Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurement

Fair Value Measurement
6 Months Ended
Jun. 30, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurement



The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


  Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
  Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
  Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).


As disclosed in Note 6, the Bridge Notes are reported at fair value, with changes in fair value recorded through the Company’s consolidated statements of operations as other income (expense) in each reporting period.


The following tables set forth the Company’s consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy at June 30, 2019 and December 31, 2018. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.


    Fair value at                    
    June 30, 2019     Level 1     Level 2     Level 3  
Convertible Bridge Notes   $ 3,510,000     $ -     $ -     $ 3,510,000  
Total   $ 3,510,000     $ -     $ -     $ 3,510,000  


    Fair value at                    
    December 31, 2018     Level 1     Level 2     Level 3  
Convertible Bridge Notes   $ 2,960,000     $ -     $ -     $ 2,960,000  
Total   $ 2,960,000     $ -     $ -     $ 2,960,000  


The following tables present a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that use significant unobservable inputs (Level 3) and the related realized and unrealized gains (losses) recorded in the consolidated statement of operations during the periods.


    Six Months Ended
June 30, 2019
Fair value, December 31, 2018   $ 2,960,000  
Issuances of debt     30,000  
Accrued interest     271,774  
Conversions of debt and accrued interest to shares of common stock     -  
Amortization of debt issuance costs     2,500  
Net unrealized loss on convertible bridge notes     245,726  
Fair value, June 30, 2019   $ 3,510,000  
Less: current portion of bridge notes    


Fair value, June 30, 2019, less current portion   $




    Six Months Ended
June 30, 2018
Fair value, December 31, 2017   $ 3,270,000  
Issuances of debt     290,000  
Accrued interest     140,488  
Conversions of debt and accrued interest to shares of common stock     (57,664 )
Amortization of debt issuance costs     2,500  
Net unrealized gain on convertible bridge notes     (345,324 )
Fair value, June 30, 2018   $ 3,300,000  


The Company’s convertible Bridge Notes are valued by using Monte Carlo Simulation methods and discounted future cash flow models. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These convertible Bridge Notes do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy. The following assumptions were used to value the Company’s convertible Bridge Notes at June 30, 2019: dividend yield of -0-%, volatility of 170%, risk free rate of 2.01% and an expected term of 9 months. The fair value of the Bridge Note was estimated based on the present value expected future cash flows using a discount rate of 20%.