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Derivative Liability
9 Months Ended
Sep. 30, 2015
Derivative Liability [Abstract]  
Derivative Liability

Note 6.  Derivative Liability.


The investor in the PPO, and the Bridge Note holder have been granted anti-dilution protection with respect to the PPO Shares and Bridge Note Conversion Shares such that, if within two years after the closing of the Merger, the Company shall issue additional shares of Company common stock or common stock equivalents, for a consideration per share less than $0.50 per share (the “Lower Price”), each such investor and holder will be entitled to receive from the Company additional shares (“Lower Price Shares”) of Company common stock in an amount such that, when added to the number of shares initially purchased by such investor or received upon conversion of the Bridge Note, will equal the number of shares that such investor's PPO subscription amount would have purchased or the Bridge Note holder would have received upon conversion of the Bridge Note at the Lower Price.  GEM was the sole investor in the PPO and designee of the Bridge Note holder who received the Bridge Note Conversion Shares.


The Company has determined that this anti-dilution protection is a freestanding financial instrument that will be carried as a liability at fair value. Management has measured this derivative at fair value and recognized the derivative value as a current liability and recorded the derivative value on the consolidated balance sheet. The derivative is valued primarily using models based on unobservable inputs that are supported by little to no market activity. These inputs represent management's best estimate of what market participants would use in pricing the liability at the measurement date and thus are classified as Level 3. The model incorporates various assumptions related to the Company's stock price and ascribes a probability based on management's expectation that such assumptions would occur. Changes in the fair values of the derivative are recognized in earnings in the current period. During the three months ended March 31, 2015, the Company recorded a derivative liability of $376,300 related to the anti-dilution protection. The Company has determined that no fair value adjustment was required as of September 30, 2015.