SPARE BACKUP, INC. - FORM 10-Q/A - XML - IDEA: XBRL DOCUMENT - September 14, 2011
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DERIVATIVE LIABILITIES
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Jun. 30, 2011
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| DERIVATIVE LIABILITIES | NOTE 8 - DERIVATIVE LIABILITIES
The maximum number of shares required to be delivered during the period under which substantially all of the Company’s outstanding warrants and convertible notes exceed the amount of authorized shares at June 30, 2011.
The Company accounts for the embedded conversion features included in its convertible promissory notes and outstanding warrants.
The aggregate fair value of derivative liabilities at June 30, 2011 and December 31, 2010 amounted to approximately $1.0 million and $471,000, respectively.
During the six-month period ended June 30, 2011, the warrants and convertible promissory notes issued by the Company were recognized as equity contracts because, at the time, the Company had sufficient amount of authorized of shares of common stock to satisfy its obligations under such contracts.
At each measurement date, the fair value of the embedded conversion features and warrants were based on the binomial and the Black Scholes method, respectively.
The fair value of the derivative instruments were based on the following assumptions:
The fair value of the warrants and embedded conversion features issued in connection with the issuance of convertible promissory notes amounted to approximately $248,000 of which $48,000 has been recognized as debt discount and $200,000 has been recognized as interest expense during the six-month period ended June 30, 2012.
The fair value of the warrants and embedded conversion features reclassified from equity contracts to liability contracts during the six-month period ended June 30, 2011 amounted to approximately $2.4 million with a corresponding decrease in additional paid-in capital.
The fair value of derivative liabilities decreased by approximately $2.1 million between measurement dates during the six-month period ended June 30, 2011. Such decrease is recorded as other income in the accompanying statement of operations.
The fair value of derivative liabilities increased by approximately $83,000 between measurement dates during the six-month period ended June 30, 2010. Such increase is recorded as other expense in the accompanying statement of operations.
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