Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

 v2.3.0.11
Stockholders' Equity
 6 Months Ended
Jun. 30, 2011
Stockholders' Equity  
Stockholders' Equity

NOTE 3 STOCKHOLDERS' EQUITY

Common Stock

On March 16, 2011, the Company sold to certain investors an aggregate of 14,313,081 shares of its common stock for a purchase price equal to $2.05 per share and, for a purchase price of $0.05 per share, warrants exercisable for a total of 5,725,227 shares of its common stock for aggregate gross proceeds equal to $30.1 million in connection with the offering. Net proceeds generated from the offering were approximately $27.8 million. The warrants have a five-year term and an exercise price equal to $2.46 per share of common stock. The number of shares issuable upon exercise of the warrants and the exercise price are subject to adjustment for subdivisions and stock splits, stock dividends, combinations, reorganizations, reclassifications, consolidations, mergers or sales of properties and assets and upon the issuance of certain assets or securities to holders of our common stock, as applicable.

As a result of the offering on March 16, 2011, the exercise price of the warrants exercisable for a total of 7,329,819 shares of common stock sold to investors in October 2009 that had an original exercise price of $2.23 per share, was subsequently reduced to $2.05 per share pursuant to the terms of such warrants.

On October 29, 2010, the Company entered into an at market issuance sales agreement, or sales agreement, with McNicoll, Lewis & Vlak LLC, or MLV, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $15.0 million from time to time through MLV as sales agent. Subject to the terms and conditions of the sales agreement, MLV will use commercially reasonable efforts to sell the Company's common stock from time to time, based upon the Company's instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company will pay MLV an aggregate commission rate of 3.0% of the gross proceeds of the sales price per share of any common stock sold under the sales agreement. Under certain circumstances, sales of the stock under the at market issuances sales agreement could result in an adjustment to the exercise price of certain of our outstanding warrants. On March 11, 2011, the Company filed a prospectus supplement reducing the amount of securities for sale under its shelf registration statement pursuant to the sales agreement. The maximum aggregate gross proceeds from potential future sales of common stock under the existing shelf registration statement are $3.3 million. As of August 4, 2011, the Company sold an aggregate of 971,037 shares of common stock at an average price of $2.66 pursuant to the sales agreement. Net proceeds from the sale of stock were $2.3 million. The sales of stock did not result in an adjustment to the exercise price of certain of our outstanding warrants.

Common Stock Warrants

The Company accounts for its common stock warrants under guidance now codified 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 statement of operations.

At June 30, 2011 and December 31, 2010, the Company had warrants outstanding to purchase 3,588,221 shares of common stock from the August 2008 offering. The fair value of these warrants on June 30, 2011 and December 31, 2010 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

     June 30,
2011		     December 31,
2010		  

Risk-free interest rate

      0.63 %      1.02 % 

Expected life (in years)

      2.17        2.66   

Dividend yield

                     

Volatility

      82 %      94 % 

Stock price

    $ 1.67      $ 1.35   

During the six months ended June 30, 2011, the change in fair value of $0.2 million related to the August 2008 warrants was recorded as other expense in the Company's consolidated statement of operations.

At June 30, 2011 and December 31 2010, the Company had warrants outstanding to purchase 7,329,819 shares of common stock from the October 2009 offering. The fair value of these warrants on June 30, 2010 and December 31 2010 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

     June 30,
2011		     December 31,
2010		  

Risk-free interest rate

      0.91 %      1.40 % 

Expected life (in years)

      3.27        3.76   

Dividend yield

                     

Volatility

      95 %      88 % 

Stock price

    $ 1.67      $ 1.35   

During the six months ended June 30, 2011 the change in fair value of $1.9 million related to the October 2009 warrants was recorded as other expense in the Company's consolidated statement of operations.

At June 30, 2011 and March 16, 2011, the Company had warrants outstanding to purchase 5,725,227 shares of common stock from the March 2011 offering. The fair value of these warrants on June 30, 2011 and March 16, 2011 was determined using a Black Scholes valuation model with the following level 3 inputs:

 

     June 30,
2011		     March 16,
2011		  

Risk-free interest rate

      1.57 %      1.87 % 

Expected life (in years)

      4.71        5.0   

Dividend yield

                     

Volatility

      93 %      89 % 

Stock price

    $ 1.67      $ 1.67   

 

On March 16, 2011, the Company determined the fair value of the March 2011 warrants to be $6.1 million and classified that amount of the net proceeds from the March 2011 offering to warrant liability. As of June 30, 2011, the fair value of the March 2011 warrants remained unchanged at $6.1 million.

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 June 30, 2011:

 

(in thousands)   

Fair Value as of

June 30,

      Basis of Fair Value Measurements  
   2011      Level 1      Level 2      Level 3  

Common stock warrants

    $ 15,689       $          $          $ 15,689   

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, 2010

    $ 7,499   

Issuance of common stock warrants related to March 2011 offering

      6,069   

Change in fair value of common stock warrants during six months ended June 30, 2011

      2,121   
  

 

 

  

Balance at June 30, 2011

    $ 15,689