4. Warrants and Warrants Liability

The Company follows ASC 815-40, Contracts in an Entity’s Own Equity, as it relates to outstanding warrants. No warrants were exercised through March 31, 2014.

In connection with the December 2013 private placement of 72,007,000 shares of the Company's common stock at a price per share of $0.25, the Company issued an aggregate of warrants to purchase 4,320,420 shares of common stock at an exercise price of $0.25 per share to the placement agents. These warrants expire December 2018. These warrants contain provisions that protect holders from a decline in the issue price of the Company’s common stock (“down-round” provision) and contain net settlement provisions. Due to these provisions, the Company accounted for these warrants as liabilities instead of equity. The Company measured the fair value of these warrants on December 23, 2013 and recorded $1,442,000 as an investment fee.

In connection with the private placement of Series B Convertible Preferred Stock, which occurred through two closings on June 26, 2013 and July 15, 2013, respectively, the Company issued an aggregate of warrants to purchase 30,040,194 shares of common stock at an exercise price of $0.14 per share. These warrants expire June 2018. These warrants contain provisions that protect holders from a decline in the issue price of the Company’s common stock (“down-round” provision) and contain net settlement provisions. Due to these provisions, the Company accounted for these warrants as liabilities instead of equity. The Company measured the fair value of these warrants on June 26, 2013 and July 15, 2013 and recorded the initial liability as part of the private placement proceeds and expensed $757,000 for the warrants issued to the placement agent.

We estimate the fair values of these securities using a Black Scholes valuation model. The following warrants were issued in 2013 using the Black-Scholes valuation method with the key inputs as follows:

	June 26, 2013			July 15, 2013			December 23, 2013
Warrants Issued		28,394,834			1,645,360			4,320,420
Risk free interest rate		.0109			.0109			0.0167
Volatility		160.94	%		163.08	%		155.24	%
Expected term		5 years			5 years			5 years
Exercise price	$	0.14		$	0.14		$	0.25

From February through May 2013, in connection with the issuance of new convertible promissory notes, the Company issued warrants to purchase up to 7,030,387 shares of its common stock. These warrants expire February through May 2018 and are exercisable at a price of $0.14 per share. These warrants are considered to be equity.

On December 22, 2011, in connection with the Biocontrol business combination, the Company issued warrants to purchase up to 1,355,164 shares of its common stock. These warrants expire in December 2016 and are exercisable at a price of $0.46 per share. These warrants are considered to be equity.

The Company’s warrant liability is adjusted to fair value each reporting period and is influenced by several factors including the price of the Company’s common stock as of the balance sheet date. On March 31, 2014, the price per share of the Company’s common stock was $0.58 per share compared to $0.50 per share at December 31, 2013. There were no warrant liabilities as of March 31, 2013. The Company re-measured the fair value of the warrants liability and recorded $2,261,000 in total charges to record the liabilities associated with the warrants at their estimated fair value totaling $18,772,000 as of March 31, 2014.