10. Warrant Liabilities

12 Months Ended

Dec. 31, 2014

Warrants and Rights Note Disclosure [Abstract]

Warrants acquired in connection with the reverse merger, contain provisions that protect holders from a decline in the issue price of our common stock (or “down-round” provisions) or that contain net settlement provisions. The Company accounts for these warrants as liabilities, not equity. Down-round provisions reduce the exercise or conversion price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise or conversion price of those instruments or issues new warrants or convertible instruments that have a lower exercise or conversion price. Net settlement provisions allow the holder of the warrant to surrender shares underlying the warrant equal to the exercise price as payment of its exercise price, instead of physically exercising the warrant by paying cash. The Company evaluates whether warrants to acquire its common stock contain provisions that protect holders from declines in the stock price or otherwise could result in modification of the exercise price and/or shares to be issued under the respective warrant agreements based on a variable that is not an input to the fair value of a “fixed-for-fixed” option.

On April 3, 2014, the Company issued 30,136,713 warrants with an exercise price of $0.001 in connection with the $10,180,000 14% Senior Secured Promissory Note. As the note contained a variable share settlement provision, these warrants are recognized as a liability recorded at fair value.

The Company recognizes these warrants as liabilities at their fair value and remeasures them at fair value on each reporting date.

The assumptions used in connection with the valuation of warrants issued were as follows:

	December 31,		April 3,		April 2,
	2014		2014		2014
Number of shares underlying the warrants		82,019,318		30,136,713 (a)		47,726,094
Exercise price		$0.001 - $0.80	$	0.001		$0.595 - $0.80
Volatility		112.99% - 207.33%		183.30%		134% - 158%
Risk-free interest rate		0.04% - 1.05%		0.11%		0.28% - 1.73%
Expected dividend yield		0.00%		0.00%		0.00%
Expected warrant life (years)		0.25 - 2.88		1		1.42 - 3.63
Stock price		$0.04		$0.08		$0.09

	December 31,		Acquisition Measurement Date		Initial		Increase (Decrease) in			December 31,
	2013		April 2, 2014		Measurement		Fair Value			2014
2011 Unit Offering	$	–	$	1,242,333	$	–	$	(738,272	)	$	504,061
2011 Unit Offering Placement Agent		–		156,367		–		(84,769	)		71,598
2012 Bridge Warrant		–		20,690		–		(19,389	)		1,301
2012 Bridge Warrant Placement Agent		–		4,138		–		(3,878	)		260
2012 Unit Offering		–		137,178		–		(105,314	)		31,864
2012 Unit Offering Placement Agent		–		96,481		–		(44,242	)		52,239
2013 Merger related notes converted		–		11,608		–		(7,736	)		3,872
2014 Senior Note Purchase		–		–		2,407,930		(1,039,630	)		1,368,300
	$	–	$	1,668,795	$	2,407,930	$	(2,043,230	)	$	2,033,495

The approximate $2,043,000 decrease in fair value of warrants is recognized as a gain in the other (income) expense section of the consolidated statement of operations. The gain is also recognized within the Corporate and Other segment’s results of operations.

Number of Warrants Subject to Remeasurement:

Number of Warrants

December 31,

April 2, 2014

Warrant

December 31,

2013

Acquisition

Additions

Reductions

2014

2011 Unit Offering

–

33,277,837

–

33,277,837

2011 Unit Offering Placement Agent

–

4,726,891

–

4,726,891

2012 Bridge Warrant

–

1,137,735

–

1,137,735

2012 Bridge Warrant Placement Agent

–

227,546

–

227,546

2012 Unit Offering

–

6,300,213

–

6,300,213

2012 Unit Offering Placement Agent

–

1,561,544

–

1,561,544

2013 Merger related notes converted

–

494,328

–

494,328

2014 Senior Note Purchase

–

34,293,224

(a)

–

34,293,224

–

47,726,094

34,293,224

–

82,019,318

(a) Warrant's original amount of 30,136,713 was adjusted subsequent to April 3, 2014 to maintain 4.99% of ASTV stock on a fully diluted basis.