Note 11

Warrants:

The Company accounts for warrants that have provisions that protect holders from a decline in the issue price of its common stock (or "down-round" provisions) as liabilities instead of equity. Down-round provisions reduce the exercise or conversion price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise or conversion price of those instruments or issues new warrants or convertible instruments that have a lower exercise or conversion price. Net settlement provisions allow the holder of the warrant to surrender shares underlying the warrant equal to the exercise price as payment of its exercise price, instead of physically exercising the warrant by paying cash. The Company evaluated whether warrants to acquire its common stock contain provisions that protect holders from declines in the stock price or otherwise could result in modification of the exercise price and/or shares to be issued under the respective warrant agreements based on a variable that is not an input to the fair value of a "fixed-for-fixed" option. In connection with the Senior secured notes (see Note 9), the Company issued warrants to purchase 3,000,000 shares of common stock. These warrants were classified as liabilities and had an initial fair value of $2,958. See the table below for the assumptions used.

As approved by the stockholders on September 30, 2015, the Company modified the terms of warrants held by the investors that participated in the June 2015 Debentures in excess of $5 million, which included reducing the exercise price of such warrants to $0.75 and adding down-round price protection provisions. These warrants had previously been classified and recorded in stockholders' equity. As a result of the modification these warrants now meet the definition of a derivative. The fair value of these warrants as of September 30, 2015 was $5,399 and have been reclassified to a warrant liability. As a result of the modification, the Company recorded a deemed dividend related to these warrants of $2,962, which was determined as the difference between the fair value of these warrants immediately before the modification and immediately after. The Company used the binomial method to value the warrants. (See assumptions used in the table below.) The following is a listing of the warrants modified:

Issue date	# of warrants		Original Exercise Price		New Exercise Price

7/24/14 Series A		4,288,500	$	2.45	$	0.75
7/24/14 Series B		4,795,321	$	2.45	$	0.75

The Company recognizes such warrants as liabilities at the fair value on each reporting date. The Company measured the fair value of these warrants as of September 30, 2015, and recorded other expense of $1,329 resulting from the increase of the liability associated with the fair value of the warrants for the three month period and recorded other expense of $679 resulting from the increase of the liability associated with the fair value of the warrants for the nine months ended September 30, 2015, respectively. The Company measured the fair value of these warrants as of September 30, 2014, and recorded other income of $2,108 resulting from the decrease of the liability associated with the fair value of the warrants for the three month period and recorded other income of $7,151 resulting from the decrease of the liability associated with the fair value of the warrants for the nine months ended September 30, 2014, respectively. The Company computed the value of the warrants using the binomial method. A summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Company's warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of September 30, 2015 and December 31, 2014 is as follows:

	September 30, 2015	June 22, 2015	December 31, 2014
	(unaudited)	(unaudited)
Stock price	$ 1.14	$ 1.38	$ 1.20
Volatility	90.00%	90.00%	72.90 – 88.10%
Risk-free interest rate	0.02% - 1.30%	1.62%	1.65%
Expected dividend yield	0%	0%	0%
Expected warrant life	0.32 – 4.73 years	5 years	4.10 – 4.33 years

Recurring Level 3 Activity and Reconciliation

The table below provides a reconciliation of the beginning and ending balances for the liability measured at fair value using significant unobservable inputs (Level 3). The table reflects gains and losses for the nine months for all financial liabilities categorized as Level 3 as of September 30, 2015.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3):

Issuance Date	January 1, 2015		Initial Measurements		Increase (Decrease) in Fair Value			Reclassed from Equity		September 30, 2015

10/31/2013	$	233	$	-	$	309		$	-	$	542
2/5/2014		266		-		767			-		1,033
7/24/2014 Series A		-		-		-			3,452		3,452
7/24/2014 Series B		-		-		-			1,947		1,947
6/22/2015		-		2,958		(397	)		-		2,561

Total	$	499	$	2,958	$	679		$	5,399	$	9,535