Annual report pursuant to Section 13 and 15(d)

Financial Instruments Fair Value Measurements (Tables)

v3.19.1
Financial Instruments Fair Value Measurements (Tables)
12 Months Ended
Dec. 31, 2018
Schedule of Financial Liabilities Measured at Fair Value On Recurring Basis

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
Inputs
    Level-2
Inputs
    Level-3
Inputs
    Total  
December 31, 2018                                
Senior Secured Convertible Note   $     —     $     $ 7,903,000     $ 7,903,000  
Series A Warrants derivative liability(2)                 —              
Series A Convertible Preferred Stock
conversion option derivative liability(2)
                       
Totals   $     $     $     $  
                                 
December 31, 2017                                
Series A Warrants derivative liability   $     $     $ 761,123     $ 761,123  
Series A Convertible Preferred Stock conversion option derivative liability                 212,217       212,217  
Totals   $     $     $ 973,340     $ 973,340  

 

  (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.
     
  (2) The Series A Warrants derivative liability and the Series A-1 Convertible Preferred Stock conversion option derivative liability were fully extinguished-upon-exchange on the March 15, 2018 Exchange Date of the Series A and Series A-1 Exchange Offer, as discussed herein below.

Schedule of Series A Convertible Preferred Stock and Warrants Issued and Outstanding

The number of Series A Warrants and shares of Series A Convertible Preferred Stock issued and outstanding as of December 31, 2018 is as follows:

 

Issued and Outstanding - December 31, 2018   Series A
Warrants
    Series A
Convertible
Preferred Stock
 
Issued and outstanding as of December 31, 2017     268,001       249,667  
Series A and Series A-1 Exchange Offer - March 15, 2018     (268,001 )     (249,667 )
Issued and outstanding as of December 31, 2018            

 

Series A Warrants and shares of Series A Convertible Preferred Stock issued and outstanding as of December 31, 2017 was as follows:

 

Issued and Outstanding - December 31, 2017   Series A
Warrants
    Series A
Convertible
Preferred Stock
 
Issued and outstanding as of December 31, 2016        
Issued in Series A Preferred Stock Units private placement     422,838       422,838  
Conversion of Series A Convertible Preferred Stock           (18,334)  
Series A Exchange Offer - November 17, 2017     (154,837 )     (154,837 )
Issued and outstanding as of December 31, 2017     268,001       249,667  

Schedule of Series A Convertible Preferred Stock Conversion Option Embedded Derivative and Warrants Liability

The reconciliation of each of the Series A Warrants and the Series A Convertible Preferred Stock conversion option derivative liability as of December 31, 2018 is as follows:

 

Derivative Liability - December 31, 2018   Series A
Warrants
   

Series A

Convertible
Preferred Stock
Conversion Option

 
Balance at December 31, 2017   $ 761,123     $ 212,217  
Change in fair value - March 15, 2018 Exchange Date     (246,561 )     (64,913 )
Series A and Series A-1 Exchange Offer - March 15, 2018     (514,562 )     (147,304 )
Balance at December 31, 2018   $     $  

 

The reconciliation of each of the Series A Warrants and the Series A Convertible Preferred Stock conversion option derivative liability as of December 31, 2017 is as follows:

 

Derivative Liability - December 31, 2017   Series A
Warrants
    Series A
Convertible
Preferred Stock
Conversion Option
 
Balance at December 31, 2016   $     $  
Initial fair value on dates of issuance     4,050,706       1,221,963  
Change in fair value     (1,942,501 )     (643,318 )
Conversion of Series A Convertible Preferred Stock           (27,335 )
Series A Exchange Offer - November 17, 2017     (1,347,082 )     (339,093 )
Balance at December 31, 2017   $ 761,123     $ 212,217  

Schedule of Series A Warrant and Convertible Preferred Stock Conversion Option

Fair Value Assumptions
Series A Warrants Derivative Liability
  March 15, 2018(1)     December 31, 2017  
Calculated aggregate estimated fair value   $ 514,562     $ 761,123  
Series A Warrants outstanding     268,001       268,001  
Value of common stock   $ 1.70     $ 2.29  
Exercise price per share - Series A Warrant   $ 6.61     $ 6.61  
Exercise price per share - Series X Warrant   $ 6.00     $ 6.00  
Expected term (years)     6.1       6.3  
Volatility     59 %     55 %
Risk free rate     2.7 %     2.2 %
Dividend yield     0 %     0 %

 

Fair Value Assumptions

Series A Convertible Preferred Stock
Conversion Option Derivative Liability

  March 15, 2018(1)     December 31 2017  
Calculated aggregate estimated fair value   $ 147,304     $ 212,217  
Series A Convertible Preferred Stock shares     249,667       249,667  
Value of common stock   $ 1.70     $ 2.29  
Common stock exchange factor numerator   $ 6.00     $ 6.00  
Common stock exchange factor denominator   $ 4.97     $ 4.97  
Expected term (years)     6.1       6.3  
Volatility     59 %     55 %
Risk-free interest rate     2.7 %     2.2 %
Dividend yield     0 %     0 %

 

  (1) As the Series A Warrants and shares of Series A Convertible Preferred Stock were each fully exchanged on the March 15, 2018 Exchange Date of the Series A and Series A-1 Exchange Offer, the final estimated fair value of each respective derivative liability was as of the March 15, 2018 Exchange Date of the Series A and Series A-1 Exchange Offer discussed below.

Schedule of Fair Value Assumption Used

Fair Value Assumptions
Senior Secured Convertible Note
  Issue Date
December 27, 2018
    December 31, 2018  
Fair value   $ 7,750,000     $ 7,903,000  
Face value principal payable   $ 7,750,000     $ 7,750,000  
Required rate of return     13.2 %     13.1 %
Conversion price   $ 1.60     $ 1.60  
Value of common stock   $ 0.92     $ 0.96  
Expected term (years)     2.0       2.0  
Volatility     46 %     50 %
Risk free rate     2.5 %     2.5 %
Dividend yield     0 %     0 %

Schedule of Series Z Warrants Issued-upon-exchange of Series A Warrants

Series Z Warrants Issued Upon Exchange of Series A Warrants - March 15, 2018   Series A Warrants Derivative Liability     Series Z Warrants Additional Paid In Capital Equity     Fair Value Change Series A Warrant Derivative Liability Other Income (Expense)  
Series A Warrants derivative liability - December 31, 2017   $ 761,123     $     $  
Series A Warrants derivative liability change in fair value - March 15, 2018     (246,561 )             246,561  
Sub-Total: Series A Warrants derivative liability - March 15, 2018 Exchange Date     514,562             246,561  
Series Z Warrants issued-upon-exchange of Series A Warrants - estimated fair value     (514,562 )     857,603       (343,041 )
Series Z Warrants issued-upon-exchange of Series A Warrants - March 15, 2018   $     $ 857,603     $ (96,480 )

Senior Secured Convertible Note [Member]  
Schedule of Senior Convertible Note Estimated Fair Value

The Senior Convertible Note estimated fair value as of the December 27, 2018 issue date is as follows:

 

Senior Secured Convertible Note - Issue Date - December 27, 2018   Fair Value  
Face value principal payable - issue date December 27, 2018   $ 7,750,000  
Lender fees paid - issue date December 27, 2018     (750,000 )
Proceeds, net - issue date December 27, 2018   $ 7,000,000  
Fair value adjustment - December 27, 2018     750,000  
Fair value - issue date December 27, 2018   $ 7,750,000  

Schedule of Senior Convertible Note Estimated Fair Value and Changes in Face Value Principal Payable

The Senior Convertible Note estimated fair value, changes in fair value, face value principal payable, and changes in face value principal payable, as of December 31, 2018 is as follows:

 

Senior Secured Convertible Note - December 31, 2018   Fair Value    

Face Value

Principal Payable

 
Fair Value /Face Value Principal Payable - issue date December 27, 2018   $ 7,750,000     $ 7,750,000  
Less: bi-monthly Installment Repayments - as of December 31, 2018            
Less: bi-monthly Non-Installment Payments - as of December 31, 2018            
Fair Value /Face Value Principal Payable - before fair value adjustment     7,750,000       7,750,000  
Fair value adjustment - December 31, 2018     153,000        
Fair Value /Face Value Principal Payable - December 31, 2018   $ 7,903,000     $ 7,750,000  

Series A and Series A-1 Exchange Offer [Member]  
Schedule of Deemed Dividend Charged to Accumulated Deficit

Series B Convertible Preferred Stock Issued-Upon-Exchange

Series A Convertible Preferred Stock and Conversion Option Derivative Liability Extinguished-Upon-Exchange

Deemed Dividend Charged to Accumulated Deficit

 

Series A

Series A-1

Exchange Offer

March 15, 2018

Exchange Date

 
Fair value - 499,334 shares of Series B Convertible Preferred Stock issued-upon-exchange   $ 873,835  
Less: Fair value - Series A Convertible Preferred Stock conversion option derivative liability extinguished-upon-exchange     147,304  
Less: Carrying value - 249,667 shares of Series A Convertible Preferred Stock extinguished-upon-exchange      
Deemed dividend charged to accumulated deficit   $ 726,531  

 

Series B Convertible Preferred Stock Issued-Upon-Exchange

Series A-1 Convertible Preferred Stock Extinguished-Upon-Exchange

Increase - Additional Paid-In Capital

 

Series A

Series A-1
Exchange Offer

March 15, 2018

Exchange Date

 
Fair value - 476,234 shares of Series B Convertible Preferred Stock issued-upon-exchange   $ 833,410  
Less: Carry value - 357,259 shares - Series A-1 Convertible Preferred Stock extinguished-upon-exchange     1,032,650  
Increase - additional paid-in capital   $ 199,241  

 

    Series A  
Series A-1 Convertible Preferred Stock Issued-Upon-Exchange   Exchange Offer  
Series A Convertible Preferred Stock and Conversion Option Derivative Liability Extinguished-Upon-Exchange Deemed Dividend Charged to Accumulated Deficit  

November 17, 2017

Exchange Date

 
Fair value - 232,259 shares of Series A-1 Convertible Preferred Stock issued-upon-exchange   $ 843,100  
Less: Fair value - Series A Convertible Preferred Stock conversion option derivative liability extinguished-upon-exchange     339,093  
Less: Carry value - 154,837 shares of Series A Convertible Preferred Stock extinguished-upon-exchange      
Deemed dividend charged to accumulated deficit   $ 504,007  

Schedule of Estimated Fair Value Assumptions Used in Convertible Preferred Stock

Fair Value Assumptions Series B Convertible Preferred Stock  

Series A

Series A-1

Exchange Offer
March 15, 2018
Exchange Date

 
Aggregate fair value   $ 873,835  
Series B Convertible Preferred Stock shares     499,334  
Required rate of return     27.0 %
Common stock conversion factor numerator   $ 3.00  
Common stock conversion factor denominator   $ 3.00  
Value of common stock   $ 1.70  
Expected term (years)     6.1  
Volatility     59 %
Risk free rate     2.7 %
Dividend yield     0 %

 

Fair Value Assumptions

Series B Convertible Preferred Stock - issued upon exchange of Series A-1 Convertible

Preferred Stock

 

Series A

Series A-1
Exchange Offer

March 15, 2018

Exchange Date

 
Aggregate fair value   $ 833,410  
Series B Convertible Preferred Stock shares     476,234  
Required rate of return     27.0 %
Common stock conversion factor numerator   $ 3.00  
Common stock conversion factor denominator   $ 3.00  
Value of common stock   $ 1.70  
Expected term (years)     6.1  
Volatility     59 %
Risk free rate     2.7 %
Dividend yield     0 %

Schedule of Equity Classified Series Z Warrants

    Series A  
    Series A-1  
    Exchange Offer  
    March 15, 2018  
Series Z Warrants - issued-upon-exchange of Series A-1 Warrants - March 15, 2018     Exchange Date  
Fair value - 1,399,185 Series Z Warrants issued-upon-exchange   $ 895,478  
Less: fair value - 279,837 Series A-1 Warrants extinguished-upon-exchange     545,682  
Modification expense /increase to additional paid in capital     349,796  
Carry value - 279,837 Series A-1 Warrants extinguished-upon-exchange - equity classified     1,879,532  
Carry value - Series Z Warrants issued-upon-exchange of Series A-1 Warrants - equity classified   $ 2,229,328  

March 15, 2018 Exchange Date [Member]  
Schedule of Estimated Fair Value Assumptions Used in Convertible Preferred Stock

Fair Value Assumptions

Series Z Warrants issued upon exchange of Series A Warrants

  March 15, 2018
Exchange Date
 
Aggregate fair value   $ 857,603  
Series Z Warrants issued upon exchange of Series A Warrants     1,340,005  
Exercise price per share - Series Z Warrant   $ 3.00  
Value of common stock   $ 1.70  
Expected term (years)     6.1  
Volatility     59 %
Risk free rate     2.7 %
Dividend yield     0 %

 

Fair Value Assumptions   March 15, 2018  
Series Z Warrants - issued upon exchange of Series A-1 Warrants   Exchange Date  
Aggregate fair value   $ 895,478  
Series Z Warrants issued upon exchange of Series A-1 Warrants     1,399,185  
Exercise price per share - Series Z Warrant   $ 3.00  
Value of common stock   $ 1.70  
Expected term (years)     6.1  
Volatility     59 %
Risk free rate     2.7 %
Dividend yield     0 %

 

Fair Value Assumptions   March 15, 2018  
Series A-1 Warrants - exchanged for Series Z Warrants   Exchange Date  
Aggregate fair value   $ 545,682  
Series A-1 Warrants exchanged for Series Z Warrants     279,837  
Exercise price per share - Series A-1 Warrant   $ 6.67  
Series W Warrants     1,399,185  
Exercise price per share - Series W Warrant     5.00  
Value of common stock   $ 1.70  
Expected term (years)     3.9  
Volatility     67 %
Risk free rate     2.5 %
Dividend yield     0 %

November 17, 2017 Exchange Date [Member]  
Schedule of Estimated Fair Value Assumptions Used in Convertible Preferred Stock

       
Fair Value Assumptions - Series A-1 Convertible Preferred Stock issued upon exchange of Series A Convertible Preferred Stock  

November 17, 2017

Exchange Date

 
Aggregate fair value   $ 843,100  
Series A-1 Convertible Preferred Stock shares     232,259  
Required rate of return     27.0 %
Common stock conversion factor numerator   $ 4.00  
Common stock conversion factor denominator   $ 4.00  
Value of common stock   $ 4.33  
Expected term (years)     6.45  
Volatility     53 %
Risk free rate     2.2 %
Dividend yield     0 %

 

Fair Value Assumptions -   November 17, 2017  
Series A Convertible Preferred Stock Conversion Option Derivative Liability   Exchange Date  
Aggregate fair value   $ 339,093  
Series A Convertible Preferred Stock shares     154,837  
Value of common stock   $ 4.33  
Common stock exchange factor numerator   $ 6.00  
Common stock exchange factor denominator   $ 4.97  
Expected term (years)     6.45  
Volatility     53 %
Risk-free interest rate     2.2 %
Dividend yield     0 %

Series A-1 Warrants [Member]  
Schedule of Fair Value Assumption Used

Fair Value Assumptions   November 17, 2017  
Series A-1 Warrants - issued upon exchange of Series A Warrants   Exchange Date  
Aggregate fair value   $ 1,347,082  
Exercise price per share - Series W Warrant   $ 5.00  
Value of common stock   $ 4.33  
Expected term (years)     4.2  
Volatility     57 %
Risk free rate     2.0 %
Dividend yield     0 %