Note 8 - Fair Value Measurements

12 Months Ended

Dec. 31, 2019

NOTE

FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received in the sale of an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company has categorized all investments recorded at fair value based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

●	Level 1: Quoted prices in active markets for identical assets or liabilities that the organization has the ability to access at the reporting date.
●	Level 2: Inputs other than quoted prices included in Level 1, which are either observable or that can be derived from or corroborated by observable data as of the reporting date.
●	Level 3: Inputs include those that are significant to the fair value of the asset or liability and are generally less observable from objective resources and reflect the reporting entity’s subjective determinations regarding the assumptions market participants would use in pricing the asset or liability.

Financial assets and liabilities measured at fair value on a recurring basis

The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the hierarchy.

The stock purchase warrants issued in

June 2017

contain certain cash settlement features and, accordingly, the Company considered them to be liabilities and accounted for them at fair value using Level

inputs. The Company determined the fair value of this warrant liability using a binomial asset pricing model that consisted of a conditional probability weighted expected return method that values the Company’s equity securities assuming various possible future outcomes to estimate the allocation of value within

one

or more of the scenarios. Using this method, unobservable inputs included the Company’s equity value, expected timing of possible outcomes, risk free interest rates and stock price volatility.

The following table sets forth a summary of changes in the fair value of Level

liabilities measured at fair value on a recurring basis for the years ended

December 31, 2019

and

2018:

Description	Balance at December 31, 2017		Established in 2018		Change in Fair Value			Balance at December 31, 2018

Warrant liability	$	15,242,915	$	-	$	(12,705,598	)	$	2,537,317

Description	Balance at December 31, 2018		Established in 2019		Change in Fair Value		Balance at December 31, 2019

Warrant liability	$	2,537,317	$	-	$	5,710,362	$	8,247,679

The following table identifies the carrying amounts of such liabilities at

December 31, 2019

and

2018:

	Level 1		Level 2		Level 3		Total

Warrant liability	$	-	$	-	$	2,537,317	$	2,537,317
Balance at December 31, 2018	$	-	$	-	$	2,537,317	$	2,537,317

	Level 1		Level 2		Level 3		Total

Warrant liability	$	-	$	-	$	8,247,679	$	8,247,679
Balance at December 31, 2019	$	-	$	-	$	8,247,679	$	8,247,679

Financial assets and liabilities carried at fair value on a non-recurring basis

The Company does

not

have any financial assets or liabilities measured at fair value on a non-recurring basis.

Non-financial assets and liabilities carried at fair value on a recurring basis

The Company does

not

have any non-financial assets or liabilities measured at fair value on a recurring basis.

Non-financial assets and liabilities carried at fair value on a non-recurring basis

The Company measures its long-lived assets, including property and equipment and goodwill, at fair value on a non-recurring basis when they are deemed to be impaired.

such impairment was recognized in the years ended

December 31, 2019

and

2018.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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