12. WARRANTS

The warrants issued in the Private Placement and the Placement Agent Warrants (as described in Note 13) are considered freestanding instruments that are contingently redeemable and classified as liabilities on the Company’s condensed consolidated balance sheet for the period ended June 30, 2016. The warrants became exercisable to purchase common stock after the Company obtained the Requisite Stockholder Approval on June 16, 2016. Upon the closing of the Private Placement on April 14, 2016, the Company recorded an estimated fair value of $3.3 million relating to warrants to purchase 1,975,580 shares of common stock that were issued in the Private Placement. The warrants were comprised of warrants to purchase 1,775,580 shares of common stock that were issued to certain accredited investors measured at an estimated fair value of $3.0 million, and placement agent warrants to purchase 200,000 shares of common stock measured at an estimated fair value of $0.3 million. The placement agent warrants were issued for services performed by placement agents as part of the Private Placement and were treated as equity issuance costs. The warrants became exercisable upon the Company obtaining the Requisite Stockholder Approval on June 16, 2016. The Placement Agent Warrants had an estimated fair value of $0.3 million and were recorded in stockholders’ equity on the Company’s condensed consolidated balance sheets to offset the Private Placement proceeds allocated to the Series A Preferred and common stock.

Additional warrants were issued on June 15, 2016 to the Majority Shareholders upon the closing of the Subsequent Financing (as described in Note 13). The warrants issued in the Subsequent Financing were also considered freestanding instruments being accounted for using the same methodology as described above. On June 15, 2016, the Company recorded an estimated fair value of $1.7 million for warrants to purchase an aggregate of 1,002,507 shares of common stock issued in the Subsequent Financing.

The Company utilized the Monte Carlo simulation model to estimate the fair value of the warrants issued in the Private Placement and Subsequent Financing, and the Placement Agent Warrants. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. These variables include expected term of the warrants, the volatility of the Company’s and its peers’ stock prices over such expected term, and the risk-free interest rate for the expected term of the warrants. The variables used in this simulation model are reviewed on a quarterly basis and adjusted, as needed. If the Company issues common stock at a price lower than the exercise price or issues stock options or other securities (other than securities issued pursuant to the Company’s stock or option plans or employment agreements, securities issued or issuable upon exercise or exchange of convertible securities outstanding as of the date of the warrants were issued or securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company) with an exercise price that is lower than the current exercise price of the warrants, the exercise price of the warrants shall be adjusted to equal to such lower price.

The total estimated fair value of the warrant liability was $4.9 million following the closings of the Private Placement and Subsequent Financing. The warrant liability was remeasured at June 30, 2016, and the remeasurement was recorded in change in estimated fair value of common stock warrant liability on the Company’s condensed consolidated statements of operations. For each of the three and six months ended June 30, 2016, the change in the estimated fair value of the warrant liability was $3.2 million. As of June 30, 2016, the total estimated fair value of the warrant liability was $8.1 million on the Company’s condensed consolidated balance sheets.

As of June 30, 2016, outstanding warrants to purchase Common Stock were:

	Original Term	Exercise Price		Number of Shares Underlying Warrants
Original issue date:
July 2006	10 years	$	31.72		17,656
November 2006	10 years	$	31.72		1,576
February 2008	10 years	$	35.07		22,792
August 2009	10 years	$	21.78		33,472
July 2010	9 years	$	21.78		6,694
December 2010	7 years	$	21.78		17,215
August 2012	7 years	$	21.78		167,182
January 2015	5 years	$	6.96		34,483
April 2016 (a)	7 years	$	4.98		1,775,580
April 2016 (b)	5 years	$	3.99		200,000
June 2016 (c)	7 years	$	4.98		1,002,507
					3,279,157

(a)	Issued on April 14, 2016 in connection with Private Placement to certain accredited investors.

(b)	Issued on April 14, 2016 in connection with Private Placement to placement agents.

(c)	Issued on June 15, 2016 in connection with the Subsequent Financing.