Quarterly report pursuant to Section 13 or 15(d)

Financial Instruments Fair Value Measurements

v3.19.3
Financial Instruments Fair Value Measurements
9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Financial Instruments Fair Value Measurements

Note 5 — 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  
September 30, 2019                                
Senior Secured Convertible Note   $     $     $ 4,471,535     $ 4,471,535  
Totals   $      —     $      —     $ 4,471,535     $ 4,471,535  
                                 
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 - December 2018

 

The Senior Secured Convertible Note issued December 27, 2018 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:

 

Senior Secured Convertible Note - Issued December 27, 2018

Nine Months Ended September 30, 2019

  Fair Value     Face Value Principal Payable  
Balances - December 31, 2018   $ 7,903,000     $ 7,750,000  
Less: repayment - bi-monthly Installment Amount - common stock     (1,162,500 )     (1,162,500 )
Less: repayment - Accelerated Installment Amount - common stock     (904,500 )     (904,500 )
Less: repayment - voluntary conversion price adjustments - common stock     (1,314,000 )     (1,314,000 )
Less: bi-monthly non-installment payments - cash     (279,002 )      
Less: non-installment payments - common stock     (112,293 )      
Fair value adjustment - nine months ended September 30, 2019     340,830        
Balances - September 30, 2019   $ 4,471,535     $ 4,369,000  

 

Senior Secured Convertible Note - Issued December 27, 2018         Face Value Principal  
December 27, 2018 to December 31, 2018   Fair Value     Payable  
Balances - issue date December 27, 2018   $ 7,750,000     $ 7,750,000  
Fair value adjustment - December 27, 2018 to December 31, 2018     153,000        
Balances - December 31, 2018   $ 7,903,000     $ 7,750,000  

 

In the nine months ended September 30, 2019, the aggregate face value principal repayments of $3,381,000 and $112,293 of corresponding non-installment payments were settled by the issue of a total of 3,850,427 shares of common stock of the Company, and an additional non-installment payments of $279,002 were cash paid.

 

The fair value adjustment of $340,830 as of September 30, 2019 was recognized as a current period expense in the nine months ended September 30, 2019, as no portion of such fair value adjustments resulted from instrument-specific credit risk of the Senior Secured Convertible Note, as of the dates noted.

 

The estimated fair value as of September 30, 2019 and December 31, 2018 of the Senior Secured Convertible Note was computed using a combination of the present value of the Senior Secured 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   September 30,     December 31,  
Senior Secured Convertible Note - Issued December 27, 2018   2019     2018  
Fair value   $ 4,471,535     $ 7,903,000  
Face value principal payable   $ 4,369,000     $ 7,750,000  
Required rate of return     12.3 %     13.1 %
Conversion price   $ 1.60     $ 1.60  
Value of common stock   $ 0.96     $ 0.96  
Expected term (years)     0.9       2.0  
Volatility     56 %     50 %
Risk free rate     1.75 %     2.5 %
Dividend yield     0 %     0 %

 

See Note 6, Debt, for further information with respect to the Senior Secured Convertible Note issued December 27, 2018.