DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2014

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

12. DERIVATIVE INSTRUMENTS

Certain warrants issued to investors and the placement agent warrants in the fourth quarter of 2010 had provisions that included anti-dilution protection and, under certain conditions, granted the right to the holder to require the Company to repurchase the warrant. Accordingly through March 2013, these warrants were accounted for as derivative liabilities. The Company used the Black-Scholes option pricing model and assumptions that consider among other factors the fair value of the underlying stock, risk-free interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments. Changes in fair value of the derivative financial instruments are recognized in the Company’s consolidated statement of operations as a derivatives gain or loss. The warrant derivative gains (losses) are non-cash income (expenses) and for the three months ended March 31, 2013, a loss of $10,449,000 were included in other expense, net in the Company’s consolidated statements of operations. No such expenses were recorded for the three months ended March 31, 2014.

In the quarter ended March 31, 2013, $476,000 was reclassified from a derivative warrant liability to additional paid-in capital related to the exercise of the 2010 warrants. In May 2013, the Company called for the redemption of all the outstanding investor warrants issued in 2010 in accordance with the terms of those warrants and as a result, during the quarter ended June 30, 2013, a total of 11,726,343 warrants were exercised, providing cash proceeds of $15,984,304.There were no derivative instruments subsequent to June 30, 2013.