Note 12—Warrants

The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are accounted for as a derivative in accordance with Financial Accounting Standards Board Accounting Standard Codification (ASC) 815, Derivatives and Hedging (ASC 815) if the stock warrants contain “down-round protection” and therefore, do not meet the scope exception for treatment as a derivative. Since “down-round protection” is not an input into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception as outlined under ASC 815. The Company will continue to classify the fair value of the warrants that contain “down-round protection” as a liability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability. From January 1, 2012 through September 30, 2012, the Company utilized the Monte Carlo simulation valuation method to value the liability classified warrants. Beginning October 1, 2012, the Company concluded that the Black-Scholes option pricing model was an appropriate valuation method due to the assumption that no future financing would be expected at a price lower than the current exercise price and the majority of the warrants were converted to equity-classified warrants on October 9, 2012.

The following table summarizes outstanding warrants to purchase common stock as of September 30, 2013 and December 31, 2012:


	Number of Warrants
Liability-classified warrants	As of September 30, 2013		As of December 31, 2012		Exercise Price		Expiration Dates
Issued in Series B Preferred Stock offering		1,320		1,320	$	2.50		Jul. – Nov. 2015
Issued in Series D Preferred Stock offering		14,800		39,800	$	2.50		Dec. 2015 – Mar. 2016
Issued in Series E Preferred Stock offering		60,000		120,000	$	2.50		May – June 2017

Subtotal		76,120		161,120


Equity-classified warrants
Issued in June 2011 equity financing		6,113		6,113	$	22.50		June 2016
Issued in March 2010 and Preferred Stock offerings		4,209,357		4,209,357	$	6.25 – 7.50		Oct. 2015 – June 2018
Issued with Convertible Notes		1,125,578		1,125,578	$	2.50		June 2018
Issued to placement agents in August 2011 equity financing		50,123		50,123	$	13.75		August 2016
Issued in August 2011 equity financing		565,759		579,759	$	18.75		August 2016

Subtotal		5,956,930		5,970,930

Total		6,033,050		6,132,050

There were 75,000 and 85,000 warrants exercised for the three and nine months ended September 30, 2013, respectively.

Liability-classified Warrants

The following table summarizes the calculated aggregate fair values as of the dates indicated along with the assumptions utilized in the Black-Scholes option pricing model for each calculation.


	September 30, 2013			December 31, 2012
Calculated aggregate value (in thousands)	$	205		$	374
Exercise price per share of warrant	$	2.50		$	2.50
Closing price per share of common stock	$	4.38		$	3.75
Volatility		68	%		70	%
Expected term (years)		3.4			4.0
Risk-free interest rate		0.8	%		0.6	%
Dividend yield		—	%		—	%