Quarterly report pursuant to Section 13 or 15(d)

Warrants

v3.8.0.1
Warrants
3 Months Ended
Mar. 31, 2018
Warrants  
Warrants

Note 5 – 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, 2018 and 2017 (in thousands):

 

    Warrants accounted for as:     Warrants accounted for as:  
    Equity     Liabilities  
          April 2013 warrants                 October 2013 Series A warrants     January 2014 warrants     Total  
                                           
Outstanding, December 31, 2017             50                       26       133       209  
                                                         
Warrants expired             -                       -       -       -  
Warrants exercised             -                       -       -       -  
Outstanding, March 31, 2018             50                       26       133       209  
Expiration date             April 25, 2018                       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 October 2013 and January 2014. The 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, 2018:

 

    October 2013
warrants
    January 2014
warrants
 
             
Strike price   $ 15.00     $ 15.00  
Expected term (years)     5.57       5.80  
Cumulative volatility %     86.73 %     87.08 %
Risk-free rate %     2.59 %     2.61 %

 

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.