During the year ended December 31, 2013, the Company issued 107,875 warrants to purchase shares of the Company’s common stock to various promissory note holders with an exercise price of $3.47626. The warrants became exercisable upon the closing of the Company’s IPO. The warrants were valued at approximately $379,000 using the Black-Scholes option pricing model and the Company recorded a debt discount of $251,800 upon issuance of the warrants based on their relative fair value in accordance with ASC 470-20-25-2.

During the year ended December 31, 2013, the Company issued a warrant for the purchase of 84,000 shares of the Company’s common stock for consulting services, with an exercise price of $6.25. The warrant shares vest in increments of 4,000 warrant shares at the end of each month beginning with November 2013 and ending with October 2014 with the remainder vesting in increments of 3,000 warrant shares at the end of each month beginning with November 2014 and ending with October 2015. Upon termination of the consulting agreement by either party, all unvested warrant shares are terminated. The warrant was valued at approximately $237,719 using the Black-Scholes option pricing model. For the year ended December 31, 2013, the Company recorded $22,640 in expense related to vested warrant shares.

During the year ended December 31, 2013, the Company issued a warrant for the purchase of 345,000 shares of the Company’s common stock to MDB Capital Group LLC, for its services as Managing Underwriter of the Company’s IPO, with an exercise price of $6.25. The warrant becomes exercisable 180 days after November 21, 2013. The warrant was valued at $1,682,877 using the Black-Scholes option pricing model.

During the year ended December 31, 2013, the State of Texas exercised its right to purchase 301,273 shares of the Company’s common stock via a cashless exercise at an exercise price of $0.001 whereby it received 301,213 shares and a cash payment of $3.59 for a fractional share. The Company recorded a charge of $404,000 to interest expense upon the cashless exercise of the right to purchase in accordance with ASC 470-20-25-2 as the final number of shares was calculated based on the IPO price. These shares are shown in the Summary of Warrant Activity as “Change in Estimate”.

During the year ended December 31, 2012, the Company issued warrants for the purchase of 886,556 shares of the Company’s common stock to various promissory note holders with exercise prices ranging from $3.47626 to $6.3276. The warrants were fully vested at December 31, 2013. The warrants were valued at $3,088,944 using the Black-Scholes option pricing model. See Note 8.

During the year ended December 31, 2012, the Company issued a warrant to purchase 200,393 shares of the Company’s common stock to a consultant in connection with consulting services. The warrant has a per share exercise price of $3.47626. The warrant vested immediately. The warrant was valued at $670,947 using the Black-Scholes option pricing model which was charged to expense during 2012.

The shares underlying the warrants have not been registered.

The assumptions used in the Black-Scholes model are as follows:

A summary of the Company’s warrant activity and related information is as follows: