FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 7 – FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

● Level 1 – Quoted prices in active markets for identical assets and liabilities;

● Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and

● Level 3 – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Liabilities measured at fair value on a recurring basis are summarized as follows:

	Fair value measurement using inputs						Carrying amount
	Level 1		Level 2		Level 3		December 31, 2019		December 31, 2018
Financial instruments:
Series 2023 Note Derivative	$	-	$	-	$	-	$	-	$	253,215
Series A Note Derivative	$	-	$	-	$	-	$	-	$	1,526,857

The following table summarizes the activity for financial instruments at fair value using Level 3 inputs for 2019 and 2018:

	2019			2018
Balance at beginning of year	$	1,780,072		$	2,047,264
Issuance of additional Series 2023 Notes		-			27,858
Issuance of additional Series A Notes		-			183,541
Net unrealized gain included in operations		-			(478,591	)
Impact of change in accounting policy		(1,780,072	)		-
Balance at end of year	$	-		$	1,780,072

The recorded value of certain financial assets and liabilities, which consist primarily of cash and cash equivalents, receivables, and accounts payable and accrued expenses approximate their fair value at December 31, 2018 and 2017 based upon the short-term nature of the assets and liabilities. Based on borrowing rates currently available to the Company for loans with similar terms, and the remaining short-term period outstanding, the carrying value of notes payable other than PIK notes approximate fair value. The estimated fair value of the PIK Notes Payable was approximately $0 and $13,863,433 at December 31, 2019 and 2018 (Level 3), respectively.

For the Company's warrant and PIK note derivative liabilities, Level 3 fair value hierarchy was estimated using a Monte Carlo Model using the following assumptions:

Series 2023 Note derivative liability	Fair Value Measurements
	Using Inputs
	December 31, 2019		December 31, 2018
Market price and estimated fair value of stock	$	-	$	0.05
Exercise price	$	-	$	0.59
Term (years)		-		4.58
Dividend yield		-		-
Expected volatility		-		142.7	%
Risk-free interest rate		-		2.50	%

Series A Note derivative liability	Fair Value Measurements
	Using Inputs
	December 31, 2019		December 31, 2018
Market price and estimated fair value of stock	$	-	$	0.05
Exercise price	$	-	$	0.40
Term (years)		-		4.58
Dividend yield		-		-
Expected volatility		-		142.7	%
Risk-free interest rate		-		2.50	%