Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments Fair Value Measurements

v3.19.2
Financial Instruments Fair Value Measurements
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Financial Instruments Fair Value Measurements

Note 10 — Financial Instruments Fair Value Measurements

 

Recurring Fair Value Measurements

 

The fair value hierarchy table for the periods indicated is as follows:

 

    Fair Value Measurement on a Recurring Basis at Reporting Date Using(1)  
    Level-1     Level-2     Level-3        
    Inputs     Inputs     Inputs     Total  
June 30, 2019                        
Senior Secured Convertible Note   $     $     $ 6,790,096     $ 6,790,096  
Totals   $     $     $ 6,790,096     $ 6,790,096  
                                 
December 31, 2018                                
Senior Secured Convertible Note   $     $     $ 7,903,000     $ 7,903,000  
Totals   $     $     $ 7,903,000     $ 7,903,000  

 

(1) As noted above, as presented in the fair value hierarchy table, Level-1 represents quoted prices in active markets for identical items, Level-2 represents significant other observable inputs, and Level-3 represents significant unobservable inputs.

  

Senior Secured Convertible Note

 

The Senior Convertible Note estimated fair value and face value principal, and the corresponding changes in estimated fair value and face value principal payable, as of each of the respective dates noted, are as follows:

 

          Face Value  
          Principal  
Senior Secured Convertible Note - Six Months Ended June 30, 2019   Fair Value     Payable  
Balances - December 31, 2018   $ 7,903,000     $ 7,750,000  
Less: repayment - bi-monthly Installment Amount - common stock     (193,750 )     (193,750 )
Less: repayment - Accelerated Installment Amount - common stock     (23,250 )     (23,250 )
Less: repayment - voluntary conversion price adjustments - common stock     (1,314,000 )     (1,314,000 )
Less: bi-monthly non-installment payments - cash     (279,002 )      
Less: bi-monthly non-installment payments - common stock     (22,961 )      
Fair value adjustment - six months ended June 30, 2019     720,059        
Balances - June 30, 2019   $ 6,790,096     $ 6,219,000  

 

In the six months ended June 30, 2019, the aggregate face value principal repayments of $1,531,000 and $22,961 of corresponding non-installment payments were settled by the issue of a total of 1,516,241 shares of common stock of the Company, and an additional $279,002 of the non-installment payments were cash paid.

 

The fair value adjustments of $720,059 as of June 30, 2019 was recognized as a current period expense, as no portion of such fair value adjustments resulted from instrument-specific credit risk of the Senior Convertible Note, as of the dates noted.

 

The estimated fair value of the Senior Convertible Note as of June 30, 2019 was computed using a combination of the present value of the Senior Convertible Note cash flows using a synthetic credit rating analysis’ required rate of return and the Black-Scholes option pricing model, using the following assumptions:

 

Fair Value Assumptions   June 30,  
Senior Secured Convertible Note   2019  
Fair value   $ 6,790,096  
Face value principal payable   $ 6,219,000  
Required rate of return     11.1 %
Conversion price   $ 1.60  
Value of common stock   $ 1.14  
Expected term (years)     1.51  
Volatility     53 %
Risk free rate     1.8 %
Dividend yield     0 %

 

See Note 12, Debt, for further information with respect to the Senior Secured Convertible Note.