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Warrant Liability
12 Months Ended
Dec. 31, 2018
Warrant Liability [Abstract]  
Warrant Liability

Note 11 – Warrant Liability



We account for common stock warrants pursuant to applicable accounting guidance contained in ASC 815 "Derivatives and Hedging - Contracts in Entity's Own Equity" and make a determination as to their treatment as either equity instruments or a warrant liability.



During January 2018, in conjunction with a registered equity offering and a concurrent private placement that closed in February 2018, the Company issued warrants to purchase an aggregate of 4,004,324 common shares at an exercise price of $1.55.  As of December 31, 2018, related warrants to purchase 3,974,324 shares of common stock remain outstanding.  The warrants have alternative settlement provisions that, at the option of the holder, provide for physical settlement or if, at the time of settlement there is no effective registration statement, a cashless exercise, as defined in the warrant agreement.   In addition, in May 2017 the Company issued warrants to purchase an aggregate of 1,650,000 shares at an exercise price of $1.65 that have similar alternative settlement provisions.



Based on analysis of the underlying warrant agreements, and applicable accounting guidance, the Company concluded that these registered warrants require the issuance of registered securities upon exercise and do not sufficiently preclude an implied right to net cash settlement.  Accordingly, these warrants were classified on the Consolidated Balance Sheets as a current liability upon issuance and are revalued at each subsequent balance sheet date.



The fair value of the liability for common stock purchase warrants is estimated using the Black Scholes option pricing model based on the market value of the underlying common stock at the measurement date, the contractual term of the warrant, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.



We recorded the liability for the common stock warrants issued in January and February 2018 at an initial fair value of $2.9 million, and a fair value as of December 31, 2018 of $1.5 million.  The warrants the company issued in May 2017, had a fair value of $0.8 million at December 31, 2017 and $0.2 million as of December 31, 2018.  The combined changes in fair value are reflected as income from change in the fair market value of common stock warrant liability of $2.2 million and $1.1 million in the consolidated statement of operations for the years ended Dcember31, 2018 and 2017, respectively.