Derivative Warrants

Upon emergence from chapter 11 on the Effective Date, pursuant to the Plan, we issued to the holders of the 2018 Notes and holders of certain claims relating to the rejection of executory contracts and unexpired leases warrants to purchase an aggregate of 118,137 shares of common stock, par value $0.01, at an exercise price of $39.82 per share and with a term expiring seven years from the Effective Date.

The following table shows the warrant activity for the three months ended March 31, 2019 and March 31, 2018:



	Three Months Ended
	March 31,
	2019	2018
Outstanding at the beginning of the period	118	118
Issued	—	—
Exercised	—	—
Outstanding at the end of the period	118	118

Fair Value of Warrants

We account for warrants in accordance with the accounting guidance for derivatives, which sets forth a two-step model to be applied in determining whether a financial instrument is indexed to an entity’s own stock which would qualify such financial instruments for a scope exception. This scope exception specifies that a contract that would otherwise meet the definition of a derivative financial instrument would not be considered as such if the contract is both (i) indexed to the entity’s own stock and (ii) classified in the shareholders’ equity section of the entity’s balance sheet. We determined that warrants are ineligible for equity classification as the warrants are not indexed to our common stock and are recorded as derivative liabilities at fair value in the condensed consolidated balance sheets. The warrants are classified as a current liability in the condensed consolidated balance sheets as they could be exercised by the holders at any time.

As discussed previously in Note 9, the fair value of the derivative warrant liability is estimated using a Monte Carlo simulation model on the date of issue and is re-measured at each quarter end until expiration or exercise of the underlying warrants with the resulting fair value adjustment recorded in “Other (income) expense, net” in the condensed consolidated statements of operations.

The fair value of the derivative warrant liability as of March 31, 2019 and December 31, 2018 was estimated using the following model inputs:



	As of March 31,			As of December 31,
	2019			2018
Exercise price	$	39.82		$	39.82
Closing stock price	$	8.90		$	8.20
Risk free rate	2.22		%	2.51		%
Expected volatility	43.30		%	36.87		%