DERIVATIVE WARRANT LIABILITY
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2014
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note 6. DERIVATIVE WARRANT LIABILITY | Derivative financial instruments are recognized as a liability on the Consolidated Balance Sheet and measured at fair value. On June 30, 2014 and December 31, 2013, the Company had outstanding Warrants to purchase 1,211,485 and 1,209,211 shares of its Common Stock, respectively. Included in these outstanding Warrants at June 30, 2014 and December 31, 2013 are Warrants to purchase 700,000 shares, which are considered to be derivative financial instruments. The fair value of these derivative instruments on June 30, 2014 and December 31, 2013 was approximately $586,000 and $1,119,000, respectively, and is included in Derivative Warrant Liability, a current liability, in the Consolidated Balance Sheet. Changes in fair value of the derivative financial instruments are recognized in the Consolidated Statement of Operations as a gain or loss on revaluation of Derivative Warrant Liability. The Gain on Revaluation of Derivative Warrant Liability for the three months ended June 30, 2014 and 2013 were approximately $393,000 and $2,995,000, respectively, and for the six months ended June 30, 2014 and 2013 were approximately $533,000 and $4,676,000, respectively.
The primary underlying risk exposure pertaining to the Warrants is the change in fair value of the underlying common stock for each reporting period. For the three months ended June 30, 2014 and 2013, no Derivative Warrants were exercised and none expired.
The table below presents the changes in the Derivative Warrant Liability, which is measured at fair value on a recurring basis and classified as Level 3 in fair value hierarchy:
|