Derivative Warrants

Upon emergence from chapter 11 on August 7, 2017 (the “Effective Date”), pursuant to the prepackaged plan of reorganization (the “Plan”), we issued to the holders of our pre-Effective Date 9.875% Senior Notes due 2018 (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, 2020 and March 31, 2019:



	Three Months Ended
	March 31,
	2020	2019
Outstanding at the beginning of the period	118	118
Issued	—	—
Exercised	—	—
Outstanding at the end of the period	118	118

The fair value of our derivative warrant liability was $354 at December 31, 2019. There was no change in the fair value at March 31, 2020.

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 the warrants are ineligible for equity classification as the warrants are not indexed to our common stock. Therefore, the warrants are recorded as derivative liabilities at fair value and included in “Accrued and other current liabilities” in the condensed consolidated balance sheets. The warrants are classified as a current liability as they could be exercised by the holders at any time.

The fair value of the derivative warrant liability was estimated using a Monte Carlo simulation model on the date of issue and is periodically re-measured until expiration or exercise of the underlying warrants with the resulting fair value adjustment recorded in “Other income, net” in the condensed consolidated statements of operations.