| 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.
|