Warrants
The following is a summary of warrant activity for the years ended December 31, 2013 and 2012 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| September 2013 Warrants | | December 2012 Warrants | | April 2011 Warrants | | March 2011 Warrants | | March 2010 Warrants | | August 2009 Warrants | | Consultant and Oxford Warrants | | Total |
Outstanding, January 1, 2012 | — |
| | — |
| | 9,470 |
| | 2,400 |
| | 540 |
| | 978 |
| | 733 |
| | 14,121 |
|
Granted | — |
| | 7,578 |
| | — |
| | — |
| | — |
| | — |
| | 400 |
| | 7,978 |
|
Exercised | — |
| | — |
| | (6,624 | ) | | (2,039 | ) | | (180 | ) | | — |
| | (40 | ) | | (8,883 | ) |
Outstanding, December 31, 2012 | — |
| | 7,578 |
| | 2,846 |
| | 361 |
| | 360 |
| | 978 |
| | 1,093 |
| | 13,216 |
|
Granted | 7,044 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 182 |
| | 7,226 |
|
Exercised | (602 | ) | | (2,661 | ) | | (1,688 | ) | | (185 | ) | | (70 | ) | | — |
| | (196 | ) | | (5,402 | ) |
Expired | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (190 | ) | | (190 | ) |
Outstanding, December 31, 2013 | 6,442 |
| | 4,917 |
| | 1,158 |
| | 176 |
| | 290 |
| | 978 |
| | 889 |
| | 14,850 |
|
Expiration | September 2018 | | December 2017 | | April 2017 | | March 2016 | | March 2016 | | August 2014 | | Varies 2014-2020 | | |
Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants.
Warrants classified as liabilities
Liability-classified warrants consist of warrants to purchase common stock issued in connection with equity financings in September 2013, December 2012, April 2011, March 2011, March 2010 and August 2009. These warrants are potentially settleable in cash and were determined not to be indexed to our common stock.
The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the condensed consolidated statement of comprehensive loss as other income (expense). The fair value of the warrants is estimated using an appropriate pricing model with the following inputs:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2013 |
| September 2013 Warrants | | December 2012 Warrants | | April 2011 Warrants | | March 2011 Warrants | | March 2010 Warrants | | August 2009 Warrants |
Strike price | $ | 2.50 |
| | $ | 1.90 |
| | $ | 0.65 |
| | $ | 0.65 |
| | $ | 2.15 |
| | $ | 4.50 |
|
Expected term (years) | 4.72 |
| | 3.98 |
| | 3.31 |
| | 2.18 |
| | 2.24 |
| | 0.59 |
|
Volatility % | 71.97 | % | | 71.38 | % | | 71.71 | % | | 73.45 | % | | 73.36 | % | | 66.85 | % |
Risk-free rate % | 1.61 | % | | 1.25 | % | | 0.93 | % | | 0.45 | % | | 0.47 | % | | 0.11 | % |
|
| | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2012 |
| September 2013 Warrants | | December 2012 Warrants | | April 2011 Warrants | | March 2011 Warrants | | March 2010 Warrants | | August 2009 Warrants |
Strike price | — |
| | $ | 1.90 |
| | $ | 0.65 |
| | $ | 0.65 |
| | $ | 2.18 |
| | $ | 4.50 |
|
Expected term (years) | 0.00 |
| | 4.98 |
| | 4.30 |
| | 3.18 |
| | 3.24 |
| | 1.59 |
|
Volatility % | — |
| | 80.93 | % | | 82.48 | % | | 69.90 | % | | 69.79 | % | | 74.13 | % |
Risk-free rate % | — |
| | 0.72 | % | | 0.59 | % | | 0.39 | % | | 0.40 | % | | 0.21 | % |
The company’s expected volatility is based on a combination of implied volatilities of similar publicly traded entities. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero, because the company has no present intention to pay cash dividends.
The changes in fair value of the warrant liability for the years ended December 31, 2013 and 2012 were as follows (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 2013 Warrants | | December 2012 Warrants | | April 2011 Warrants | | March 2011 Warrants | | March 2010 Warrants | | August 2009 Warrants | | Total |
Warrant liability, January 1, 2012 | $ | — |
| | $ | — |
| | $ | 3,145 |
| | $ | 421 |
| | $ | 116 |
| | $ | 64 |
| | $ | 3,746 |
|
Fair value of warrants granted | — |
| | 7,286 |
| | — |
| | — |
| | — |
| | — |
| | 7,286 |
|
Fair value of warrants exercised | — |
| | — |
| | (8,130 | ) | | (2,456 | ) | | (257 | ) | | — |
| | (10,843 | ) |
Change in fair value of warrants | — |
| | (332 | ) | | 8,295 |
| | 2,413 |
| | 328 |
| | 71 |
| | 10,775 |
|
Warrant liability, December 31, 2012 | — |
| | 6,954 |
| | 3,310 |
| | 378 |
| | 187 |
| | 135 |
| | 10,964 |
|
Fair value of warrants granted | 8,238 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 8,238 |
|
Fair value of warrants exercised | (1,931 | ) | | (8,482 | ) | | (3,455 | ) | | (260 | ) | | (121 | ) | | — |
| | (14,249 | ) |
Change in fair value of warrants | 16,643 |
| | 19,588 |
| | 5,214 |
| | 645 |
| | 879 |
| | 1,043 |
| | 44,012 |
|
Warrant liability, December 31, 2013 | $ | 22,950 |
| | $ | 18,060 |
| | $ | 5,069 |
| | $ | 763 |
| | $ | 945 |
| | $ | 1,178 |
| | $ | 48,965 |
|
Warrants classified as equity
Equity-classified warrants consist of warrants issued in connection with consulting services provided to us. Additionally, on May 8, 2013 as a part of our Loan financing, we granted Oxford Financial LLC warrants to purchase 182,186 shares of common stock at an exercise price of $2.47, which equaled to the 20-day average market price of our common stock prior to the date of the grant. The warrants were valued using the Black Scholes model. The fair value assumptions for the grant included a volatility of 75.34%, expected term of seven years, risk free rate of 1.20%, and a dividend rate of 0.00%. The fair value of the warrants granted was $1.93 per share. These warrants are recorded in equity at fair value upon issuance, and not as liabilities, and are not subject to adjustment to fair value in subsequent reporting periods.
