Stock Purchase Warrants

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 Company’s common stock and a warrant to purchase 0.5 shares of common stock. The warrants, exercisable for an aggregate of 7,029,808 shares of common stock, have an exercise price of $1.75 per share and a life of five years. The warrants vested immediately and expire October 10, 2019.

The warrants issued in conjunction with the registered direct offering in October 2014 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 at a premium. Accordingly, the Company recorded the warrants as a liability at their estimated fair value on the issuance date and changes in estimated fair value will be recorded as non-cash income or expense in the Company’s statement of operations at each subsequent period. At June 30, 2015, the fair value of the warrant liability was $14.8 million, which represented non-cash expense of $3.9 million and $8.1 million for the three months and six months ended June 30, 2015, respectively. In accordance with authoritative accounting guidance, the warrant was valued on the date of grant and in subsequent periods using the Black-Scholes valuation model. The assumptions used by the Company are summarized in the following table:

	June 30,			March 31,			December 31,			Issuance
	2015			2015			2014			Date
Closing stock price	$	2.85		$	2.19		$	1.46		$	1.75
Expected dividends		0	%		0	%		0	%		0	%
Expected volatility		90	%		90	%		90	%		95	%
Risk free interest rate		1.41	%		1.26	%		1.59	%		1.39	%
Expected life of warrant		4.30 years			4.55 years			4.79 years			5 years

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

Balance at December 31, 2014	$	6,756
Change in fair value of warrant liability		8,047
Balance at June 30, 2015	$	14,803

As of June 30, 2015, all of the warrants remained outstanding.

On October 25, 2012, the Company entered into a Common Stock Purchase Agreement with certain accredited investors. As part of this agreement, the Company issued warrants to purchase 635,855 shares of common stock to the placement agent, or its permitted assigns. The warrants have an exercise price of $1.60 and a life of five years. The warrants vested immediately and expire October 25, 2017. Since these warrants were granted as part of an equity raise, the Company has treated them as a direct offering cost. The result of the transaction has no affect to equity. Warrants outstanding as of June 30, 2015 were 316,522.

A summary of warrant activity for the Company for the six months ended June 30, 2015 and for the year ended December 31, 2014 is as follows:

		Weighted Average
	Number of Warrants	Exercise Price
Balance at December 31, 2013	1,632,501	$	1.99
Granted	7,029,808	$	1.75
Exercised	(232,619)	$	1.47
Forfeited	(454,896)	$	1.88
Balance at December 31, 2014	7,974,794	$	1.80
Granted	-	$	-
Exercised	-	$	-
Forfeited	(61,207)	$	3.30
Balance at June 30, 2015	7,913,587	$	1.79

A summary of all outstanding and exercisable warrants as of June 30, 2015 is as follows:

				Weighted Average
Exercise		Warrants	Warrants	Remaining	Aggregate
Price		Outstanding	Exercisable	Contractual Life	Intrinsic Value
$	1.60	316,522	316,522	2.32 years	$	396,000
$	1.75	7,029.808	7,029,808	4.28 years	$	7,732,000
$	2.22	517,257	517,257	1.41 years	$	326,000
$	3.75	50,000	50,000	0.63 years	$	-
$	1.79	7,913,587	7,913,587	3.99 years	$	8,454,000