8. WARRANTS

The Company has periodically issued warrants in connection with certain common stock offerings. The warrants issued in December 2007, January 2009 and August 2009 are classified as liabilities as opposed to equity due to their settlement terms which require settlement in registered shares. These warrants are non-cash liabilities and the Company is not required to expend any cash to settle these liabilities. All other warrants issued by the Company were recorded as additional paid-in-capital and no further adjustments are made.

The warrants classified as liabilities are recorded at fair value on the balance sheet and are adjusted to fair value at each financial reporting period, with changes in the fair value being recorded as “Gain (loss) on change in warrant valuation” in the statement of operations and comprehensive loss. The fair value is determined using the Black-Scholes option-pricing model, which requires the use of significant judgment and estimates for the inputs used in the model. The following reflects the weighted-average assumptions for each of the periods indicated:


	Year Ended December 31,
	2012			2011			2010
Risk-free interest rate		0.2% - 0.3	%		0.1% - 0.4	%		0.6% - 1.0	%
Expected dividend yield		0	%		0	%		0	%
Expected lives		1.1 - 1.6 years			1.0 - 2.7 years			2.0 - 3.7 years
Expected volatility		139.2% - 164.1	%		71.8% - 75.6	%		84.7% - 90.1	%
Warrants classified as liabilities		3,127,618			4,824,827			4,901,591
Market value of stock at beginning of year	$	4.50		$	12.72		$	8.76
Market value of stock at end of year	$	25.80		$	4.50		$	12.72

The risk-free interest rate is estimated using an average of U.S. Treasury bill interest rates that correlate to the prevailing interest rates at the time of the valuation date. The expected dividend yield is zero as the Company has not paid any dividends to date and does not expect to pay dividends prior to the expiration of the warrants. The expected lives are based on the remaining contractual lives of the related warrants at the valuation date. The expected volatility is estimated using historical volatility of the Company’s common stock, over a period commensurate with the remaining contractual lives, taking into account factors such as future events or circumstances that could impact volatility. The amounts estimated according to the Black-Scholes option pricing model may not be indicative of the actual values realized upon the exercise of these warrants by the holders.

A reconciliation of the change in value of the Company’s warrants recorded as liabilities for the years ended December 31, 2012, 2011 and 2010 is as follows:


	For the Year Ended December 31,
	2012			2011			2010
	(in thousands)
Balance at beginning of year	$	5,446		$	39,111		$	27,609
Change in value of warrants		91,938			(33,022	)		11,502
Reclassification to shareholders’ equity upon exercise of warrants		(32,191	)		(643	)		0
Issuances		0			0			0

Balance at end of year	$	65,193		$	5,446		$	39,111

All other warrants issued by the Company other than the warrants issued in connection with its December 2007, January 2009 and August 2009 financings are classified as equity; the fair value of the warrants was recorded as additional paid-in capital and no further adjustments were made.

A summary of the Company’s warrant activity with respect to 2012, 2011 and 2010 is as follows:


	For the Year Ended December 31,
	2012					2011					2010
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Warrants outstanding at beginning of year		4,867,477		$	9.54		4,944,241		$	9.48		5,388,833		$	20.40
Granted		0			0		0			0		0			0
Exercised		(1,739,859	)		11.81		(76,764	)		8.34		(51,333	)		10.68
Expired		0			0		0			0		(393,259	)		159.00

Warrants outstanding at end of year		3,127,618		$	8.48		4,867,477		$	9.54		4,944,241		$	9.48

Exercisable at end of year		3,127,618		$	8.48		4,867,477		$	9.54		4,944,241		$	9.48

The following table summarizes information about warrants outstanding at December 31, 2012.


Issue Date	Exercise Price		Outstanding Warrants at December 31, 2012		Expiration Date		Weighted Average Remaining Contractual Life (Years)		Exercisable Warrants
1/30/2009	$	6.96		1,842,551		7/30/2014		1.6		1,842,551
1/30/2009	$	8.70		3,912		1/30/2014		1.1		3,912
8/25/2009	$	10.68		1,281,155		8/31/2014		1.7		1,281,155

				3,127,618						3,127,618