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Note 7 - Derivative Liabilities
9 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 7. DERIVATIVE LIABILITIES

 

The Company accounts for its derivative instruments under the provisions of ASC 815,Derivatives and Hedging”. Under the provisions of ASC 815, the Company identified embedded features within the Series D Preferred host contracts that qualify as derivative instruments and require bifurcation.

 

The Company determined that the conversion option, redemption option and participating dividend feature contained in the Series D Preferred host instrument required bifurcation. The Company valued the bifurcatable features at fair value. Such liabilities aggregated approximately $7,486,000 and $24,128,000 at September 30, 2021 and December 31, 2020, respectively, and are classified as current liabilities on the Company’s condensed consolidated balance sheets under the caption “Derivative liabilities”. The Company will revalue these features at each balance sheet date and record any change in fair value in the determination of period net income or loss.

 

The change in fair value of such amounts are recorded in the caption “Change in fair value of derivative liabilities” in the Company’s condensed consolidated statements of income (loss). For the three and nine months ended September 30, 2021, the Company recorded a decrease to its derivative liabilities using fair value methodologies of approximately $1,342,000 and $16,558,000 related to Series D embedded derivatives. In conjunction with the conversion of 242 shares of Series D Preferred during the three months ended September 30, 2021, the Company recognized a gain of approximately $34,000. In conjunction with the conversion of 646 shares of Series D Preferred during the nine months ended September 30, 2021, the Company recognized a loss on the extinguishment of derivative liabilities of approximately $311,000.

 

The Company determined that the conversion option, redemption option and participating dividend feature contained in the Series C Preferred host instrument required bifurcation. The Company valued these bifurcatable features at fair value and such liabilities aggregated approximately $0 at September 30, 2020. There is no Series C Preferred outstanding at September 30, 2021. The change in fair value of such amounts are recorded in the caption “Change in fair value of derivative liabilities” in the Company’s condensed consolidated statements of operations. During the three and nine months ended September 30, 2020, the Company recorded a decrease to these derivative liabilities using fair value methodologies of approximately $535,000 and $369,000, respectively.