Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENT

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FAIR VALUE MEASUREMENT
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Note 17 - FAIR VALUE MEASUREMENTS

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

 

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3—Unobservable inputs to the valuation methodology that is significant to the measurement of fair value of assets or liabilities.

 

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of September 30, 2017:

 

    Level 1     Level 2     Level 3     Total  
                         
Warrant liability                     85,663       85,663  

 

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2016:

 

    Level 1     Level 2     Level 3     Total  
                         
Derivative liability   $ -     $ -     $ 5,115,280     $ 5,115,280  
Warrant liability                     26,903       26,903  
Total   $ -     $ -     $ 5,142,183     $ 5,142,183  

 

The table below sets forth a summary of changes in the fair value of the Company's Level 3 financial liabilities from December 31, 2016 through September 30, 2017:

 

    Debt Derivative Liability    

Warrant

Liability

 
Balance, December 31, 2016     5,115,280       26,903  
Transfers in (out):                
Initial fair value of debt derivative at note issuance     11,023,244       -  
Transfers out of Level 3 upon conversion and settlement of notes     (1,146,201 )     -  
Transfers out of Level 3 upon note modification     (30,806,073 )        
Mark-to-market at September 30, 2017:                
Embedded derivative     15,813,750       58,760  
Balance, September 30, 2017   $ -0-     $ 85,663