Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v2.4.0.8
Stockholders' Equity
 6 Months Ended
Jun. 30, 2014
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 June 30, 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 the Company in a private placement in October 2009. The fair value of these warrants on June 30, 2014 and December 31, 2013 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

 

 

June 30,

2014

 

 

December 31,

2013

 

Risk-free interest rate

 

0.11

%

 

 

0.13

%

Expected life (in years)

 

0.27

 

 

 

0.76

 

Dividend yield

 

—

 

 

 

—

 

Volatility

 

44

%

 

 

49

%

Stock price

$

3.96

 

 

$

4.67

 

 

 

During the three and six months ended June 30, 2014, the change in fair value of $3.4 million and $3.1 million, respectively, related to the October 2009 warrants was recorded as other income in the Company’s consolidated statement of operations.

At both June 30, 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 the Company in an underwritten public offering in March 2011. The fair value of these warrants on June 30, 2014 and December 31, 2013 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

 

 

June 30,

2014

 

 

December 31,

2013

 

Risk-free interest rate

 

0.47

%

 

 

0.78

%

Expected life (in years)

 

1.71

 

 

 

2.21

 

Dividend yield

 

—

 

 

 

—

 

Volatility

 

50

%

 

 

88

%

Stock price

$

3.96

 

 

$

4.67

 

 

 

During the three and six months ended June 30, 2014, the change in fair value of $3.2 million and $5.0 million, respectively, 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 2011 offerings, subject to fair value measurements as of June 30, 2014 and December 31, 2013:

 

 

Fair Value as of

June 30,

2014

 

 

Basis of Fair Value Measurements

 

(in thousands)

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

October 2009 warrants

$

8,190

 

 

$

—

 

 

$

—

 

 

$

8,190

 

March 2011 warrants

 

7,109

 

 

 

—

 

 

 

—

 

 

 

7,109

 

Total common stock warrants

$

15,299

 

 

$

—

 

 

$

—

 

 

$

15,299

 

 

 

Fair Value as of

December 31,

2013

 

 

Basis of Fair Value Measurements

 

(in thousands)

 

 

 

 

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 six months ended June 30, 2014

 

(8,122

)

Exercise of warrants during six months ended June 30, 2014

 

—

 

 

 

 

 

Balance at June 30, 2014

$

15,299