Derivative Liability and Fair Value Measurements
|12 Months Ended|
Dec. 31, 2018
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
|Derivative Liability and Fair Value Measurements||
Note 12 — Derivative Liability and Fair Value Measurements
The Company recognized a derivative liability for the warrants to purchase shares of its common stock issued in connection with the equity offering and related debt conversions on August 5, 2013. These warrants had a cashless exercise provision and an exercise price that was subject to adjustment in the event of subsequent equity sales at a lower purchase price (subject to certain exceptions) along with full-ratchet anti-dilution provisions. In accordance with ASC 815-10-25
Derivatives and Hedging
we measured the derivative liability using a Monte Carlo Options Lattice pricing model at the warrants’ life/ maturity issuance date and subsequently re-measured the liability on each reporting date.
Accordingly, at the end of each quarterly reporting date, the derivative fair market value is re-measured and adjusted to current market value. As at December 31, 2018 and 2017, a total of nil and 38,100, respectively, warrants were outstanding that contained a full-ratchet anti-dilution provision. In connection with the Series A Private Placement on January 2, 2015 (see Note 14), holders of approximately 86% of outstanding warrants issued by the Company in its public offering and in connection with the conversion by certain holders of the Company’s outstanding debt in connection with the Company’s public offering (collectively, the “Public Offering Warrants”) agreed to irrevocably waive their rights to anti-dilution protection under Section 2(b) of the Public Offering Warrants in the event the Company issues additional securities at a per share price lower than the exercise price of the Public Offering Warrants (the “Public Offering Warrant Waiver”). As a result, the related derivative liability was reversed to zero and reclassified into stockholders’ equity under Additional Paid-In Capital.
We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at December 31, 2018 and 2017:
Changes in the fair value of the warrant liability were as follows:
The Monte Carlo Options Lattice pricing model was used to estimate the fair value of warrants outstanding and reflected the following assumptions:
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef