Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity (Deficit)

v2.4.0.8
Stockholders' Equity (Deficit)
 9 Months Ended
Sep. 30, 2014
Equity [Abstract]  
Stockholders' Equity (Deficit)

NOTE 4 — STOCKHOLDERS’ EQUITY (DEFICIT)

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.

During the three and nine months ended September 30, 2014, warrants to purchase 1,478,528 shares of common stock were exercised on a cashless basis resulting in the net issuance of 821,753 shares of common stock. In addition, during the nine months ended September 30, 2014, warrants to purchase 2,160,206 shares of common stock were exercised for cash resulting in net proceeds of approximately $4.4 million. As of the date of exercise of the warrants, the Company transferred the fair value of the warrants of approximately $9.1 million from warrant liability into stockholders’ equity for both the three and nine months ended September 30, 2014.

At September 30, 2014 and December 31, 2013, the Company had warrants outstanding to purchase 649,206 and 4,287,940 shares of common stock, respectively, having an exercise price of $2.05 per share, which warrants were initially issued by the Company in a private placement in October 2009. All of the warrants related to the October 2009 offering were exercised prior to their expiration date of October 5, 2014. The fair value of these warrants on September 30, 2014 and December 31, 2013 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

 

 

September 30,

2014

 

 

December 31,

2013

 

Risk-free interest rate

 

0.02

%

 

 

0.13

%

Expected life (in years)

 

0.01

 

 

 

0.76

 

Dividend yield

 

—

 

 

 

—

 

Volatility

 

47

%

 

 

49

%

Stock price

$

3.61

 

 

$

4.67

 

 

 

During the three and nine months ended September 30, 2014, the change in fair value of $1.9 million of noncash expense and $1.2 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 both September 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 September 30, 2014 and December 31, 2013 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

 

 

September 30,

2014

 

 

December 31,

2013

 

Risk-free interest rate

 

0.58

%

 

 

0.78

%

Expected life (in years)

 

1.46

 

 

 

2.21

 

Dividend yield

 

—

 

 

 

—

 

Volatility

 

45

%

 

 

88

%

Stock price

$

3.61

 

 

$

4.67

 

 

 

During the three and nine months ended September 30, 2014, the change in fair value of $1.6 million and $6.6 million of noncash income, 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 October 2009 and March 2011 offerings, subject to fair value measurements as of September 30, 2014 and December 31, 2013:

 

 

Fair Value as of September 30, 2014

 

 

Basis of Fair Value Measurements

 

(in thousands)

 

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

October 2009 warrants

$

1,013

 

 

$

—

 

 

$

—

 

 

$

1,013

 

March 2011 warrants

 

5,551

 

 

 

—

 

 

 

—

 

 

 

5,551

 

Total common stock warrants

$

6,564

 

 

$

—

 

 

$

—

 

 

$

6,564

 

 

 

 

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 nine months ended September 30, 2014

 

(7,781

)

Exercise of warrants during nine months ended September 30, 2014

 

(9,076

)

 

 

 

 

Balance at September 30, 2014

$

6,564