6. Stock Purchase Warrants

On November 18, 2016, the Company completed a public offering of 25 million shares of common stock with accompanying warrants to purchase an aggregate of 50 million shares of 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 $1.00. The shares of common stock were immediately separable from the warrants and were issued separately. The initial per share exercise price of the Series A warrants is $1.43 and the per share exercise price of the Series B warrants is $1.72, each subject to adjustment as specified in the Warrants. The Series A and Series B warrants may be exercised 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 are exercisable until December 31, 2017. 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, which was $15.7 million, 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, 2017, the fair value of the warrant liability was $6.6 million, which resulted in non-cash income of $2.0 million and $6.1 million for the three and six months ended June 30, 2017, respectively. In accordance with U.S. GAAP, the warrants were valued on the date of grant using a Monte Carlo simulation. The assumptions used by the Company are summarized in the following table:

	Series A									Series B
	June 30, 2017			December 31, 2016			Issuance Date			June 30, 2017			December 31, 2016			Issuance Date
Closing stock price	$	0.57		$	0.76		$	0.89		$	0.57		$	0.76		$	0.89
Expected dividends		0	%		0	%		0	%		0	%		0	%		0	%
Expected volatility		95	%		85	%		85	%		75	%		90	%		85	%
Risk free interest rate		1.62	%		1.67	%		1.58	%		1.14	%		0.85	%		0.81	%
Expected life of warrant (years)		3.4			3.9			4.0			0.5			1.0			1.1

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 are being recorded as non-cash income or expense in the Company’s condensed consolidated statement of operations at each subsequent period. At June 30, 2017, the fair value of the warrant liability was $1.0 million, which resulted in non-cash income of $0.2 million and $1.1 million for the three and six months ended June 30, 2017, respectively. At June 30, 2016, the fair value of the warrant liability was $7.6 million, which resulted in non-cash income of $3.5 million and $3.0 million for the three and six months ended June 30, 2016, respectively. In accordance with U.S. GAAP, the warrants were valued on the date of grant using the Black-Scholes valuation model which approximates the value derived using a Monte Carlo simulation. The assumptions used by the Company are summarized in the following table:

	June 30, 2017			December 31, 2016			Issuance Date
Closing stock price	$	0.57		$	0.76		$	1.75
Expected dividends		0	%		0	%		0	%
Expected volatility		0.90	%		95	%		95	%
Risk free interest rate		1.43	%		1.41	%		1.39	%
Expected life of warrant (years)		2.30			2.79			5.0

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

Balance at December 31, 2016	$	14,821
Change in fair value of warrant liability		(7,249	)
Balance at June 30, 2017	$	7,573

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 on October 25, 2017. Since these warrants were granted as part of an equity raise, the Company has treated them as a direct offering cost. Warrants outstanding as of June 30, 2017 were 311,834.

A summary of warrant activity for the Company for the six months ended June 30, 2017 and for the year ended December 31, 2016 is as follows:

	Number of Warrants			Weighted Average Exercise Price

Balance at December 31, 2015		7,908,899		$	1.79
Granted		50,000,000			1.58
Exercised		-			-
Forfeited		(567,257	)		2.35
Balance at December 31, 2016		57,341,642			1.60
Granted		-			-
Exercised		-			-
Forfeited		-			-
Balance at June 30, 2017		57,341,642		$	1.60

A summary of all outstanding and exercisable warrants as of June 30, 2017 is as follows:

Exercise Price		Warrants Outstanding		Warrants Exercisable		Weighted Average Remaining Contractual Life (years)
$	1.43		25,000,000		25,000,000	3.39
$	1.60		311,834		311,834	0.32
$	1.72		25,000,000		25,000,000	0.50
$	1.75		7,029,808		7,029,808	2.28
$	1.60		57,341,642		57,341,642	1.98