Warrants

The Company accounts for common stock warrants as equity instruments, derivative liabilities, or liabilities, depending on the specific terms of the warrant agreement. See Note 3 for further details on accounting policies related to the Company's stock warrants.

In connection with various financing transactions, the Company has issued warrants to purchase the Company’s common stock. In September 2016, the Company issued warrants to purchase 18,087,500 shares of its common stock for an exercise price of $1.50 per share to investors in connection with a private placement of convertible debt securities as more fully discussed in Note 7. The warrants are exercisable at any time beginning six months after issuance through five years after issuance. The Company classified these warrants as liabilities based on the guidance in ASC 480, as the warrants contain a provision that could result in the Company’s redemption of the warrants outside its control for cash equal to the value of the warrants calculated using a Black-Scholes option pricing model. As of December 31, 2016 and 2015, all of the Company’s outstanding common stock warrants were classified as either derivative liabilities or liabilities.

Liability-classified Warrants

The following table summarizes outstanding liability-classified warrants to purchase common stock as of:



	Number of Warrants
	December 31, 2016	December 31, 2015	Exercise Price		Expiration Dates
Issued in March 2010 financing	—	319,789	$	6.25	Mar 2016
Issued in June 2011 financing	—	6,113	$	22.50	Jun 2016
Issued in August 2011 financing	—	565,759	$	18.75	Aug 2016
Issued to placement agents in August 2011 financing	—	50,123	$	13.635	Aug 2016
Issued in Series B and D Preferred Stock offerings	—	1,970,594	$	6.250	Jul 2016 - Dec 2016
Issued in Series E Preferred Stock offering ⁽¹⁾	214,288	60,000	$	0.70	Dec 2017
Issued with June 2012 Convertible Notes	1,125,578	1,125,578	$	2.50	Jun 2018
Issued in Series E Preferred Stock offering	1,568,823	1,568,823	$	7.50	Dec 2018
Issued with September 2016 Convertible Notes	18,087,500	—	$	1.50	Sep 2021
Total	20,996,189	5,666,779


(1)	As a result of the anti-dilution provisions contained in the warrants, the exercise price for warrants issued in connection with the Company’s Series E Preferred Stock offering was decreased from $2.50 per warrant share to $0.70 and the number of warrant shares was increased by 154,288 during 2016.

The table below is a summary of the Company's warrant activity for the year ended December 31, 2016.



	Number of warrants		Weighted average exercise price
Outstanding at December 31, 2015	5,666,779		$	7.14
Issued	18,087,500		1.50
Adjustments ⁽¹⁾	154,288		0.70
Exercised	—		—
Expired	(2,912,378	)	8.84
Outstanding at December 31, 2016	20,996,189		$	1.99


(1)	See footnote 1 in table above.

Accounting for Liability-classified Warrants

The foregoing warrants are recorded as liabilities at their estimated fair value at the date of issuance, with subsequent changes in estimated fair value recorded in warrant revaluation income in the Company’s Consolidated Statement of Operations in each subsequent period. The change in estimated fair value of the Company's warrant liability for the years ended December 31, 2016 and 2015 resulted in non-cash income of $11.9 million and $2.9 million, respectively. Additionally, the warrants are classified as either current or non-current on the Company's Consolidated Balance Sheet based on their contractual expiration date. The Company utilizes the Monte Carlo simulation valuation method to value its liability-classified warrants.

Assumptions Used in Determining Fair Value of Warrants

The estimated fair value of warrants is determined using Level 2 and Level 3 inputs which is further discussed in Note 10. Inherent in the Monte Carlo simulation valuation method are the following assumptions:

Volatility. The Company estimates stock price volatility based on the Company’s historical stock price performance over a period of time that matches the volume-weighted average expected remaining life of the warrants.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve in effect at the valuation date commensurate with the expected remaining life assumption.

Expected remaining life. The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

Dividend rate. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.

Scenarios. The probability of complex features of the warrants being triggered is subjective (no observable inputs or available market data) and based on internal and external information known to management at the valuation date.

The following table summarizes the calculated aggregate fair values, along with the assumptions utilized in each calculation:



($ in thousands, except per share data)	December 31, 2016			December 31, 2015
Calculated aggregate value	$	6,034		$	8,275
Weighted average exercise price per share	$	1.99		$	7.14
Closing price per share of common stock	$	0.63		$	4.55
Volatility	85.6		%	85.2		%
Weighted average remaining expected life	4 years, 3 months			1 year, 8 months
Risk-free interest rate	1.75		%	0.98		%
Dividend yield	—			—