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Stockholders' Equity
 6 Months Ended
Jun. 30, 2014
Stockholders' Equity

Note 10. Stockholders’ Equity

Common Stock and Associated Warrant Liability

In August 2009, the Company issued warrants to purchase 2.4 million shares of common stock, exercisable at an exercise price of $2.90 per share (“2009 Warrants”). The 2009 Warrants are exercisable for a period of five years from the issue date.

In November 2010, the Company received net proceeds of approximately $19.7 million, after deducting underwriting discounts and commissions and stock issuance costs of approximately $1.3 million, from an underwritten public offering of 7.4 million units. Each unit sold consisted of one share of common stock and a warrant to purchase 1/2 of a share of common stock. Each unit was sold for $2.85, resulting in the issuance of 7.4 million shares of common stock and warrants to purchase 3.7 million shares of common stock, exercisable at an exercise price of $3.20 per share. The warrants issued in November 2010 (“2010 Warrants”) became exercisable on May 15, 2011, and are exercisable for a period of five years from the issue date.

 

The fair value of the 2009 Warrants and 2010 Warrants was recorded on the condensed consolidated balance sheets as a liability pursuant to “Accounting for Derivative Instruments and Hedging Activities” and “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” Topics of ASC and are adjusted to fair value at each financial reporting date thereafter until the earlier of exercise or modification to remove the provisions which require the warrants to be treated as a liability, at which time, these warrants would be reclassified into stockholders’ equity. The Company classified the 2009 Warrants and 2010 Warrants as a liability as these warrants contain certain provisions that, under certain circumstances, which may be out of the Company’s control, could require the Company to pay cash to settle the exercise of the warrants or may require the Company to redeem the warrants.

The fair value of the warrants at June 30, 2014 and December 31, 2013, consisted of the following (in thousands):

 

     June 30,      December 31,  
     2014      2013  

2009 Warrants

    $ 3,018       $ 8,542   

2010 Warrants

      4,635         11,848   
  

 

 

     

 

 

  

Total warrant liability

    $ 7,653       $ 20,390   
  

 

 

     

 

 

  

The fair value of the Company’s warrants was based option valuation models and using the following assumptions at June 30, 2014 and December 31, 2013:

 

     June 30,      December 31,  
     2014      2013  

2009 Warrants:

      

Expected term (in years)

      0.15              0.65        

Estimated volatility

      49%          45%    

Risk-free interest rate

      0.04%          0.10%    

Expected dividend yield

      0%          0%    

2010 Warrants:

      

Expected term (in years)

      1.36              1.86        

Estimated volatility

      49%          41%    

Risk-free interest rate

      0.11%          0.38%    

Expected dividend yield

      0%          0%    

For the three months ended June 30, 2014 and 2013, the Company recorded non-cash gains of $3.5 million and of $0.7 million, respectively, on its condensed consolidated statements of operations within non-operating expense, net, due to the changes in fair value of the warrants. For the six months ended June 30, 2014 and 2013, the Company recorded non-cash gains of $12.5 million and losses of $4.4 million, respectively, on its condensed consolidated statements of operations within non-operating expense, net, due to the changes in fair value of the warrants. Significant changes to the Company’s market price for its common stock will impact the implied and/or historical volatility used to fair value the warrants. Any significant increases in the Company’s stock price will likely create an increase to the fair value of the warrant liability. Similarly, any significant decreases in the Company’s stock price will likely create a decrease to the fair value of the warrant liability. During the three and six months ended June 30, 2014, warrants to purchase 157,894 shares of common stock were exercised from the outstanding 2010 Warrants. In 2013, warrants to purchase 186,586 shares of common stock were issued upon exercise of outstanding 2010 Warrants. As of June 30, 2014, 2.4 million of the 2009 warrants were outstanding and 3.3 million of the 2010 warrants were outstanding.

Sales Agreement

On March 21, 2014, the Company entered into Amendment No. 1 to the Controlled Equity OfferingSM Sales Agreement, dated August 31, 2012 (as amended, the “Amended Cantor Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) that provides for the issuance and sale of shares of its common stock over the term of the Amended Cantor Agreement having an aggregate offering price of up to $70.0 million through Cantor. Under the Amended Cantor Agreement, Cantor also acts as the Company’s sales agent and receives compensation based on an aggregate of 2% of the gross proceeds on the sale price per share of its common stock. The issuance and sale of these shares by the Company pursuant to the Amended Cantor Agreement are deemed an “at-the-market” offering and are registered under the Securities Act. During the year ended December 31, 2013, approximately 5.4 million shares of the Company’s common stock were sold under the Amended Cantor Agreement for aggregate net proceeds of $23.5 million. During the six months ended June 30, 2014, 0.9 million shares of the Company’s common stock were sold under the Amended Cantor Agreement for aggregate net proceeds of $3.9 million. At June 30, 2014, the Company had approximately $37.6 million of common stock available to be sold under the Amended Cantor Agreement.

 

Public Offering of Common Stock

The Company completed a public offering of common stock on March 19, 2013. As a result of this offering, the Company issued approximately 8.3 million shares of its common stock at $4.20 per share. The Company provided the underwriters an overallotment of an additional approximately 1.3 million shares of its common stock, which was fully subscribed. Combined gross proceeds for the offering were approximately $40.3 million. Net proceeds to the Company were approximately $38.0 million after the underwriters’ discount of approximately $1.8 million and offering costs of approximately $0.5 million.

Stockholder Rights Plan

In October 2009, the Company’s Board of Directors adopted an amendment to its 1999 stockholder rights plan, commonly referred to as a “poison pill,” to reduce the exercise price, extend the expiration date and revise certain definitions under the plan. The stockholder rights plan is intended to deter hostile or coercive attempts to acquire the Company. The stockholder rights plan enables stockholders to acquire shares of the Company’s common stock, or the common stock of an acquirer, at a substantial discount to the public market price should any person or group acquire more than 15% of the Company’s common stock without the approval of the Board of Directors under certain circumstances. The Company has designated 250,000 shares of Series C Junior Participating preferred stock for issuance in connection with the stockholder rights plan.