Derivative Financial Instruments

12 Months Ended

Dec. 31, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for under the relevant sections of FASB Accounting Standards Codification. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative financial instrument and is marked-to-market at each balance sheet date and recorded as an asset or liability. In the event that the fair value is recorded as an asset or liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion, exercise or expiration of a derivative financial instrument, the instrument is marked to fair value and then that fair value is reclassified to equity.

Certain of the Company’s outstanding warrants were treated as derivative liabilities for accounting purposes due to insufficient authorized shares to settle these outstanding contracts at the time of issuance. These common stock purchase warrants did not trade in an active securities market. The Company estimated the fair value of these warrant liabilities using a Monte Carlo simulation option pricing model.