11.

Stockholders’ Deficit

Common Stock Issuances

First Quarter 2014

During the quarter ended March 31, 2014, the Company issued in aggregate 238,496 shares of common stock in exchange for consulting services for which performance was complete. The fair value of the common stock recognized was $1.6 million.

On January 17, 2014, in connection with the four Cognate BioServices Agreements, the Company issued one-time initiation payments of 5,101,366 shares of common stock, subject to most favored nation treatment. The common stock is vesting over thirty six months from the closing date. Stock-based compensation expense related to Cognate BioServices with respect to these shares was $8.7 million for the year ended December 31, 2014. See Note 5 for more information.

During the quarter ended March 31, 2014, the Company issued in aggregate 32,000 shares of common stock for cash. The fair value of the common stock recognized was $0.2 million.

During the quarter ended March 31, 2014, the Company converted accounts payable due to Cognate BioServices of approximately $5.9 million into 1,481,644 shares, subject to most favored nation treatment. The Company recorded $2.8 million of inducement expense associated with the issuance of the common shares. In addition, the Company issued warrants that were valued at $2.5 million at the date of issuance related to the conversion of accounts payable. Total inducement charge was $5.3 million.

During the quarter ended March 31, 2014, the Company converted notes and relevant accrued interest of $0.2 million into approximately 0.07 million shares of common stock.

During the quarter ended March 31, 2014, the Company issued an aggregate of 721,827 shares of common stock from the exercise of warrants previously issued. The Company received proceeds of approximately $2.7 million from the exercise of these warrants.

During the quarter ended March 31, 2014, 1,444,788 redeemable shares with a carrying value of $8.9 million were no longer redeemable and were reclassified to stockholders’ equity.

During the quarter ended March 31, 2014, the Company issued an aggregate of 41,310 shares of common stock from the cashless exercise of warrants previously issued.

During the quarter ended March 31, 2014, the Company issued 20,833 shares of common stock to an individual investor. However the cash proceeds of $0.1 million was received in 2012.

Second Quarter 2014

On April 9, 2014, the Company entered into a Securities Purchase Agreement with a single institutional investor for the sale of 2,272,727 shares of common stock at a purchase price of $6.60 per share, for a total purchase price of $15.0 million. Additionally, for one year after the closing date, the investor had a non-transferable contractual over-allotment right to purchase up to 2,272,727 additional shares of common stock at a price per share of $7.50, for an additional subscription amount of up to $17.05 million. This over-allotment right was cancelled on October 9, 2014. See Note 12 for further explanation.

On June 30, 2014, the Company issued Cognate BioServices 562,500 shares of common stock and 281,250 warrants for proceeds of $2.3 million. The shares and warrants are subject to most favored nation treatment with respect to the terms (including in regards to warrants) provided to any other investors or creditors, including share issuances upon the exercise of previously issued derivative securities.

During the quarter ended June 30, 2014, the Company issued 200,000 shares of common stock to an individual investor at $7.00 per share. The total proceeds of $1.4 million were received by the Company during the first quarter in 2014, and were recorded as shares payable on the balance sheet as of March 31, 2014. The $1.4 million shares payable were re-classed to stockholders’ deficit during the second quarter in 2014.

During the quarter ended June 30, 2014, the Company issued 58,614 shares of common stock for cash to an individual investor for proceeds of $435,540.

During the quarter ended June 30, 2014, the Company issued 16,200 shares of common stock for $125,550 of cash.

During the quarter ended June 30, 2014, the Company issued an aggregate of 92,100 shares of common stock from the exercise of warrants previously issued. The Company received proceeds of $394,925 from the exercise of these warrants.

During the quarter ended June 30, 2014, the Company issued an aggregate of 12,533 shares of common stock from the cashless exercise of warrants previously issued.

During the quarter ended June 30, 2014, the Company issued an aggregate of 24,924 shares of common stock in exchange for consulting services. The fair value of the common stock recognized was $155,607.

During the quarter ended June 30, 2014, the Company converted accounts payable due to Cognate BioServices of approximately $2.9 million into 727,291 shares of common stock and 363,646 warrants, subject to most favored nation treatment. The Company recorded $1.4 million of inducement expense associated with the issuance of the common shares. In addition, as noted in Note 4 the Company issued warrants that were valued at $1.1 million at the date of issuance related to the conversion of accounts payable. Total inducement charge was $2.5 million.

Third Quarter 2014

During the quarter ended September 30, 2014, the Company entered into a Securities Purchase Agreement with an individual investor for the sale of 435,202 shares of restricted common stock at purchase price of $5.17 per share and 448,207 shares of restricted common stock at a purchase price of $5.02 per share, for aggregate proceeds of $4.5 million. Additionally, the Company also agreed to reset the expiration date of the investor’s 1,398,625 warrants to September 15, 2018. The modification of the warrants in connection with this transaction was accounted for as a component of equity.

During the quarter ended September 30, 2014, the Company issued an aggregate of 497,133 shares of common stock from the exercise of warrants previously issued. The Company received proceeds of $1.7 million from the exercise of these warrants.

During the quarter ended September 30, 2014, the Company converted accounts payable due to Cognate BioServices of approximately $7.9 million into 1,986,205 shares of common stock and 1.1 million warrants, subject to most favored nation treatment. The Company recorded $4.5 million of inducement expense associated with the issuance of the common shares. In addition, as noted in Note 4, the warrants were valued at $3.8 million at the date of issuance, resulting in a total inducement charge for the quarter of $8.3 million.

During the quarter ended September 30, 2014, the Company issued an aggregate of 14,519 shares of common stock in exchange for consulting services. The fair value of the common stock recognized was $94,999.

On August 12, 2014, the Company issued 3,013 common shares at a purchase price of $5.60 per share and 1,507 warrants to an individual investor. The proceeds of $15,000 were received by the Company in August 2012. Therefore the Company made a reclassification between additional paid-in-capital and common stock par value during the quarter ended September 30, 2014.

On September 19, 2014, the Company issued 49,107 shares of common stock at purchase price of $5.60 per share and 14,732 warrants to an individual investor. The proceeds of $275,000 were received by the Company in August 2012. Therefore the Company made a reclassification between additional paid-in-capital and common stock par value during the quarter ended September 30, 2014.

During the quarter ended September 30, 2014, the Company issued 52,120 shares of common stock to multiple investors. However the cash proceeds of $0.3 million was received in 2012.

Fourth Quarter 2014

On October 6, 2014, the Company entered into a Stock Purchase, Amendment and Issuance Agreement (the “Agreement”) with an existing single institutional investor for the sale of 2,272,727 shares of common stock at a purchase price of $5.05 per share, for a total purchase price of about $11.5 million. In the Agreement, the Company terminated the investor’s existing contractual over-allotment purchase right to purchase 2,272,727 shares of our common stock for $7.50 per share at any time prior to April 14, 2015, and agreed to issue the purchaser a warrant to purchase up 2,735,000 shares at an exercise price of $5.15 per share, exercisable commencing six months after issuance and with an exercise period of 30 months.

During the quarter ended December 31, 2014, the Company issued 109,868 shares of common stock to an individual investor as settlement of redemption of redeemable securities. The total settlement expense was $0.4 million and was recorded as inducement expense.

On November 17, 2014, the Company entered into a private offering of $25 million to purchase 4,317,789 shares of common stock of the Company, at a price of $5.79 per share (the closing price of the stock on November 14, 2014, the trading day prior to the sale of shares). The shares were purchased by C.F. Woodford Equity Income Fund of the UK. The Company agreed to file a registration statement within two weeks after the closing, and to use best efforts to complete the registration within sixty days thereafter. There were no warrants, overallotment rights, pre-emptive rights or other securities or rights entitling the investor to purchase or obtain additional shares.

During the quarter ended December 31, 2014, the Company entered into a service agreement with an agent for services provided on the UK mortgages. On November 19, 2014, the Company issued total 38,400 shares of common stock at fair value of $5.15 per share to the agent and related finders. Total amount of $197,376 was recorded as deferred financing cost and amortized though the Mortgage’s life.

First Quarter 2013

During the quarter ended March 31, 2013, the Company issued 235,593 shares of common stock to existing stockholders in connection with an agreement with the stockholders and a consultant providing for advisory services. The shares of common stock were valued at the closing price of the Company’s common stock on the date issued and amounted to approximately $0.9 million.

For the quarter ended March 31, 2013, the Company converted $0.9 million of notes payable into approximately 359,000 shares. The fair value of the common stock on the date of these transactions was approximately $2.60 per share.

Second Quarter 2013

During the quarter ended June 30, 2013, the Company issued a total of 178,504 shares of common stock to non-employees in exchange for services. The shares were fully vested and non-forfeitable on the date of issue and were therefore recorded as a charge to operations at their grant date fair value of $0.6 million.

In April 2013, the Company entered into an agreement with an institutional investor for $1.0 million in exchange for 281,690 shares of common stock at the closing market price of $3.55 per share.

In April 2013, the Company entered into an agreement with one healthcare-dedicated institutional investor for a registered direct placement of $10.0 million of common stock at $3.90 per share. The Company issued to the investor 2,564,103 shares of common stock and 1,025,641 common stock purchase warrants. The warrants have an exercise price of $4.29 per share and are exercisable beginning six months after closing, with a term of five years. The Company incurred offering costs amounting to $0.8 million in connection with this financing transaction. The warrants issued resulted in stockholders’ equity classification in accordance with the guidance contained in ASC 815-40-15-7D, "Contracts in Entity's Own Equity".

During the quarter ended June 30, 2013, the Company converted $0.9 million of notes payable into approximately 316,000 shares. The fair value of the common stock on the date of these transactions was approximately $2.90 per share.

During the quarter ended June 30, 2013, the Company issued an aggregate of 168,354 shares of common stock from the cashless exercise of warrants. The Company did not receive any proceeds from this cashless exercise.

Third Quarter 2013

During the quarter ended September 30, 2013, the Company issued an aggregate of 14,326 shares of common stock to non-employees in exchange for services. The shares were fully vested and non-forfeitable on their dates of issue and were therefore recorded as a charge to operations at their grant date fair values. The aggregate grant date fair value of these shares amounted to approximately $0.1 million.

During the third quarter of 2013, the Company entered into a series of extension agreements, with a counterparty owning 366,667 redeemable shares, to extend the redemption date to November 20, 2013. In connection with this extension, the Company issued 30,000 restricted shares at a fair value of $3.46 per share based on the publicly quoted price of the Company’s common stock and recorded a conversion inducement expense of approximately $0.1 million.

On August 8, 2013, the Company entered into a securities purchase agreement with institutional investors for the sale of an aggregate of $15.0 million of units in a registered direct offering. Each unit consists of one share of common stock, warrant to purchase 0.25 of a share of common stock and one over-allotment warrant to purchase 0.25 of a share of common stock. The Company issued to the investors 4,477,612 shares of common stock and long-term warrants exercisable for 1,119,403 shares of common stock, with an exercise price of $4.00 per share, exercisable six months after closing with a term of five years after they are first exercisable. The Company also issued to the investor’s over-allotment warrants exercisable for 1,119,403 shares of common stock, with an exercise price of $3.35 per share and exercisable immediately with a term of one year. The Company incurred offering costs amounting to $1.2 million in connection with this financing transaction. The warrants issued resulted in stockholders’ equity classification in accordance with the guidance contained in ASC 815-40-15-7D, "Contracts in Entity's Own Equity".

During the third quarter ended September 30, 2013, the Company converted $10.3 million of accounts payable to Cognate BioServices into approximately 2,902,072 shares and fifty percent warrant coverage, subject to most favored nation treatment. The fair value of the common stock on the date of these transactions was approximately $3.55 per share.

During the third quarter ended September 30, 2013, the Company converted $0.5 million of notes payable into approximately 184,600 shares. The fair value of the common stock on the date of these transactions was approximately $2.60 per share. The Company also issued 164,155 shares for notes payable that were converted in 2012.

Fourth Quarter 2013

During the quarter ended December 31, 2013 the Company issued in aggregate 141,330 shares of common stock in exchange for consulting services. The fair value of the common stock on the date of this transaction was approximately $0.7 million.

During the quarter ended December 31, 2013, the Company issued an aggregate of 733,104 restricted shares of common stock in exchange for the extension of the redemption period. The fair value of the restricted shares was $3.68 per share based on the publicly quoted price of the Company’s common stock and the Company recorded a conversion inducement expense of approximately $2.7 million.

During the fourth quarter of 2013, the Company redeemed 41,667 redeemable shares for $0.2 million. The common shares have not been cancelled as of December 31, 2014.

During the fourth quarter of 2013, 383,315 redeemable shares with a carrying value of $1.9 million were no longer redeemable and were reclassed to stockholders’ deficit.

During the quarter ended December 31, 2013, the Company issued an aggregate of 179,094 shares of common stock from the exercise of warrants previously issued. The Company received proceeds of approximately $0.6 million from the exercise of these warrants.

In November 2013, the Company entered into an underwriting agreement for a registered direct placement of $27.0 million of common stock at the closing market price of $4.80 per share. The Company issued 5,630,208 shares of common stock at $4.80 per share for gross proceeds of approximately $27.0 million. In connection with the offering, the Company issued warrants exercisable for 2,815,104 shares of common stock. The warrants have an exercise price of $6.00 per share and are exercisable beginning six months after closing, with a term of five years. The Company incurred offering costs amounting to $2.0 million in connection with this financing transaction. Net proceeds to the Company amounted to $25.0 million. The warrants have a five year term and the original exercise price was $6.00. The warrants contain “down round protection.” Accordingly, the Company allocated approximately $5.6 million of the proceeds received in this transaction to the warrant instruments, which have been recorded as a liability stated at fair value and. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company's statements of operations. The fair value of the warrants issued by the Company in connection with this transaction have been estimated using a Monte Carlo simulation (Note 4).

During the quarter ended December 31, 2013, the Company converted accounts payable to Cognate BioServices into approximately 1,818,000 shares, with fifty percent warrant coverage, subject to most favored nation treatment (including with respect to warrants). The Company also converted notes payable to Cognate into 150,000 shares. The fair value of the common stock on the date of these transactions was approximately $6.7 million and $0.5 million, respectively. The Company recorded $1.5 million of inducement expense related to the conversion of accounts payable.

During the quarter ended December 31, 2013, the Company converted $0.5 million of notes payable into 149,732 shares of common stock.

c. Stock Purchase Warrants

Stock Purchase Warrants

The following is a summary of warrant activity for the year ended December 31, 2013 and December 31, 2014:

	Number of		Weighted Average
	Warrants		Exercise Price
Outstanding as of December 31, 2012		12,086	$	6.18
January 2013, warrants issued in exchange for services		109		6.40
Expired in first quarter of 2013		(18)		15.45
Outstanding as of March 31, 2013		12,177		6.82
April 2013, warrants issued in connection with registered direct offering		1,026		4.29
April 2013, warrants issued to placement agent in connection with registered direct offering		128		4.29
Exercised on a cashless basis in second quarter of 2013		(168)		5.60
Expired in second quarter of 2013		(18)		12.00
Outstanding as of June 30, 2013		13,145		6.78
July 2013, warrants issued in connection with conversion of Cognate accounts payable		2,116		4.00
August 2013, warrants issued in connection with registered direct offering		2,239		4.00
September 2013, warrants issued for extension of redeemable securities		73		4.00
Expired in third quarter of 2013		(19)		12.00
Outstanding as of September 30, 2013		17,554		6.07
Warrants issued for service		74		5.00
October 2013, warrants issued in connection with registered direct offering*		2,815		6.00
September 2013, warrants issued for extension of redeemable securities		53		6.40
December 2013, warrants issued in connection with conversion of Cognate accounts payable*		240		4.00
Expired in fourth quarter of 2013		(441)		11.94
Exercised in fourth quarter of 2013		(179)		3.35
Outstanding as of December 31, 2013		20,116		5.23
Warrants issued in connection with conversion of Cognate accounts payable*		741		4.00
Warrants issued in exchange for services*		2,434		4.00
Warrants issued in connection with common stock issued		150		5.00
Warrants exercised on a cashless basis		(73)		-
Warrants exercised for cash		(722)		3.66
Expired in first quarter of 2014		(6)		9.54
Outstanding as of March 31, 2014		22,640		5.12
Warrants issued in connection with conversion of Cognate accounts payable*		364		4.00
Warrants issued to Cognate in connection with common stock issued for cash*		281		4.00
Warrants exercised for cash		(90)		4.25
Over-allotment rights issued in connection with registered direct offering		2,273		7.50
Warrants issued to placement agent in connection with registered direct offering		113		8.25
Outstanding as of June 30, 2014		25,581		5.32
Warrants issued in connection with conversion of Cognate accounts payable*		1,121		4.00
Warrants issued to Cognate for services*		2,326		4.00
Warrants issued for services		17		6.33
Warrants exercised for cash		(497)		3.48
Expired in third quarter of 2014		(1)		7.63
Adjustment related to prior issued warrants		415		6.44
Outstanding as of September 30, 2014 **		28,962		4.90
Warrants issued in connection with registered direct offering		2,735		5.15
Warrants canceled		(2,273)		7.50
Warrants adjustment for prior period		4		5.60
Expired and canceled in fourth quarter 2014		(43)		8.14
Outstanding as of December 31, 2014 **		29,385	$	4.72

*The warrants contain “down round protection” and the Company classifies these warrant instruments as liabilities at their fair value and adjusts the instruments to fair value at each reporting period.

** Approximately 14,261,000 warrants issued to Cognate BioServices, during the 7 years 2008 through 2014, with a weighted average exercise price and remaining contractual term of $4.00 and 3.8 years, respectively. The weighted average exercise price in part gives effect to adjustments related to the most favored nation clause that occurred during the period, based upon terms provided by the Company to other unrelated investors and creditors.