STOCKHOLDERS' DEFICIT

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' DEFICIT

9. STOCKHOLDERS’ DEFICIT

Warrants - At September 30, 2013, there were warrants to purchase up to 4,129,827 shares of the Company’s common stock outstanding at a weighted average exercise price of $3.10.

In September 2013, the Company issued to a financial advisor common stock warrants to purchase up to 2,125,000 shares of the Company’s common stock, at an exercise price of $1.00 per share. These warrants expire in February 2019. The estimated fair value was computed using the Black-Scholes option pricing model with the following assumptions: an expected term of 5.5 years; a risk-free interest rate of 1.55%; a dividend yield of zero; and expected volatility of 70%. A portion of the warrant’s estimated fair value of $0.4 million was charged to general and administrative expenses during the quarter ended September 30, 2013 at which time one-third of the warrants became exercisable and non-forfeitable, in accordance with Accounting Standards Codification (“ASC”) 505-50 “Equity-Based Payments to Non-Employees.”

In September 2013, the Company issued warrants to purchase 24,359 shares of common stock as a result of anti-dilution adjustments triggered by the issuances of shares of common stock and warrants. The value at the date of issuance of $552 was recorded to reflect these additional warrants.

In October 2013, the holder of the 2013 Term Loan agreed that contingent upon the closing of an offering of at least $6.0 million to convert the 2013 Term Loan into the Company’s common stock on the same terms as such shares are sold to other investors in the offering. In exchange for this recapitalization, upon such closing, the Company will issue to the holder of the 2013 Term Loan warrants to purchase 150,000 shares of the Company’s common stock at an exercise price equal to the higher of $1.00 per share or the price paid by the other investors in an offering.

Stock options - At September 30, 2013, there were outstanding options to purchase 3,412,000 shares of the Company’s common stock at a weighted average exercise price of $1.40. In September 2013, the Board of Directors granted to its employees, officers, directors, and a consultant of the Company a total of 2,759,500 stock options under the Company’s 2010 Long-Term Equity Incentive Plan and the Company’s 2012 Stock Option and Incentive Plan, reducing the total number of shares available for issuance upon the grant or exercise of awards to 859,721. The estimated fair value was computed using the Black-Scholes option pricing model with the following assumptions: an expected term of 6.5 years; a risk-free interest rate of 1.86%; a dividend yield of zero; and expected volatility of 70%.