

Related-party arrangements

3 Months Ended

Mar. 31, 2012

Related-party arrangements

11. Related-party arrangements

In October 2007, the Company entered into a $350.0 million loan arrangement with its principal stockholder. In February 2009, the promissory note underlying the loan arrangement was revised as a result of the principal stockholder being licensed as a finance lender under the California Finance Lenders Law. Accordingly, the lender was revised to The Mann Group. Interest accrues on each outstanding advance at a fixed rate equal to the one-year LIBOR rate as reported by the Wall Street Journal on the date of such advance plus 3% per annum and is payable quarterly in arrears. The borrowing rate was 4.6% at both March 31, 2012 and December 31, 2011, respectively. In August 2010, the Company amended and restated the promissory note to extend the maturity date from December 31, 2011 to December 31, 2012. In January 2012, the Company amended the note with The Mann Group to extend the maturity date from December 31, 2012 to March 31, 2013 and to extend the date through which the Company can continue to borrow under the amended terms of the note until June 30, 2012. In addition, interest is payable on the first day of the calendar quarter following the calendar quarter in which an advance is made, or such other time as the Company and The Mann Group mutually agree. On May 9, 2012, the Company amended the note with The Mann Group to extend the maturity date of the $350.0 million loan arrangement from March 31, 2013 to July 1, 2013. Under the amended and restated promissory note The Mann Group may require the Company to prepay up to $200.0 million in advances that have been outstanding for at least 12 months. If The Mann Group exercises this right, the Company will have 90 days after The Mann Group provides written notice (or the number of days to maturity of the note if less than 90 days) to prepay such advances. In August 2010, the Company entered into a letter agreement confirming a previous commitment by The Mann Group to not require the Company to prepay amounts outstanding under the amended and restated promissory note if the prepayment would require the Company to use its working capital resources. In the event of a default, all unpaid principal and interest either becomes immediately due and payable or may be accelerated at The Mann Group’s option, and the interest rate will increase to the one-year LIBOR rate calculated on the date of the initial advance or in effect on the date of default, whichever is greater, plus 5% per annum. All borrowings under the loan arrangement are unsecured. The loan arrangement contains no financial covenants. There are no warrants associated with the loan arrangement.

The principal amount outstanding under the loan arrangement was $283.5 million and $277.2 million at March 31, 2012 and December 31, 2011, respectively. As of March 31, 2012, the Company had accrued interest of $8.9 million related to the amount outstanding, had cancelled a total of $27.8 million indebtedness and had $38.8 million of available borrowings under the loan arrangement.

In August 2010, the Company entered into a common stock purchase agreement with The Mann Group. Under this common stock purchase agreement, the Company was required to issue and sell, and The Mann Group was obligated to purchase, the same number of shares of the Company’s common stock that Seaside purchased on each closing date under its agreement with the Company. The price of the shares that the Company sold to The Mann Group under the agreement was equal to the greater of $7.15 per share (the closing bid price of the Company’s common stock on August 10, 2010) and the closing bid price of the Company’s common stock on the trading day immediately preceding the applicable closing date. The aggregate purchase price for the shares of common stock the Company issued and sold to The Mann Group was paid by cancelling an equal amount of the outstanding principal under the $350.0 million loan arrangement provided by The Mann Group. The common stock purchase agreement with The Mann Group terminated during the quarter ended September 30, 2011.

On February 8, 2012, the Company sold $86.3 million worth of units in an underwritten public offering, with each unit consisting of one share of common stock and a warrant to purchase 0.6 of a share of common stock. Concurrent with this public offering, The Mann Group LLC purchased $77.2 million worth of restricted shares of common stock which will be paid, at the discretion of the Company, by cash or by cancellation of principal indebtedness under the amended loan arrangement, subject to stockholder approval to increase the Company’s number of authorized shares.

- Definition

The entire disclosure for related party transactions, including the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Article 4
-Section 08
-Paragraph k

Reference 2: http://www.xbrl.org/2003/role/presentationRef
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-Paragraph 1-4
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864

+ Details

Senior convertible notes

3 Months Ended

Mar. 31, 2012

Senior convertible notes [Abstract]

Senior convertible notes

12. Senior convertible notes

Senior convertible notes consist of the following (in thousands):


	March 31 2012			December 31 2011
Notes due 2013
Principal amount	$	115,000		$	115,000
Unaccreted debt issuance expense		(997	)		(1,140	)

Net carrying amount		114,003			113,860

Notes due 2015
Principal amount	$	100,000		$	100,000
Unaccreted debt issuance expense		(3,057	)		(3,218	)

Net carrying amount		96,943			96,782

Senior convertible notes	$	210,946		$	210,642

In August 2010, the Company completed a Rule 144A offering of $100.0 million aggregate principal amount of 5.75% Senior Convertible Notes due 2015. The Notes due 2015 are governed by the terms of an indenture dated as of August 24, 2010 (the “2015 Note Indenture”). The Notes due 2015 bear interest at the rate of 5.75% per year on the principal amount, payable in cash semi-annually in arrears on February 15 and August 15 of each year, beginning February 15, 2011. As of March 31, 2012 and December 31, 2011, the Company had accrued interest of $735,000 and $2.2 million, respectively, related to the Notes due 2015. The Notes due 2015 are general, unsecured, senior obligations of the Company and effectively rank junior in right of payment to all of the Company’s secured debt, to the extent of the value of the assets securing such debt, and to the debt and all other liabilities of the Company’s subsidiaries. The maturity date of the Notes due 2015 is August 15, 2015 and payment is due in full on that date for unconverted securities. Holders of the Notes due 2015 may convert, at any time prior to the close of business on the business day immediately preceding the stated maturity date, any outstanding principal into shares of the Company’s common stock at an initial conversion rate of 147.0859 shares per $1,000 principal amount, which is equal to a conversion price of approximately $6.80 per share, subject to adjustment. Except in certain circumstances, if the Company undergoes a fundamental change: (1) the Company will pay a make-whole premium on the Notes due 2015 converted in connection with a fundamental change by increasing the conversion rate on such Notes due 2015, which amount, if any, will be based on the Company’s common stock price and the effective date of the fundamental change, and (2) each holder of Notes due 2015 will have the option to require the Company to repurchase all or any portion of such holder’s Notes due 2015 at a repurchase price of 100% of the principal amount of the Notes due 2015 to be repurchased plus accrued and unpaid interest, if any. The Company may elect to redeem some or all of the Notes due 2015 if the closing stock price has equaled 150% of the conversion price for at least 20 of the 30 consecutive trading days ending on the trading day before the Company’s redemption notice. The redemption price will equal 100% of the principal amount of the Notes due 2015 to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date, plus a make-whole payment equal to the sum of the present values of the remaining scheduled interest payments through and including August 15, 2015 (other than interest accrued up to, but excluding, the redemption date). The Company will be obligated to make the make-whole payment on all the Notes due 2015 called for redemption and converted during the period from the date the Company mailed the notice of redemption to and including the redemption date. The Company may elect to make the make-whole payment in cash or shares of its common stock, subject to certain limitations. Under the terms of the 2015 Note Indenture, the conversion option can be net-share settled and the maximum number of shares that could be required to be delivered under the contract, including the make-whole shares, is fixed and less than the number of authorized and unissued shares less the maximum number of shares that could be required to be delivered during the contract period under existing commitments. The Company performed an analysis at the time of the offering of the Notes due 2015 and each reporting date since and has concluded that the number of available authorized shares at the time of the offering and each subsequent reporting date was in excess of the maximum number of shares that could be required to be delivered during the contract period under existing commitments, including the outstanding convertible notes, stock options, restricted stock units, warrants, and other potential common stock issuances.

The Company incurred approximately $4.2 million in issuance costs which are recorded as an offset to the Notes due 2015 in the accompanying condensed consolidated balance sheets. These costs are being amortized to interest expense using the effective interest method over the term of the Notes due 2015.

In December 2006, the Company completed a registered offering of $115.0 million aggregate principal amount of 3.75% Senior Convertible Notes due 2013. The Notes due 2013 are governed by the terms of an indenture dated as of November 1, 2006 and a First Supplemental Indenture, dated as of December 12, 2006 (the “2013 Note Indenture”). The Notes due 2013 bear interest at the rate of 3.75% per year on the principal amount, payable in cash semi-annually in arrears on June 15 and December 15 of each year, beginning June 15, 2007. As of March 31, 2012 and December 31, 2011, the Company had accrued interest of $1.3 million and $192,000, respectively, related to the Notes due 2013. The Notes due 2013 are general, unsecured, senior obligations of the Company and effectively rank junior in right of payment to all of the Company’s secured debt, to the extent of the value of the assets securing such debt, and to the debt and all other liabilities of the Company’s subsidiaries. The maturity date of the Notes due 2013 is December 15, 2013 and payment is due in full on that date for unconverted securities. Holders of the Notes due 2013 may convert, at any time prior to the close of business on the business day immediately preceding the stated maturity date, any outstanding principal into shares of the Company’s common stock at an initial conversion rate of 44.5002 shares per $1,000 principal amount, which is equal to a conversion price of approximately $22.47 per share, subject to adjustment. Except in certain circumstances, if the Company undergoes a fundamental change: (1) the Company will pay a make-whole premium on the Notes due 2013 converted in connection with a fundamental change by increasing the conversion rate on such Notes, which amount, if any, will be based on the Company’s common stock price and the effective date of the fundamental change, and (2) each holder of Notes due 2013 will have the option to require the Company to repurchase all or any portion of such holder’s Notes at a repurchase price of 100% of the principal amount of the Notes to be repurchased plus accrued and unpaid interest, if any. Under the terms of the 2013 Note Indenture, the conversion option can be net-share settled and the maximum number of shares that could be required to be delivered under the contract, including the make-whole shares, is fixed and less than the number of authorized and unissued shares less the maximum number of shares that could be required to be delivered during the contract period under existing commitments. The Company performed an analysis at the time of the offering of the Notes due 2013 and each reporting date since and has concluded that the number of available authorized shares at the time of the offering and each subsequent reporting date was in excess of the maximum number of shares that could be required to be delivered during the contract period under existing commitments, including the outstanding convertible notes, stock options, restricted stock units, warrants, and other potential common stock issuances.

The Company incurred approximately $3.7 million in issuance costs which are recorded as an offset to the Notes due 2013 in the accompanying condensed consolidated balance sheets. These costs are being amortized to interest expense using the effective interest method over the term of the Notes due 2013.

Amortization of debt issuance expense in connection with the offerings of the Notes due 2015 and the Notes due 2013 during the three months ended March 31, 2012 and 2011 was as follows (in thousands):


	Three months ended March 31,
	2012		2011
Amortization expense	$	339	$	320

Income taxes

3 Months Ended

Mar. 31, 2012

Income taxes [Abstract]

Income taxes

13. Income taxes

As required by ASC 740 Income Taxes (“ASC 740”), management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Management has concluded, in accordance with the applicable accounting standards, that it is more likely than not that the Company may not realize the benefit of its deferred tax assets due to its history of operating losses. Accordingly, the net deferred tax assets have been fully reserved.

ASC 740-10-25 Income Taxes Recognition clarifies the accounting and disclosure for uncertainty in tax positions, as defined. This guidance seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to this guidance. Tax years since 1993 remain subject to examination by the major tax jurisdictions in which the Company is subject to tax.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
-Paragraph h
-Article 4

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 136, 172
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 109
-Paragraph 43, 44, 45, 46, 47, 48, 49
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(h))
-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

+ Details