Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
NOTE 8. FAIR VALUE MEASUREMENTS

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

 

The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of the dates indicated:

 

   

Fair Value at

March 31,

     Fair Value Measurement Using  
Description   2018     Level 1     Level 2     Level 3  
                         
Derivative Liabilities – Conversion Feature   $ 4,059,400     $ -     $ -     $ 4,059,400  
                                 
    $ 4,059,400     $ -     $ -     $ 4,059,400  

 

    Fair Value at December 31,       Fair Value Measurement Using    
Description     2017     Level 1       Level 2       Level 3    
                         
Derivative Liabilities – Conversion Feature   $ 9,331,400     $ -     $ -     $ 9,331,400  
                                 
    $ 9,331,400     $ -     $ -     $ 9,331,400  

 

The following table presents a reconciliation of the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

 

Balance at December 31, 2017   $ 9,331,400  
         
Change in Fair Market Value of Conversion Feature     (2,281,000 )
Derivative Debt Converted into Equity     (9,431,000 )
Fair Value of Derivative Liability Recorded Upon Issuance of Convertible Debt     6,440,000  
         
Balance at March 31, 2018   $ 4,059,400  

  

The Company estimates the fair value of the derivative liabilities using the Black-Scholes-Merton option pricing model using the following assumptions for issuances during the period ended:

  

    March 31,     March 31,  
    2018     2017  
             
Stock Price   $2.52 - $6.90     $3.81 - $5.04  
Conversion and Exercise Price   $2.06 - $6.60     $2.06 - $6.60  
Annual Dividend Yield   -     -  
Expected Life (Years)   1.12 - 2.66     0.70 - 3.42  
Risk-Free Interest Rate   1.77% - 2.27%     1.05% - 2.50%  
Expected Volatility   62.36% - 134.84%     61.88% - 123.56%  

  

Volatility is based on historical volatility of our common stock. Historical volatility was computed using weekly pricing observations for our common stock that correspond to the expected term. This method produces an estimate that is representative of our expectations of future volatility over the expected term of these warrants and conversion features.

 

No financial assets were measured on a recurring basis as of March 31, 2018 and December 31, 2017.

  

Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis

 

Non-financial assets, such as property, equipment and leasehold improvements, goodwill, and intangible assets, are required to be measured at fair value only when an impairment loss is recognized.