Quarterly report pursuant to Section 13 or 15(d)

Warrant Liability

v2.4.0.8
Warrant Liability
 6 Months Ended
Jun. 30, 2014
Warrant Liability [Abstract]  
Warrant Liability
7. Warrant Liability

The common stock purchase warrants issued to the underwriters in the Company's IPO in March 2013 have certain cash settlement features that require them to be recorded as liability instruments. At issuance, a portion of the proceeds from the IPO were allocated to the value of the warrant and recorded as an offering cost, reducing the proceeds from the IPO. Accordingly, as a liability, the warrant obligations are adjusted to fair value at the end of each reporting period with the change in value reported in the statement of operations. Such fair values were estimated using the Black-Scholes option pricing model. The Company will continue to adjust the warrant liability for changes in fair value until the earlier of the exercise, at which time the liability will be reclassified to stockholders' equity, or expiration of the warrants.

 
The warrant liability was valued using the Black-Scholes option pricing model and the following assumptions on the following dates:
 
   
June 30,
2014
    
December 31,
2013
  
Strike price
   $ 10.00     $ 10.00  
Market price
   $ 4.07     $ 4.61  
Expected life
  
4.68 years
    
5.17 years
  
Risk-free interest rate
     1.62 %     0.86 %
Dividend yield
     0.00 %     0.00 %
Volatility
     43 %     39 %
Warrants outstanding
     131,250       131,250  
Fair value of warrants
   $ 71,689     $ 85,221  

The fair value of the warrant liability decreased to $71,689 at June 30, 2014 from $85,221 at December 31, 2013. Accordingly, the Company decreased the warrant liability by $13,532 to reflect the change in the fair value of the warrant instruments for the six month ended June 30, 2014, which is included in the accompanying condensed statements of comprehensive loss. The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis:

Beginning balance
  
$
(85,221
)
Decrease in net value of warrant liability
    
13,532
  
Ending balance
  
$
(71,689
)