Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v3.20.1
Fair Value Measurements
 12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements

NOTE 16. FAIR VALUE MEASUREMENTS

 

In accordance with ASC No. 820 (Fair Value Measurements and Disclosures), the Company uses various inputs to measure the outstanding warrants and certain embedded conversion feature associated with convertible debt on a recurring basis to determine the fair value of the liability. ASC No. 820 also establishes a hierarchy categorizing inputs into three levels used to measure and disclose fair value. The hierarchy gives the highest priority to quoted prices available in active markets and the lowest priority to unobservable inputs. An explanation of each level in the hierarchy is described below:

 

Level 1 – Unadjusted quoted prices in active markets for identical instruments that are accessible by the Company on the measurement date

 

Level 2 – Quoted prices in markets that are not active or inputs which are either directly or indirectly observable

 

Level 3 – Unobservable inputs for the instrument requiring the development of assumptions by the Company

 

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2018 and 2017:

 

    December 31, 2018  
    Fair value at December 31, 2018     Quoted prices in active markets
(Level 1)		     Significant other observable inputs (Level 2)     Significant unobservable inputs
(Level 3)		  
Warrant derivative liability   $ 3,558     $ —     $ —     $ 3,558  
Debt derivative liability     8,038       —       —       8,038  
Total fair value   $ 11,596     $ —     $ —     $ 11,596  

 

    December 31, 2017  
    Fair value at December 31, 2017     Quoted prices in active markets
(Level 1)		     Significant other observable inputs (Level 2)     Significant unobservable inputs
(Level 3)		  
Warrant derivative liability   $ 16,492     $ —     $ —     $ 16,492  
Debt derivative liability     48,195       —       —       48,195  
Total fair value   $ 64,687     $ —     $ —     $ 64,687  

 

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2018 and 2017.

 

The following table presents changes in Level 3 liabilities measured at fair value for the years ended December 31, 2018 and 2017. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.

 

    Warrant Liability     Debt Derivative Liability     Total  
Balance – December 31, 2016   $ 1,437     $ —     $ 1,437  
Additional warrant liability     14,698       —       14,698  
Additional derivative liability from issuance of convertible notes     —       15,817       15,817  
Extinguishment of derivative liabilities related to debt conversion and repayment     —       (2,634 )     (2,634 )
Change in fair value     357       35,012       35,369  
Balance – December 31, 2017     16,492       48,195       64,687  
Additional derivative liability from issuance of convertible notes     —       17,882       17,882  
Extinguishment of warrant liabilities related to warrants exercise     (1,256 )     —       (1,256 )
Extinguishment of derivative liabilities related to debt conversion and repayment     —       (40,862 )     (40,862 )
Change in fair value     (11,678 )     (17,177 )     (28,855 )
Balance – December 31, 2018     3,558       8,038       11,596  

 

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities and embedded conversion feature that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 and 2017 is as follows:

 

    As of December 31, 2018     As of December 31, 2017  
          Embedded           Embedded  
   

Warrant

Liability

     Conversion Feature    

Warrant

Liability

     Conversion Feature  
Strike price   $ 7.80     $ 2.61     $ 5.93     $ 3.47  
Contractual term (years)     2.7       0.6       3.2       0.8  
Volatility (annual)     91.2 %     91.2 %     135.5 %     135.5 %
Risk-free rate     2.24 %     2.36 %     1.98 %     1.55 %
Dividend yield (per share)     0 %     0 %     0 %     0 %