Quarterly report pursuant to Section 13 or 15(d)

Warrants

v2.4.0.8
Warrants
6 Months Ended
Jun. 30, 2014
Notes to Financial Statements  
Warrants

The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2014 (in thousands):

 

    January 2012 warrants     February 2012 warrants     June 2013 warrants     June 2013 warrants     August 2013 warrants     October 2013 warrants     Series A warrants     January 2014 warrants     Total  
                                                       
Outstanding, January 1, 2014     -       -       -       -       -       -       -       -       -  
Warrants acquired in merger     650       1,000       455       1,864       10,000       200       7,000       -       21,169  
Warrants issued     -       -       -       -       -       -       -       5,500       5,500  
Outstanding, June 30, 2014     650       1,000       455       1,864       10,000       200       7,000       5,500       26,669  

 

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 issued in connection with equity financings in February 2012, August 2013, October 2013 and January 2014.  These warrants are potentially settleable in cash and were determined not to be indexed to the Company’s own stock and are therefore accounted for as liabilities.

 

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 consolidated statement of comprehensive income (loss) as other income (expense). The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of June 30, 2014:

 

    February 2012 warrants     August 2013 warrants     October 2013 warrants     October 2013 warrants     January 2014 warrants  
                               
Strike price   $ 0.60     $ 0.40     $ 0.50     $ 0.50     $ 0.50  
                                         
Expected term (years)     1.6       9.1       4.3       9.3       9.5  
Cumulative volatility %     67 %     105 %     82 %     105 %     105 %
Risk-free rate %     0.35 %     2.42 %     1.36 %     2.44 %     2.47 %

 

The Company’s expected volatility is based on a combination of implied volatilities of similar publicly traded entities given that the Company has limited history of its own observable stock price. 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 balance sheet date. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

 

Warrants classified as equity

 

Warrants other than those in the above table were recorded in equity at fair value upon issuance, and are not reported as liabilities on the balance sheet.