10. Common and Preferred Stock Warrants

In May 2010, the Company issued a warrant to purchase 45,000 shares of series A preferred stock at an exercise price of $1.00 per share (the “2010 SVB Warrant”) to a third party in connection with the Loan and Security Agreement (Note 6). The 2010 SVB Warrant was exercisable immediately and had a ten-year life. The 2010 SVB Warrant was initially valued at $38,000 using the Black-Scholes option-pricing model. The Company recorded a debt discount of $38,000 upon issuance of the 2010 SVB Warrant, which was being accreted as interest expense over the remaining term of the loan. The Company recorded interest expense of $0, $0 and $19,000 for the years ended December 31, 2014, 2013 and 2012, respectively. The offsetting credit to the debt discount was recorded as a warrant liability and was classified as a long-term liability in the accompanying balance sheets. The fair value of the 2010 SVB Warrant was re-measured at each reporting date or until it was converted using then-current assumptions. As of February 6, 2014, the date of the IPO, December 31, 2013 and 2012, the 2010 SVB Warrant was valued using the Black-Scholes option-pricing model at $53,000, $64,000 and $32,000, respectively. The following assumptions were used in valuing the 2010 SVB Warrant:


	February 6, 2014			December 31, 2013			December 31, 2012
Risk-free interest rate		2.45	%		2.45	%		1.26	%
Expected dividend yield		0.00	%		0.00	%		0.00	%
Expected term (in years)		6.31			6.41			7.41
Expected volatility		75.82	%		75.82	%		76.60	%

The changes in fair value of $(11,000), $32,000 and $6,000 were recorded as other (income) expense in the accompanying statement of operations and comprehensive loss for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, the warrant had been exercised in full.

On September 4, 2012, the Company issued a warrant to purchase 150,000 shares of series A preferred stock at an exercise price of $1.00 per share (the “2012 SVB Warrant”) in connection with the First Loan Modification Agreement (Note 6). The 2012 SVB Warrant was exercisable immediately and had a ten-year life. The 2012 SVB Warrant was initially valued at $97,000 using the Black-Scholes option-pricing model. The Company recorded a debt discount of $97,000 upon issuance of the 2012 SVB Warrant, which was being accreted as interest expense over the remaining term of the loan. The Company recorded interest expense of $22,000, $24,000 and $8,000 for the years ended December 31, 2014, 2013 and 2012, respectively. The offsetting credit to the debt discount was recorded as a warrant liability and was classified as a long-term liability in the accompanying balance sheets. The fair value of the 2012 SVB Warrant was re-measured at each reporting date or until it was converted using then-current assumptions. As of February 6, 2014, the date of the IPO, December 31, 2013 and 2012, the 2012 SVB Warrant was valued using the Black-Scholes option-pricing model at $194,000, $233,000 and $115,000, respectively. The following assumptions were used in valuing the 2012 Warrant:


	February 6, 2014			December 31, 2013			December 31, 2012			September 4, 2012
Risk-free interest rate		3.04	%		2.79	%		1.74	%		1.67	%
Expected dividend yield		0.00	%		0.00	%		0.00	%		0.00	%
Expected term (in years)		8.58			8.68			9.35			10
Expected volatility		77.90	%		77.90	%		74.00	%		76.92	%

The change in fair value of $(39,000), $118,000 and $18,000 was recorded as other (income) expense in the accompanying statement of operations for the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, the 2012 Warrant had been exercised in full.

On November 25, 2014, the Company issued a warrant to purchase 27,500 shares of common stock at an exercise price of $11.04 per share (the “2014 SVB Warrant) in connection with the Second Loan Modification Agreement (Note 6). The 2014 SVB Warrant is exercisable immediately and has a ten-year life. The 2014 SVB Warrant was initially valued at $254,000 using the Black-Scholes option-pricing model. The following assumptions were used in valuing the 2014 SVB Warrant:


	November 25, 2014
Risk-free interest rate		2.27	%
Expected dividend yield		0.00	%
Expected term (in years)		10
Expected volatility		79.28	%

On December 2, 2014, the Company issued 871,840 warrants to purchase shares of common stock at an exercise price of $15.00 per share (the “PIPE Warrants”) in connection with a private placement of common stock (Note 9). The PIPE Warrants are exercisable immediately and have a three-year life upon certain events, the Company is required to settle the PIPE Warrants for cash. As a result, the Company has classified the warrants as a liability.

The Company allocated $3.0 million to the PIPE Warrants with the residual proceeds allocated to the common stock. The fair value of the PIPE Warrants was determined using the Black-Scholes option pricing model. The fair value of the PIPE Warrants is re-measured at each reporting date using then-current assumptions With changes in fair value charged to other income (expense) on the statement of operations and comprehensive loss. As of December 31, 2014, the PIPE Warrants were valued using the Black-Scholes option-pricing model at $3.2 million. The following assumptions were used in valuing the PIPE Warrants:


	December 31, 2014			December 2, 2014
Risk-free interest rate		1.10	%		0.96	%
Expected dividend yield		0.00	%		0.00	%
Expected term (in years)		2.92			3.00
Expected volatility		56.79	%		57.28	%

The change in fair value of $173,000 was recorded as other (income) expense in the accompanying statement of operations for the year ended December 31, 2014. As of December 31, 2014, none of the PIPE Warrants had been exercised.