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Convertible Preferred Stock and Stock Warrants | 9 Months Ended
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Sep. 30, 2012
Convertible Preferred Stock and Stock Warrants [Abstract] |
Convertible Preferred Stock and Stock Warrants | Note 12 — Convertible Preferred Stock and Stock Warrants On August 12, 2009, the Company sold 16,000 units (the “Units”), consisting of preferred stock and warrants for $1,000 per Unit. Each Unit consisted of one share of Series A cumulative convertible preferred stock (“Convertible Preferred Stock”), detachable warrants to purchase up to 155 common shares at an exercise price of $2.31 per share (“Exercisable Warrants”) and detachable contingent warrants to purchase up to 500 shares of common stock at an exercise price of $2.45 per share (“Contingent Warrants”). The gross proceeds from the issuance of the Units were allocated, based upon the respective fair values of the preferred stock and detachable warrants. At the date of the transaction, the Company recorded approximately 68% of the proceeds or $10.8 million (net of the discount recognized upon the allocation of proceeds to the detachable warrants) as preferred stock in stockholders’ equity. The fair value of the detachable warrants was independently assessed at $5.2 million and recorded as a warrant liability. Further, the Company determined the conversion option embedded within the preferred stock had intrinsic value beneficial to the holders of the preferred stock, accordingly, $5.2 million was recorded as a beneficial conversion discount with an offset to additional paid-in capital at the date of the transaction. The preferred stock conversion period was estimated to be 36 months based upon an independent evaluation of the conversion options. Preferred Stock Each share of Convertible Preferred Stock was convertible at any time, at the holder’s option, into 434.782 shares of the Company’s common stock. Dividends accrued at a rate of 15% of the liquidation preference per year and accumulated, if not paid quarterly. Subsequent to February 11, 2010, the Company had the ability to convert the preferred shares into common shares if the closing price of the common stock met certain price criteria. In the event any Convertible Preferred Stock was converted, the Company was obligated to pay an amount, in cash or common stock, equal to eight quarterly dividend payments less any dividends previously paid. During January and February 2011, the Company paid dividends on the then outstanding shares of Convertible Preferred Stock with shares of the Company’s common stock. The payment, at an annual rate of 15% of the liquidation preference, was valued at $300 per share. In February 2011, the Company exercised its contractual right to mandatorily convert all remaining outstanding shares of Convertible Preferred Stock into shares of common stock at the then prevailing conversion rate of 434.782 shares of common stock for each share of preferred stock. Stock Warrants Exercisable Warrants are exercisable upon issuance and expire August 12, 2014, if not exercised. Contingent Warrants became exercisable on November 9, 2009, and expire November 9, 2014, if not exercised. Prior to June 14, 2012, all warrants contained anti-dilution price protection in the event the Company issued shares of common stock or securities exercisable for, or convertible into, common stock at a price per share less than the respective warrants’ exercise price. In accordance with these contractual anti-dilution price adjustment provisions, the warrants were re-priced as a result of a payment of a portion of the Company’s initial and deferred commitment fees related to the Company’s Term Loan (See Note 8) with common stock on March 31, 2010 and September 30, 2010. Due to anti-dilution price adjustment provisions, warrants were deemed to be a liability and recorded at fair value at the date of issuance and were subsequently adjusted to fair value at the end of each reporting period while the anti-dilution price adjustment provisions remained in effect. On June 14, 2012, contractual provisions related to the Company’s Exercisable and Contingent Warrant agreements were amended to eliminate anti-dilution price adjustment provisions and removed cash settlement provisions in the event of a change of control. The amended warrants then met the requirements for classification as equity and accordingly, the Company revalued the warrants at June 14, 2012, the date of the amendment. The change in the fair value of the warrant liability compared to the most recent fair value adjustment realized on March 31, 2012 of $6.5 million was recognized as income and the revalued warrant liability of $14.0 million was reclassified from a liability to additional paid-in capital. No subsequent fair value adjustments are required as long as the warrants continue to fall within equity classification criteria. The Black-Scholes option-pricing model was used to estimate the fair value of the warrant liability for each reporting period prior to contractual amendment. Inputs into the fair value calculation of the warrants took into consideration the remaining term of the warrants, a volatility rate of 58.1%, a risk-free rate of return of 0.36%, and an assumed dividend rate of zero. At September 30, 2012, Exercisable and Contingent Warrants to purchase up to 1,675,250 shares of common stock at $1.21 per share remain outstanding.

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