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SEC Filings


10-Q
FIBROCELL SCIENCE, INC. filed this Form 10-Q on 08/09/2018
Entire Document
 
Fibrocell Science, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Note 5. Warrants (continued)

Accounting for Liability-Classified Warrants

The Company’s liability-classified warrants were recorded as liabilities at their estimated fair value at the date of issuance, with the subsequent changes in estimated fair value recorded in warrant revaluation income (expense) in the Company’s Condensed Consolidated Statements of Operations in each subsequent period. The change in the estimated fair value of the warrant liability for the three months ended June 30, 2018 and June 30, 2017, resulted in non-cash income (expense) of approximately $0.1 million and ($9.7) million respectively and for the six months ended June 30, 2018 and June 30, 2017, the change in the estimated fair value of the warrant liability resulted in non-cash income (expense) of approximately $0.3 million and ($9.7) million respectively.

Additionally, the liability-classified warrants are classified as either current or non-current on the Company’s Condensed Consolidated Balance Sheets based on their contractual expiration date. The Company utilizes a Monte Carlo simulation valuation method to value its liability-classified warrants.

Assumptions Used In Determining Fair Value of Liability-Classified Warrants

The estimated fair value of warrants is determined using Level 2 and Level 3 inputs (as described below).  Inherent in the Monte Carlo simulation valuation method are the following assumptions:

Volatility. The Company estimates stock price volatility based on the Company’s historical stock price performance over a period of time that matches the volume-weighted average expected remaining life of the warrants.

Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve in effect at the valuation date commensurate with the expected remaining life assumption.

Expected remaining life. The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

Dividend rate. The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.

Scenarios.  The probability of complex features of the warrants being triggered is subjective (no observable inputs or available market data) and based on internal and external information known to management at the valuation date. Such assumptions include, among other inputs, probabilities related to a change of control and when it might occur as well as probabilities related to a default under the provisions of the Notes and when it might occur.

Changes to the key assumptions or to the scenarios used in the valuation model, including the probability of key events, such as a change of control transaction, could have a material impact to the overall valuation of the warrant liability.

The following table summarizes the calculated aggregate fair values, along with the inputs and assumptions utilized in each calculation:
 
 
 
 
($ in thousands except per share data)
June 30, 2018
 
December 31, 2017
Calculated aggregate value
$
747

 
$
1,073

Weighted average exercise price per share
$
29.69

 
$
30.11

Closing price per share of common stock
$
2.71

 
$
3.20

Volatility
96.7
%
 
92.2
%
Weighted average remaining expected life
3 years

 
3 years, 4 months

Risk-free interest rate
2.58
%
 
2.00
%
Dividend yield

 




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