In conjunction with the Beam acquisition, the agreement provided for an anti-dilution benefit to former members of Beam whereby until such time as a former member sells or disposes of all of his CCGI common stock, any Triggering Event, as defined by the Agreement, whereby the issue price of the Company stock is below $1.58 shall cause the Company to issue a warrant to each former member to purchase an additional number of Company common shares at the Triggering Event price so as to preserve such Beam Member’s pre-Triggering Event percentage ownership in the Company. The Company has recorded warrants payable and a provision for warrants payable for warrants that are required to be issued based on the Triggering Events occurring during the period of February 26, 2013 through September 30, 2014. The Company estimated the warrants payable using the Black Scholes model and recorded the fair value as of September 30, 2014 and December 31, 2013. The measurement is based on significant inputs that are not observable in the market, which Topic 820 “Fair Value Measurements and Disclosures” of the FASB Accounting Standards Code refers to as Level 3 inputs. The warrants payable balance at September 30, 2014 and December 31, 2013 was $10,911 and $1,216,000 respectively. During the quarter ended June 30, 2014, the Company changed significant estimates used to calculate the fair value of these warrants including the term, the impact of Beam member stock sales and the impact thereof on their subsequent percentage of ownership on a prospective basis and changes to percentage of ownership on a fully diluted basis. The following table reflects the activity of the warrant payable for the three months and nine months ended September 30, 2014:

 

		Three months ended September 30, 2014			Nine months ended September 30, 2014
Balance at beginning of period		$	247,800		$	1,216,000
Change in estimate			—			(925,500)
Provision for new warrant issuances			3,311			3,311
Mark to market (gains)/losses			7,600			(35,100)
Issuances of warrants			(247,800)			(247,800)
Balance at end of period		$	10,911		$	10,911

 

On August 8, 2014, the Company issued 714,209 warrants to the former Beam members, payable as of June 30, 2014, at a fair value estimated at $247,800. As of September 30, 2014, warrants to purchase an additional 31,000 shares are required to be issued based on triggering events during the quarter ended September 30, 2014 valued at $10,911, using the Black-Scholes valuation model and the following assumptions: (1) an expected volatility of 84% based on historical volatility; (2) an interest rate of 0.13%; 3) an expected life of one year and (4) a zero dividend yield. The stock price was determined based on the closing market price on the date of the grant. These warrants were issued by the Company on October 3, 2014.