Derivative Warrant Liability

12 Months Ended

Dec. 31, 2015

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Warrant Liability

7. Derivative Warrant Liability

In December 2013, the Company sold 1,420,250 shares of the Company’s common stock and warrants to purchase an additional 1,420,250 shares of the Company’s common stock (the “2013 Warrants”). In August 2014, the Company sold 2,000,000 shares of common stock and warrants to purchase an additional 1,000,000 shares of common stock (the “2014 Warrants”). In February 2015, the Company sold 2,216,667 shares of the Company’s common stock, Series A warrants to purchase an additional 2,216,667 shares of the Company’s common stock (the “Series A Warrants”), and Series B warrants to purchase an additional 2,216,667 shares of the Company’s common stock (the “Series B Warrants”). In May 2015, the Company sold 4,300,000 shares of the Company’s common stock and Series C warrants to purchase an additional 430,000 shares of the Company’s common stock (the “Series C Warrants”).  In December 2015, we issued 10,050,000 units of common stock shares and warrants.  The Series A units included 2,050,000 common shares and Series D warrants.  The Series B units included Series D warrants to purchase 8,000,000 shares of common stock (the “Series D Warrants”) and Series E Warrants to purchase 8,000,000 shares of common stock (the “Series E Warrants”, together with the Series A Warrants, the Series B Warrants, and the Series C Warrants, the “2015 Warrants”).      

	Issuance Date	Expiration Date	Exercise Price		Shares Underlying Warrants on Issuance Date		Shares Issued upon Warrant Exercises as of December 31, 2015			Shares Underlying Warrants Outstanding as of December 31, 2015
2013 Warrants	12/16/2013	12/16/2018	$	7.53		1,420,250		(304,774	)		1,115,476
2014 Warrants	8/5/2014	8/5/2019	$	5.13		1,000,000		(610,771	)		389,229
2015 Series A Warrants	2/3/2015	2/3/2020	$	1.00		2,216,667		(321,670	)		1,894,997
2015 Series B Warrants	2/3/2015	8/3/2015		-		2,216,667		(1,935,901	)		-
2015 Series C Warrants	5/19/2015	5/19/2020	$	3.60		430,000		-			430,000
2015 Series D Warrants	12/11/2015	12/11/2020	$	1.40		10,050,000		-			10,050,000
2015 Series E Warrants	12/11/2015	12/11/2016	$	0.01(1)		8,000,000		(1,471,000	)		6,529,000
						25,333,584		(4,644,116	)		20,408,702

(1) The exercise price is $1.00 with $0.99 prepaid.

The agreements governing the above warrants include the following terms:

· the warrants have exercise prices which are subject to adjustment for certain events, including the issuance of stock dividends on the Company’s common stock and, in certain instances, the issuance of the Company’s common stock or instruments  convertible into the Company’s common stock at a price per share less than the exercise price of the respective warrants;

· warrant holders may exercise the warrants through a cashless exercise if, and only if, the Company does not have an effective registration statement then available for the issuance of the shares of its common stock. If an effective registration statement is available for the issuance of its common stock, a holder may only exercise the warrants through a cash exercise;

· the exercise price and the number and type of securities purchasable upon exercise of  the warrants are subject to adjustment upon certain corporate events, including certain combinations, consolidations, liquidations, mergers, recapitalizations, reclassifications, reorganizations, stock dividends and stock splits, a sale of all or substantially all of the Company’s assets and certain other events; and

· in the event of an extraordinary transaction (as defined in the respective warrant agreements), generally including any merger with or into another entity, sale of all or substantially all of the Company’s assets, tender offer or exchange offer, or reclassification of its common stock, in which the successor entity (as defined in the respective warrant agreements) that assumes the warrant is not a publicly traded company, the Company or any successor entity will pay the warrant holder, at such holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the extraordinary transaction, an amount of cash equal to the value of such holder’s warrants as determined in accordance with the Black Scholes option pricing model and the terms of the respective warrant agreement.

· Additionally, the agreement governing the Series B Warrants included the following additional term(s):

if, commencing on the 30th day after the Series B Warrants are issued and continuing through the expiration date of the Series B Warrants, the adjusted market price (as defined in the warrant agreement governing the terms of the Series B Warrants) of a share of the Company’s common stock was less than $3.00 (as adjusted for stock splits, stock dividends, recapitalization and other similar events), then the holders of the Series B Warrants could have exercised the Series B Warrants in a cashless exercise. This cashless exercise provision would have, subject to certain limitations set forth in the warrant agreement, permitted holders of such Series B Warrants to obtain a number of shares of the Company’s common stock equal to 100% of (i) the aggregate dollar amount of Series B Warrants being exercised divided by the market price less (ii) the number of shares into which such Series B Warrants would then be exercised on a cash basis.  The Series B Warrants expired on August 3, 2015.

· Additionally, the Series E warrants do not contain any anti-dilution protection that applies to the other warrants as described above.

Based on these terms, the Company has determined that the 2013 Warrants, the 2014 Warrants, and the 2015 Warrants (together, the “Warrants”) qualify as derivatives and, as such, are presented as a derivative warrant liability on the consolidated balance sheets and recorded at fair value each reporting period. The fair value of the Warrants was estimated to be $10.5 million and $3.1 million as of December 31, 2015 and December 31, 2014, respectively. The increase in the estimated fair value of the Warrants represents an unrealized loss which has been recorded as a loss from the change in fair value of derivative warrant liability in the consolidated statements of operations.

During the twelve months ended December 31, 2015, Common Stock was issued as a result of exercise of Warrants as described below:

	Twelve Months Ended December 31, 2015
	Common Stock Issued		Proceeds (1)
2013 Warrants		304,774	$	1,057,010
2014 Warrants		610,771		2,204,540
2015 Series A Warrants		321,670		1,302,750
2015 Series B Warrants		1,935,901		5,586,564
2015 Series C Warrants		-		-
2015 Series D Warrants		-		-
2015 Series E Warrants		1,471,000		14,710
		4,644,116	$	10,165,573

(1) Proceeds received from exercise of Warrants are net of inducement payments.

In May 2015, certain holders of the 2013 Warrants agreed to exercise some or all of their 2013 Warrants for cash, at the then-current exercise price of $15.30 per share. As an inducement to exercise the 2013 Warrants, the Company agreed to pay each such holder a cash inducement fee in an amount equal to $11.55 for each share of common stock issued upon such exercise, which resulted in net proceeds to the Company of $3.75 per share. In addition, certain holders of the 2014 Warrants agreed to exercise some or all of their 2014 Warrants for cash, at the then-current exercise price of $9.60 per share. As an inducement to exercise the 2014 Warrants, the Company agreed to pay each such holder a cash inducement fee in an amount equal to $5.85 for each share of common stock issued upon such exercise, which resulted in net proceeds to the Company of $3.75 per share. The Company received aggregate proceeds, net of inducement fees, of approximately $3.3 million from the exercises of the 2013 Warrants and 2014 Warrants described above.