7.	Stock Purchase Warrants

In connection with the issuance of long-term debt and convertible notes, the Company granted and/or sold warrants to purchase 6,388,431 and 2,979,345 shares of convertible preferred stock as of September 30, 2013 and December 31, 2012, respectively. All warrants become automatically exercisable to common stock upon a qualified initial public offering or the conversion of the related convertible preferred stock (Note 11).

The Company recognizes all of its warrants with in its balance sheet as liabilities. The liability is revalued at each reporting period and changes in the fair value of the warrant liability are included as a component of Other income (expense), net. The initial recognition and subsequent changes in fair value of the warrant liability have no effect on the Company’s cash flows.

Key assumptions utilized in the fair value calculation as of September 30, 2013 and December 31, 2012 appear in the table below.


	SEPTEMBER 30, 2013	DECEMBER 31, 2012

Expected term (years)	5.39–6.91	6.13–7.66
Volatility	65.00%	60.00%
Risk-free interest rate	1.51%–2.00%	0.98%–1.31%
Dividend yield	0%	0%

For the three months and nine months ended September 30, 2013, the Company recorded $3.5 million and $3.8 million in Other income (expense), net, respectively, to reflect the change in fair value. For the three months and nine months ended September 30, 2012, the Company recorded $788,000 and $441,000 in Other income (expense), net, respectively, to reflect the change in fair value.