5. Stock Warrants

On October 15, 2018, the Company closed its underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company and sold an aggregate of (i) 2,520,000 Class A Units (the “Class A Units”), with each Class A Unit consisting of one share of the Common Stock, and one five-year warrant to purchase one share of Common Stock at an exercise price of $1.38 per share (each a “Warrant” and collectively, the “Warrants”), with each Class A Unit to be offered to the public at a public offering price of $1.15, and (ii) 15,723 Class B Units (the “Class B Units”, and together with the Class A Units, the “Units”), with each Class B Unit offered to the public at a public offering price of $1,000 per Class B Unit and consisting of one share of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $1,000 and convertible into shares of Common Stock at the stated value divided by a conversion price of $1.15 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 13,672,173 shares of Common Stock, and issued with an aggregate of 13,672,173 Warrants . In addition, pursuant to the underwriting agreement that the Company had entered into with A.G.P./Alliance Global Partners (the “Underwriters”), as representative of the underwriters, the Company granted the Underwriters a 45 day option (the “Over-allotment Option”) to purchase up to an additional 2,428,825 shares of Common Stock and/or additional Warrants to purchase an additional 2,428,825 shares of Common Stock. The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 1,807,826 shares of Common Stock.

The Warrants are immediately exercisable at a price of $1.38 per share of Common Stock (which is 120% of the public offering price of the Class A Units) and expire on October 15, 2023. If, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised through a cashless exercise. No fractional shares of Common Stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied by the fair market value of any such fractional shares. The Company has concluded that the Warrants are required to be equity classified. The Warrants were valued on the date of grant using Monte Carlo simulations.

The assumptions used by the Company are summarized in the following table:


	Issuance
	Date
Closing stock price	$	0.88
Expected dividends		0	%
Expected volatility		90	%
Risk free interest rate		3.01	%
Expected life of warrant (years)		5.00

On November 18, 2016, the Company completed a public offering of 714,286 shares of Common Stock in combination with accompanying warrants to purchase an aggregate of 1,428,571 shares of the Common Stock. The stock and warrants were sold in combination, with two warrants for each share of Common Stock sold, a Series A warrant and a Series B warrant, each representing the right to purchase one share of Common Stock. The purchase price for each share of Common Stock and accompanying warrants was $35.00. The shares of Common Stock were immediately separable from the warrants and were issued separately. The per share exercise price of the Series A warrants is $50.05 and the per share exercise price of the Series B warrants is $60.20, each subject to adjustment as specified in the warrant agreements. The Series A and Series B warrants were each exercisable at any time on or after the date of issuance. The Series A warrants are exercisable until the four-year anniversary of the issuance date. The Series B warrants expired December 31, 2017 and none were exercised prior to expiration. The warrants include a provision that if the Company were to enter into a certain transaction, as defined in the agreement, the warrants would be purchased from the holder for cash. Accordingly, the Company recorded the warrants as a liability at their estimated fair value on the issuance date of $15.7 million and changes in estimated fair value are being recorded as non-cash income or expense in the Company’s Condensed Consolidated Statements of Operations at each subsequent period. At September 30, 2019, the fair value of the warrant liability was $100. At September 30, 2018, the fair value of the warrant liability was $19,000, which resulted in non-cash income of $605,000 and $3.6 million for the three and nine months ended September 30, 2018, respectively. The warrants were valued on the date of grant and on each remeasurement period using Monte Carlo simulations.

The assumptions used by the Company are summarized in the following table:


	Series A
	December 31,			November 18,
	2018			2016
Closing stock price	$	0.56		$	31.15
Expected dividends		0	%		0	%
Expected volatility		92.5	%		85	%
Risk free interest rate		2.50	%		1.58	%
Expected life of warrant		1.9 years			4.0 years

On October 10, 2014, the Company raised net proceeds of $19.1 million through the sale of 14,059,616 units at a price of $1.47 per unit to certain institutional investors in a registered direct offering. Each unit consisted of one share of the Common Stock and a warrant to purchase 0.50 shares of Common Stock. The warrants, exercisable for an aggregate of 200,852 shares of Common Stock, have an exercise price of $61.25 per share and a life of five years. The warrants vested immediately and expired on October 10, 2019.

The warrants issued in conjunction with the registered direct offering in October 2014 included a provision that if the Company were to enter into a certain transaction, as defined in the agreement, the warrants would be purchased from the holder at a premium. Accordingly, the Company recorded the warrants as a liability at their estimated fair value on the issuance date, which was $7.4 million, and changes in estimated fair value are being recorded as non-cash income or expense in the Company’s Consolidated Statements of Operations at each subsequent period. At September 30, 2019, the fair value of the warrant liability was zero. At September 30, 2018, the fair value of the warrant liability was $200, which resulted in non-cash income of $21,000 and $415,000 for the three and nine months ended September 30, 2018, respectively. The warrants were valued on the date of grant using the Black-Scholes valuation model which approximates the value derived using Monte Carlo simulations. The assumptions used by the Company are summarized in the following table:


	December 31,			October 10,
	2018			2014
Closing stock price	$	0.56		$	61.25
Expected dividends		0	%		0	%
Expected volatility		110	%		95	%
Risk free interest rate		2.60	%		1.39	%
Expected life of warrant		.79	years		5.0	years

The following table summarizes the estimated fair value of the warrant liability (in thousands):


Balance at December 31, 2017	$	4,083
Change in fair value of warrant liability		(4,083)
Balance at December 31, 2018		—
Change in fair value of warrant liability		—
Balance at September 30, 2019	$	—

A summary of all warrant activity for the Company for the nine months ended September 30, 2019 and the year ended December 31, 2018 is as follows:


	Number of	Weighted Average
	Warrants	Exercise Price

Balance at December 31, 2017	915,138	$	52.50
Granted	18,000,713		1.38
Exercised	—		—
Forfeited	—		—
Balance at December 31, 2018	18,915,851		3.85
Granted	—		—
Exercised	—		—
Forfeited	—		—
Balance at September 30, 2019	18,915,851	$	3.85

On December 26, 2017, the Company entered into a consulting agreement for advisory services for a period of six months. As compensation for such services, the consultant was paid an upfront payment, is paid a monthly fee, and on January 24, 2018 was issued a warrant exercisable for 714 shares of the Common Stock on the date of issuance. The warrant is equity classified and the fair value of the warrant approximated $9,000 on the date of grant and was measured using the Black-Scholes option pricing model. This entire expense was recorded in the quarter ended March 31, 2018.

The assumptions used by the Company are summarized in the following table:


	Issuance
	Date
Closing stock price	$	18.55
Expected dividends		0	%
Expected volatility		85	%
Risk free interest rate		2.42	%
Expected life of warrant (years)		4.92

A summary of all outstanding and exercisable warrants as of September 30, 2019 is as follows:


				Weighted Average
		Warrants	Warrants	Remaining
Exercise Price		Outstanding	Exercisable	Contractual Life
$	1.38	17,999,999	17,999,999	4.04 years
	18.20	714	714	3.24 years
	50.05	714,286	714,286	1.14 years
	61.25	200,852	200,852	0.03 years
$	3.85	18,915,851	18,915,851	3.88 years