6. 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, which was $7.4 million, and changes in estimated fair value will be recorded as non-cash income or expense in the Consolidated Statements of Operations at each subsequent period. At March 31, 2016, the fair value of the warrant liability was $11.1 million, which resulted in non-cash expense of $0.5 million for the three months ended March 31, 2016. At March 31, 2015, the fair value of the warrant liability was $10.9 million, which resulted in non-cash expense of $4.2 million for the three months ended March 31, 2015. In accordance with authoritative accounting guidance, the warrants were valued on the date of grant using the Black-Scholes valuation model. The assumptions used by the Company are summarized in the following table:

	March 31, 2016		December 31, 2015		Issuance Date
Closing stock price		$2.36		$2.29		$1.75
Expected dividends		0%		0%		0%
Expected volatility		90%		85%		95%
Risk free interest rate		0.96%		1.49%		1.39%
Expected life of warrant		3.54 years		3.79 years		5 years

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

Balance at December 31, 2015	$	10,567
Change in fair value of warrant liability		498
Balance at March 31, 2016	$	11,065

As of March 31, 2016, 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 March 31, 2016 were 311,834.

A summary of warrant activity for the Company for the three months ended March 31, 2016 and for the year ended December 31, 2015 is as follows:

	Number of Warrants		Weighted Average Exercise Price

Balance at December 31, 2014		7,974,794	$	1.80
Granted		-	$	-
Exercised		(2,448)	$	1.60
Forfeited		(63,447)	$	1.79
Balance at December 31, 2015		7,908,899	$	1.79
Granted		-	$	-
Exercised		-	$	-
Forfeited		(50,000)	$	3.75
Balance at March 31, 2016		7,858,899	$	1.77

A summary of all outstanding and exercisable warrants as of March 31, 2016 is as follows:

Exercise Price		Warrants Outstanding		Warrants Exercisable		Weighted Average Remaining Contractual Life
$	1.60		311,834		311,834	1.57 years
$	1.75		7,029,808		7,029,808	3.53 years
$	2.22		517,257		517,257	0.66 years

$	1.77		7,858,899		7,858,899	3.26 years