NOTE 8—STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

On October 29, 2010, the Company entered into an at market issuance sales agreement, as amended, or the prior sales agreement, with MLV & Co., LLC, formerly McNicoll, Lewis & Vlak LLC (“MLV”), pursuant to which the Company was able to issue and sell shares of its common stock having an aggregate offering price of up to $17.6 million from time to time through MLV as sales agent. The Company paid MLV an aggregate commission rate of 3.0% of the gross proceeds of the sales price per share of the common stock sold under the prior sales agreement.During the year ended December 31, 2012, the Company sold 2,022,144 shares of its common stock at an average price of $6.29 pursuant to the prior sales agreement. Net proceeds from the sale of common stock in 2012 were $12.3 million. In 2014 and 2013, there were no shares sold pursuant to the prior sales agreement. In April 2014, the prior sales agreement was terminated.

On August 1, 2014, the Company entered into a new at market issuance sales agreement, or the current sales agreement, with MLV, which provides that, upon the terms and subject to the conditions and limitations set forth in the current sales agreement, the Company may elect to issue and sell shares of its common stock having an aggregate offering price of up to $30.0 million from time to time through MLV as the Company’s sales agent. Sales of the Company’s common stock through MLV, if any, will be made on The NASDAQ Capital Market by means of ordinary brokers’ transactions at market prices, in block transactions or as otherwise agreed by the Company and MLV. Subject to the terms and conditions of the current sales agreement, MLV will use commercially reasonable efforts to sell the Company’s common stock from time to time, based upon the Company’s instructions (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company is not obligated to make any sales of common stock under the current sales agreement. The Company will pay MLV an aggregate commission rate of up to 3.0% of the gross proceeds of the sales price per share of any common stock sold under the current sales agreement. The number of shares the Company is able to sell under this arrangement will be limited in practice based on the trading volume of the Company’s common stock. The Company has not yet sold any common stock pursuant to the current sales agreement. Under certain circumstances, sales of the stock under the current sales agreement could result in a downward adjustment to the exercise price of the warrants to purchase common stock that the Company issued in February 2015 (see Note 13—Subsequent Events).

On March 16, 2011, the Company sold to certain investors an aggregate of 14,313,081 shares of its common stock for a purchase price equal to $2.05 per share and, for a purchase price of $0.05 per share, warrants exercisable for a total of 5,725,227 shares of its common stock for aggregate gross proceeds equal to $30.1 million in connection with the offering. Net proceeds generated from the offering were approximately $27.8 million which includes underwriter discounts and estimated offering costs. The warrants have a five-year term and an exercise price equal to $2.46 per share of common stock. The number of shares issuable upon exercise of the warrants and the exercise price are subject to adjustment for subdivisions and stock splits, stock dividends, combinations, reorganizations, reclassifications, consolidations, mergers or sales of properties and assets and upon the issuance of certain assets or securities to holders of the Company’s common stock, as applicable.

On October 5, 2009, the Company sold to certain investors an aggregate of 18,324,599 shares of its common stock for a purchase price equal to $1.86 per share and, for a purchase price of $0.05 per share, warrants exercisable for a total of 7,329,819 shares of its common stock for aggregate gross proceeds equal to $35.0 million in connection with the offering. Net proceeds generated from the offering were $33.1 million. The warrants had a five-year term and an exercise price equal to $2.23 per share of common stock. The exercise price of the warrants was subject to adjustment in certain circumstances, including certain issuances of securities at a price equal to less than the then current exercise price. In addition, the number of shares issuable upon exercise of the warrants and the exercise price was subject to adjustment for subdivisions and stock splits, stock dividends, combinations, reorganizations, reclassifications, consolidations, mergers or sales of properties and assets and upon the issuance of certain assets or securities to holders of the Company’s common stock, as applicable. As a result of the offering on March 16, 2011, the exercise price of the warrants exercisable for a total of 7,329,819 shares of common stock sold to investors in October 2009 that had an original exercise price of $2.23 per share, was subsequently reduced to $2.05 per share pursuant to the terms of such warrants. As of October 5, 2014, all such warrants had been fully exercised.

Common Stock Warrants

The Company accounts for its common stock warrants under guidance now codified in ASC 815 that clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock, which would qualify for classification as liabilities. The guidance required the Company’s outstanding warrants to be classified as liabilities and to be fair valued at each reporting period, with the changes in fair value recognized as other income (expense) in the Company’s consolidated statements of operations.

In 2014, warrants to purchase 2,106,792 shares of common stock were cashless exercised for 1,108,582 shares of common stock. In addition, warrants to purchase 2,328,766 shares of common stock were exercised on a cash basis for net proceeds of approximately $4.8 million. In 2013, warrants to purchase 2,367,636 shares of common stock were cashless exercised for 1,555,043 shares of common stock. In addition, warrants to purchase 933,475 shares of common stock were exercised on a cash basis for net proceeds of approximately $1.9 million. In 2012, warrants to purchase 999,895 shares of common stock were cashless exercised for 666,793 shares of common stock. In addition, warrants to purchase 4,060,538 shares of common stock were exercised on a cash basis for net proceeds of approximately $8.8 million. As of the date of exercise of the warrants, the Company transferred the fair value of the warrants of approximately $10.1 million and $11.5 million and $27.9 million from warrant liability into stockholders’ equity (deficit) in 2014, 2013 and 2012, respectively.

At December 31, 2013, all warrants related to an offering in August 2008 had been exercised. During the years ended December 31, 2013 and 2012, a change in fair value of $2.4 million non-cash expense and $9.9 million non-cash income related to the August 2008 warrants was recorded as other income (expense) in the Company’s consolidated statements of operations, respectively.

At December 31, 2014 and 2013, the Company had warrants outstanding to purchase 0 and 4,287,940 shares of common stock, respectively, from the October 2009 offering. All of the warrants related to the October 2009 offering were exercised prior to their expiration date of October 5, 2014. The fair value of these warrants on December 31, 2013 was determined using a Black Scholes valuation model with the following Level 3 inputs:

During the years ended December 31, 2014, 2013 and 2012, a change in fair value of $1.3 million of non-cash income, $0.6 million of non-cash income and $24.2 million of non-cash expense related to the October 2009 warrants was recorded as other income (expense) in the Company’s consolidated statements of operations, respectively.

At December 31, 2014 and 2013 the Company had warrants outstanding to purchase 3,846,165 and 3,993,783 shares of common stock, respectively, from the March 2011 offering. The fair value of these warrants on December 31, 2014 and 2013 was determined using a Black Scholes valuation model with the following Level 3 inputs:

During the years ended December 31, 2014, 2013 and 2012, a change in the fair value of $8.0 million of non-cash income, $0.5 million of non-cash expense and $17.1 million of non-cash income related to the March 2011 warrants was recorded as other income (expense) in the Company’s consolidated statements of operations, respectively.

The following table sets forth the Company’s financial liabilities, related to warrants issued in the October 2009 and March 2011 offerings, subject to fair value measurements as of December 31, 2014 and 2013:

The following table is a reconciliation of the warrant liability measured at fair value using level 3 inputs (in thousands):