Quarterly report pursuant to Section 13 or 15(d)

Warrant Liability

v3.20.2
Warrant Liability
9 Months Ended
Sep. 30, 2020
Warrant Liability  
Warrant Liability

15.    Warrant Liability

 

On September 10, 2019 and November 6, 2019, the Company issued 1,250,000 and 4,000,000 warrants, respectively, as equity issuance consideration, in connection with a private placement of the Company’s common stock. The warrants entitle the holder to purchase one share of our common stock at an exercise price equal to $0.014 per share at any time on or after their issuance date and on or prior to the close of business 3 years after the issuance date (the “Termination Date”). The Company determined that these warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included in the public share offering. Management also determined that the warrants required classification as a liability pursuant to ASC 815. In accordance with the accounting guidance, the outstanding warrants are recognized as a warrant liability on the balance sheet and are measured at their inception date fair value and subsequently re-measured at each reporting period with changes being recorded as a component of other income in the statement of operations.

 

The fair value of the warrant liabilities was measured using a Black-Scholes model. Significant inputs into the model at the inception are as follows:

 

 

 

 

 

 

 

 

 

 

    

Period

    

Period 

 

 

 

 end date(1) 

 

end date(2) 

 

Black -Scholes Assumptions

 

September 30, 2020

 

September 30, 2020

 

Exercise Price(1)(2)

 

$

0.014

 

$

0.014

 

Warrant Expiration Date (1)(2)

 

 

September 10, 2022

 

 

November 6, 2022

 

Stock Price (3)

 

$

0.014

 

$

0.014

 

Interest Rate (annual) (4)

 

 

0.13

%  

 

0.13

%

Volatility (annual) (5)

 

 

171.53

%  

 

171.53

%

Time to Maturity (Years)

 

 

1.95

 

 

2.10

 

Calculated fair value per share

 

$

0.01076

 

$

0.01101

 

Future Estimated Quarterly Dividend per share(6)

 

$

 —

 

$

 —

 

 

Significant inputs into the model at the reporting period measurement dates are as follows:

 

 

 

 

 

 

 

 

 

 

    

Year ending(1) 

    

Year ending(2) 

 

 

 

December 31, 

 

December 31, 

 

Black-Scholes Assumptions

 

2019

 

2019

 

Exercise Price(1)(2)

 

$

0.014

 

$

0.014

 

Warrant Expiration Date (1)(2)

 

 

September 10, 2022

 

 

November 6, 2022

 

Stock Price (3)

 

$

0.014

 

$

0.014

 

Interest Rate (annual) (4)

 

 

1.62

%  

 

1.62

%

Volatility (annual) (5)

 

 

137.47

%  

 

137.47

%

Time to Maturity (Years)

 

 

2.70

 

 

2.85

 

Calculated fair value per share

 

$

0.01045

 

$

0.01064

 

Future Estimated Quarterly Dividend per share(6)

 

$

 —

 

$

 —

 


(1)

Based on the terms provided in the warrant agreement related to the issuance of common stock of on September 10th, 2019

(2)

Based on the terms provided in the warrant agreement related to the issuance of common stock of on November 6th, 2019

(3)

Based on the observable transaction value of common stock of per the most recent stock issuance financing agreements.

(4)

Interest rate for U.S. Treasury Bonds, as of the issuance dates and each presented period ending date, as published by the U.S. Federal Reserve.

(5)

Based on the historical daily volatility of Guideline Public Companies and each presented period ending date.

(6)

Current estimated dividend payments beyond initial four quarters. At a future date, the company will review the working capital needs and make a final determination of any future dividend payments.

The warrants outstanding and fair values at each of the respective valuation dates are summarized below:

 

 

 

 

 

 

 

 

 

 

 

    

Warrants  

    

Fair Value 

    

 

 

Warrant Liability

 

Outstanding

 

per Share

 

Fair Value

Fair Value at initial measurement date of 9/10/2019

 

1,250,000

 

$

0.01091

 

$

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value at initial measurement date of 11/6/2019

 

4,000,000

 

$

0.01085

 

$

43

 

 

 

 

 

 

 

 

 

Fair Value as of period ending 12/31/2019

 

 

 

 

 

 

$

56

Change in fair value of warrant liability

 

 

 

 

 

 

 

(1)

Fair Value as of period ending September 30, 2020

 

5,250,000

 

 

0.01095

 

$

57

 

The warrant liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about of future activities and the Company’s stock prices and historical volatility of Guideline Public Companies as inputs. As of September 30, 2020,  none of the warrants have been exercised.