Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.5.0.2
Stockholders' Equity
 6 Months Ended
Jun. 30, 2016
Equity [Abstract]  
Stockholders' Equity

NOTE 4 — STOCKHOLDERS’ EQUITY

Common Stock Warrant Valuation

The Company accounts for its common stock warrants under guidance in ASC 815 that clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify for classification as liabilities. The guidance requires the Company’s outstanding warrants to be classified as liabilities and to be fair valued at each reporting period, with the changes in fair value recognized as other income (expense) in the Company’s consolidated statements of operations.

At both June 30, 2016 and December 31, 2015 the Company had warrants outstanding to purchase 8.3 million shares of common stock, having an initial exercise price of $10.86 per share, which warrants were issued by the Company in the Company’s February 2015 public offering of common stock and warrants. The exercise price was adjusted to $3.62 on January 21, 2016 pursuant to the terms of warrant. The fair value of these warrants on June 30, 2016 and December 31, 2015 was determined using a Black-Scholes model with the following key level 3 inputs:

 

 

June 30,

2016

 

 

December 31, 2015

 

Risk-free interest rate

 

1.01

%

 

 

1.76

%

Expected life (in years)

 

3.64

 

 

 

4.14

 

Dividend yield

 

—

 

 

 

—

 

Volatility

 

116

%

 

 

112

%

Stock price

$

0.64

 

 

$

0.48

 

 

 

During the three and six months ended June 30, 2016 the change in fair value of $1.0 million and $0.7 million, respectively, of noncash expense related to the February 2015 warrants was recorded as other income (expense) in the Company’s consolidated statement of operations.

On March 16, 2016, warrants outstanding, which were initially issued by the Company in an underwritten public offering in March 2011, to purchase 3.8 million shares of common stock expired and noncash income of $38,000 related to the expired warrants was recognized as other income (expense) in the Company’s consolidated statement of operations. At December 31, 2015, the Company had March 2011 warrants outstanding to purchase 3.8 million shares of common stock, having an exercise price of $2.46 per share. The fair value of these warrants on December 31, 2015 was determined using a Black Scholes valuation model with the following key level 3 inputs:

 

 

 

December 31,

2015

 

Risk-free interest rate

 

0.16

%

Expected life (in years)

 

0.21

 

Dividend yield

 

—

 

Volatility

 

179

%

Stock price

$

0.48

 

 

The following table sets forth the Company’s financial liabilities, related to warrants issued in the February 2015 and March 2011 offerings, subject to fair value measurements as of June 30, 2016 and December 31, 2015:

 

 

Fair Value as of June 30, 2016

 

 

Basis of Fair Value Measurements

 

(in thousands)

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

February 2015 warrants

$

2,490

 

 

$

—

 

 

$

—

 

 

$

2,490

 

 

 

 

Fair Value as of December 31, 2015

 

 

Basis of Fair Value Measurements

 

(in thousands)

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 2011 warrants

 

38

 

 

 

—

 

 

 

—

 

 

 

38

 

February 2015 warrants

 

1,826

 

 

 

—

 

 

 

—

 

 

 

1,826

 

Total common stock warrants

$

1,864

 

 

$

—

 

 

$

—

 

 

$

1,864

 

 

The following table is a reconciliation of the warrant liability measured at fair value using level 3 inputs (in thousands):

 

 

Warrant

Liability

 

Balance at December 31, 2015

$

1,864

 

Change in fair value related to expired March 2016 common stock warrants

 

(38

)

Change in fair value of common stock warrants during six months ended June 30, 2016

 

664

 

Exercise of warrants during six months ended June 30, 2016

 

—

 

Balance at June 30, 2016

$

2,490