6. WARRANTS

The Company has periodically issued warrants in connection with certain common stock offerings. The warrants issued in January 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.

The outstanding warrants classified as liabilities are recorded on the unaudited condensed consolidated balance sheets and are adjusted to fair value at each financial reporting period, with changes in the fair value being recorded as “Loss on change in warrant valuation” in the unaudited condensed consolidated statements of operations and comprehensive loss. Fair value is determined using the Black-Scholes-Merton option-pricing model, which requires the use of significant judgment and estimates for the inputs used in the model.

The following table reflects the assumptions for each of the periods indicated:


	As of June 30, 2014	As of December 31, 2013
Risk-free interest rate (1)	Less than 0.1%	0.1%
Expected dividend yield (2)	0%	0%
Expected lives (3)	0.1 – 0.2 years	0.6 – 0.7 years
Expected volatility (4)	48.2 – 62.1%	95.5%
Shares underlying warrants classified as liabilities	501,494	791,508
Market value of stock at beginning of the period	$20.37	$25.80
Market value of stock at end of the period	$29.79	$20.37

(1)	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 valuation date.

(2)	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.

(3)	The expected lives are based on the remaining contractual lives of the related warrants at the valuation date.

(4)	The expected volatility is estimated using implied volatility in exchange-traded options associated with the Company’s common stock.

The amounts estimated according to the Black-Scholes-Merton option-pricing model may not be indicative of the actual values realized upon the exercise of these warrants by the holders.

The following table summarizes the reconciliation of the change in value of the Company’s liability classified warrants for each of the periods indicated:


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
	(in thousands)
Balance at beginning of the period	$	9,213		$	91,077		$	9,006		$	65,193
Increase in value of warrants		3,784			1,945			7,035			28,851
Reclassification to stockholders’ equity upon exercise of warrants		(3,171	)		(13,906	)		(6,215	)		(14,928	)

Balance at end of the period	$	9,826		$	79,116		$	9,826		$	79,116

The following table summarizes the Company’s warrant activity for each of the periods indicated:


	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2014					2013					2014					2013
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Warrants outstanding at beginning of the period		633,740		$	9.92		3,093,676		$	8.49		791,508		$	10.50		3,127,618		$	8.48
Exercised		(132,246	)		8.87		(464,753	)		8.94		(290,014	)		9.80		(498,695	)		8.89

Warrants outstanding at end of the period		501,494		$	10.20		2,628,923		$	8.41		501,494		$	10.20		2,628,923		$	8.41


Warrants exercisable at end of the period		501,494		$	10.20		2,628,923		$	8.41		501,494		$	10.20		2,628,923		$	8.41

The following table summarizes the Company’s warrants outstanding at June 30, 2014:


Issue Date	Exercise Price		Outstanding Warrants		Expiration Date
1/30/2009	$	6.96		65,325		7/30/2014
8/25/2009	$	10.68		436,169		8/31/2014