Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
 9 Months Ended
Sep. 30, 2013
Equity [Abstract]  
Stockholders' Equity

NOTE 4— STOCKHOLDERS’ EQUITY

Common Stock Warrants

The Company accounts for its common stock warrants in accordance with 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 required 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.

 

During nine months ended September 30, 2013, warrants to purchase 2,367,636 shares of common stock were cashless exercised for 1,555,043 shares of common stock. In addition, during the nine months ended September 30, 2013, warrants to purchase 893,475 shares of common stock were exercised for net proceeds of approximately $1.8 million. As of the date of exercise of the warrants, the Company transferred the fair value of the warrants of approximately $3.8 million and $11.3 million from warrant liability into stockholders’ equity for the three and nine months ended September 30, 2013, respectively.

At September 30, 2013 and December 31, 2012, the Company had warrants outstanding to purchase 0 and 3,058,811 shares of common stock, respectively, from the August 2008 offering. All of the warrants related to the August 2008 offering had been exercised prior to their expiration date of August 29, 2013. During the three and nine months ended September 30, 2013, the change in fair value of $0.6 million of noncash income and $2.5 million of noncash expense, respectively, related to the August 2008 warrants was recorded as other income (expense) in the Company’s consolidated statement of operations.

At September 30, 2013 and December 31 2012, the Company had warrants outstanding to purchase 4,287,940 shares of common stock from the October 2009 offering. The fair value of these warrants on September 30, 2013 and December 31, 2012 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

     September 30,
2013		     December 31,
2012		  

Risk-free interest rate

      0.10 %     0.25 %

Expected life (in years)

      1.01       1.76  

Dividend yield

      —         —    

Volatility

      56 %     98 %

Stock price

    $ 4.65     $ 4.21  

During the three and nine months September 30, 2013, the change in fair value of $2.8 million and $0.6 million of noncash income, respectively, related to the October 2009 warrants was recorded as other income (expense) in the Company’s consolidated statement of operations.

At September 30, 2013 and December 31, 2012, the Company had warrants outstanding to purchase 4,033,783 and 4,236,083 shares of common stock, respectively from the March 2011 offering. The fair value of these warrants on September 30, 2013 and December 31, 2012 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

     September 30,
2013		     December 31,
2012		  

Risk-free interest rate

      0.63 %     0.72 %

Expected life (in years)

      2.46       3.21  

Dividend yield

      —         —    

Volatility

      87 %     94 %

Stock price

    $ 4.65     $ 4.21  

During the three and nine months ended September 30, 2013, the change in fair value of $2.9 million of noncash income and $0.6 million of noncash expense, respectively, related to the March 2011 warrants was recorded as other income (expense) in the Company’s consolidated statement of operations.

The following table sets forth the Company’s financial liabilities, related to warrants issued in the August 2008, October 2009 and March 2011 offerings, subject to fair value measurements as of September 30, 2013 and December 31, 2012:

 

(in thousands)    Fair Value as of
September 30,
2013		      Basis of Fair Value Measurements  
      Level 1      Level 2      Level 3  

August 2008 warrants

    $ —         $ —         $ —        $ —     

October 2009 warrants

      11,406         —          —          11,406   

March 2011 warrants

      12,384        —          —          12,384  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total common stock warrants

    $ 23,790      $ —        $ —        $ 23,790   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(in thousands)    Fair Value as of
December 31,
2012		      Basis of Fair Value Measurements  
      Level 1      Level 2      Level 3  

August 2008 warrants

    $ 8,014       $ —        $ —        $ 8,014   

October 2009 warrants

      11,963         —          —          11,963   

March 2011 warrants

      12,581        —          —          12,581  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total common stock warrants

    $ 32,558      $ —         $ —        $ 32,558   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

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, 2012

    $ 32,558  

Change in fair value of common stock warrants during nine months ended September 30, 2013

      2,559  

Exercise of warrants during nine months ended September 30, 2013

      (11,327 ) 
  

 

 

  

Balance at September 30, 2013

    $ 23,790