Quarterly report pursuant to Section 13 or 15(d)

Warrants

Warrants

3 Months Ended

Mar. 31, 2017

Note 4 – Warrants

The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the three months ended March 31, 2017 and 2016 (in thousands):

	Warrants accounted for as:								Warrants accounted for as:
	Equity								Liabilities
	January 2012 warrants			March 2013 warrants			April 2013 warrants		February 2012 warrants			October 2013 Series A warrants		January 2014 warrants		Total

Outstanding, December 31, 2015		650			455			1,500		1,000			775		4,000		8,380

Warrants expired		(650	)		(455	)		-		(889	)		-		-		(1,994	)
Warrants exercised		-			-			-		(111	)		-		-		(111	)

Outstanding, March 31, 2016		-			-			1,500		-			775		4,000		6,275
Outstanding, March 31, 2017		-			-			1,500		-			775		4,000		6,275
Expiration date		January 11, 2016			March 1, 2016			April 25, 2018		February 28, 2016			October 24, 2023		January 16, 2024

Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants.

Warrants classified as liabilities

Liability-classified warrants consist of warrants issued in connection with equity financings in February 2012, August 2013, October 2013 and January 2014. The remaining warrants issued in February 2012 expired during the first quarter of 2016 and all of the August 2013 warrants have been exercised as of December 31, 2016. The remaining outstanding warrants are potentially settleable in cash and were determined not to be indexed to the Company’s own stock and are therefore accounted for as liabilities.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of comprehensive loss as changes in fair value of derivative liabilities. The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of March 31, 2017:

	October 2013 warrants			January 2014 warrants

Strike price	$	0.50		$	0.50
Expected term (years)		6.57			6.8
Cumulative volatility %		91.4	%		91.5	%
Risk-free rate %		2.27	%		2.29	%

The Company’s expected volatility is based on a combination of the Company’s own historical volatility and the implied volatilities of similar publicly traded entities given that the Company has limited history of its own observable stock price. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the balance sheet date. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends.

Warrants classified as equity

Warrants that were recorded in equity at fair value upon issuance, and are not reported as liabilities on the balance sheet, are included in the above table which shows all warrants.