| Fair Value Measurement |
6. FAIR VALUE MEASUREMENT
See Note 5 – Notes Payable –
Convertible and Other Notes for warrants classified as derivative liabilities that were issued in connection with a convertible
note.
On August 4, 2017, the Company issued
five-year warrants to purchase an aggregate of 48,023 shares of common stock to our Chief Executive Officer in connection with
his employment agreement. The warrants vest immediately and have exercise prices ranging from $35.00 to $150.00 per share. The
warrants had an issuance date fair value of $153,529, which was recorded as a derivative liability.
Assumptions utilized in the valuation of Level 3 liabilities
are described as follows:
| |
|
For the Three Months Ended |
|
|
For the Nine Months Ended |
|
| |
|
September 30, |
|
|
September 30, |
|
| |
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Risk-free interest rate |
|
|
1.55 - 1.62 |
% |
|
|
0.58% - 1.08 |
% |
|
|
1.47 - 1.62 |
% |
|
|
0.58% - 1.16 |
% |
| Expected term (years) |
|
|
1.28 - 3.75 |
|
|
|
2.28 - 5.00 |
|
|
|
1.28 - 4.00 |
|
|
|
2.28 - 5.00 |
|
| Expected volatility |
|
|
114% - 130 |
% |
|
|
123% - 139 |
% |
|
|
114% - 149 |
% |
|
|
114% - 154 |
% |
| Expected dividend yield |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
The following table sets forth a summary
of the changes in the fair value of Level 3 warrant liabilities that are measured at fair value on a recurring basis:
| Derivative Liabilities |
|
|
|
| Beginning balance as of January 1, 2017 |
|
$ |
1,583,103 |
|
| Issuance of warrants |
|
|
936,881 |
|
| Change in fair value of derivative liability |
|
|
24,108,022 |
|
| Ending balance as of September 30, 2017 |
|
$ |
26,628,006 |
|
| |
|
|
|
|
| Warrants Payable |
|
|
|
|
| Beginning balance as of January 1, 2017 |
|
$ |
155,412 |
|
| Accrual of other warrant obligations |
|
|
8,616 |
|
| Change in fair value of warrants payable |
|
|
2,366,686 |
|
| Ending balance as of September 30, 2017 |
|
$ |
2,530,714 |
|
Assets and liabilities measured at fair value on a recurring
or nonrecurring basis are as follows:
| |
|
September 30, 2017 |
|
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Derivative liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
26,628,006 |
|
|
$ |
26,628,006 |
|
| Warrants payable |
|
|
- |
|
|
|
- |
|
|
|
2,530,714 |
|
|
|
2,530,714 |
|
| Total liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
29,158,720 |
|
|
$ |
29,158,720 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
December 31, 2016 |
|
| |
|
|
Level 1 |
|
|
|
Level 2 |
|
|
|
Level 3 |
|
|
|
Total |
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Derivative liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,583,103 |
|
|
$ |
1,583,103 |
|
| Warrants payable |
|
|
- |
|
|
|
- |
|
|
|
155,412 |
|
|
|
155,412 |
|
| Total liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,738,515 |
|
|
$ |
1,738,515 |
|
|