Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENT

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FAIR VALUE MEASUREMENT
3 Months Ended
Mar. 31, 2016
Notes to Financial Statements  
Note 16 - FAIR VALUE MEASUREMENT

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 are 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 March 31, 2016:

 

    Level 1     Level 2     Level 3     Total  
                                 
Derivative liability   $ -     $ -     $ 124,932     $ 124,932  
Warrant liability                     19,425       19,425  
Total   $ -     $ -     $ 144,357     $ 144,357  

 

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, 2015:

 

    Level 1     Level 2     Level 3     Total  
                                 
Derivative liability   $ -     $ -     $ 170,531     $ 170,531  
Warrant liability                     22,746       22,746  
Total   $ -     $ -     $ 193,277     $ 193,277  

 

The table below sets forth a summary of changes in the fair value of the Company's Level 3 financial liabilities from December 31, 2015 through March 31, 2016: 

 

    Debt Derivative Liability    

Warrant

Liability

 
                 
Balance, December 31, 2015    $ 170,531       22,746  
Transfers in (out):                 
Initial fair value of debt derivative at note issuance      96,170          
Fair value of debt derivative at note extinguishment transferred to equity      (173,787 )        
Mark-to-market at March 31, 2016:                 
Embedded derivative      32,018       (3,321 )
Balance, March 31, 2016    $ 124,932     $ 19,425