DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2015

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

12.DERIVATIVE INSTRUMENTS

The warrants issued in connection with the Company’s May 2014 public offering have anti-dilution protection provisions that allow for the reduction in the exercise price of the warrants if the Company subsequently issues equity securities, including common stock or any security convertible or exchangeable for shares of common stock, for no consideration or for consideration less than the exercise price of the warrants. Accordingly, these warrants are accounted for as derivative liabilities. The Company used the Black-Scholes option pricing model and assumptions that consider, among other factors, the fair value of the underlying stock, risk-free interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments. Changes in fair value of the derivative financial instruments are recognized in the Company’s consolidated statement of operations as a derivative gain or loss. The warrant derivative gains (losses) are non-cash income (expenses); and for the six months ended June 30, 2015 and 2014 a gain (loss) of $(14,940) and $1,127, respectively, were included in other income (expense) in the Company’s consolidated statement of operations.

	June 30, 2015
Risk-free interest rate	1.27	%
Expected dividend yield	0.00	%
Expected term (in years)	3.86
Expected volatility	115.31	%

The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying Common Stock for each reporting period.

Changes in the derivative warrant liability for the six months ended June 30 are as follows (in thousands):

	Six Months Ended June 30,
	2015			2014
Balance at December 31,	$	7,224		$	—
Fair value of warrants issued	—			6,848
Reduction in derivative liability due to exercise and modification of warrants	(14,442		)	—
Increase (decrease) in the fair value of warrants	14,940			(1,127		)
Balance at June 30,	$	7,722		$	5,721