The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the year ended December 31, 2014 (in thousands):

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 by Biozone in connection with equity financings in February 2012, August 2013, October 2013 and January 2014, which were assumed by the Company in connection with its merger with Biozone in January 2014.  As of December 31, 2014, 23,700,000 warrants are accounted for as liabilities and 2,969,000 warrants are accounted for as equity.  Warrants accounted for as liabilities are either potentially settleable in cash or not indexed to the Company’s own stock because they contain contingencies under which the Company could be forced to settle them for cash or because they contain potential adjustments to their exercise price.  As such, they  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 operations and comprehensive income (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 December 31, 2014:

The Company’s expected volatility is based on a combination of 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.

Subsequent to December 31, 2014, 12,689,000 warrants have been converted into 4,991,331 common shares using the warrants’ cashless exercise provision.