Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
 3 Months Ended
Mar. 31, 2014
Equity [Abstract]  
Stockholders' Equity

NOTE 4— STOCKHOLDERS’ EQUITY

Common Stock Warrants

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 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.

At both March 31, 2014 and December 31, 2013, the Company had warrants outstanding to purchase 4,287,940 shares of common stock, having an exercise price of $2.05 per share, which warrants were initially issued by us in a private placement in October 2009. The fair value of these warrants on March 31, 2014 and December 31, 2013 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

     March 31,
2014		     December 31,
2013		  

Risk-free interest rate

      0.13 %     0.13 %

Expected life (in years)

      0.52        0.76   

Dividend yield

      —          —    

Volatility

      44 %     49 %

Stock price

    $ 4.76      $ 4.67   

During the three months March 31, 2014 the change in fair value of $0.3 million related to the October 2009 warrants was recorded as other expense in the Company’s condensed consolidated statement of operations.

 

At both March 31, 2014 and December 31, 2013, the Company had also warrants outstanding to purchase 3,993,783 shares of common stock, having an exercise price of $2.46 per share, which warrants were initially issued by us in an underwritten public offering in March 2011. The fair value of these warrants on March 31, 2014 and December 31, 2013 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

     March 31,
2014		     December 31,
2013		  

Risk-free interest rate

      0.44 %     0.78 %

Expected life (in years)

      1.96        2.21   

Dividend yield

      —          —    

Volatility

      55 %     88 %

Stock price

    $ 4.76      $ 4.67   

During the three months ended March 31, 2014, the change in fair value of $1.8 million related to the March 2011 warrants was recorded as other income in the Company’s consolidated statement of operations.

The following table sets forth the Company’s financial liabilities, related to warrants issued in the October 2009 and March 2011offerings, subject to fair value measurements as of March 31, 2014 and December 31, 2013:

 

     Fair Value as of
March 31,
2014 		     Basis of Fair Value Measurements  
(in thousands)       Level 1      Level 2      Level 3  

October 2009 warrants

    $ 11,620       $ —        $ —        $ 11,620   

March 2011 warrants

      10,344         —          —          10,344   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total common stock warrants

    $ 21,964       $ —        $ —        $ 21,964   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

(in thousands)    Fair Value as of
December 31,
2013 		     Basis of Fair Value Measurements  
      Level 1      Level 2      Level 3  

October 2009 warrants

    $ 11,320       $ —        $ —        $ 11,320   

March 2011 warrants

      12,101         —          —          12,101   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total common stock warrants

    $ 23,421       $ —        $ —        $ 23,421   
  

 

 

     

 

 

     

 

 

     

 

 

  

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, 2013

    $ 23,421   

Change in fair value of common stock warrants during three months ended March 31, 2014

      (1,457 )

Exercise of warrants during three months ended March 31, 2014

      —     
  

 

 

  

Balance at March 31, 2014

    $ 21,964