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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2019
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 15. Fair Value Measurements The Company’s financial instruments consist of Level 1, Level 2 and Level 3 assets as of December 31, 2019. As of December 31, 2019, the Company’s cash and cash equivalents of $8,852,281, were Level 1 assets and included savings deposits, overnight investments, and other liquid funds with financial institutions. The carrying value of the Company’s 12% Amended Senior Secured Notes (as defined below) approximates fair value based on current market interest rates for debt instruments of similar credit standing and, consequently, their fair values are based on Level 2 inputs. The quantitative information utilized in the fair value calculation of the Level 3 liabilities are as follows: Unearned Revenues – The fair value of unearned revenues as of December 31, 2019 of $41,101,381 was determined with the following inputs: (1) projection of when deferred revenue will be earned; (2) expense necessary to fulfill the subscriptions; (3) gross up of the fulfillment costs to include a market participant level of profitability; (4) slight premium to the fulfillment-costs plus a reasonable profit metric; and (5) reduce projected future cash flows to present value using an appropriate discount rate. The current portion of the unearned revenues is classified within current liabilities based on the expected portion that will be earned (delivery of the subscription) within twelve months, with the remaining portion classified within long-term liabilities on the consolidated balance sheets. The changes in unearned revenues with inputs classified as Level 3 of the fair value hierarchy are reflected within revenues on the consolidated statements of operations. The Company accounted for the embedded conversion features of the 8% Promissory Notes and 10% Convertible Debentures (both as described in Note 16) as derivative liabilities, which required that the Company carry such amounts on its consolidated balance sheets as a liability at fair value, as adjusted at each reporting period-end. The Company accounts for certain warrants and the embedded conversion features of the 12% Convertible Debentures (as described in Note 17) as derivative liabilities, which required the Company carry such amounts on its consolidated balance sheets as a liability at fair value, as adjusted at each reporting period-end. The Company determined, due to their greater complexity, prior to the reset provision (as described in Note 16), the fair value of the L2 Warrants (as described in Note 20) and the embedded conversion feature with respect to the 8% Promissory Notes, as of the date of repayment, and 10% Convertible Debentures, as of the date of conversion, using appropriate valuation models derived through consultations with the Company’s independent valuation firm. The Company determined the fair value of the Strome Warrants (as described in Note 20) utilizing the Black-Scholes valuation model as further described below. After the reset provision, the Company determined the fair value of the L2 Warrants utilizing the Black-Scholes valuation model as further described below since such valuation model meets the fair value measurement objective based on the substantive characteristics of the instrument. These warrants and the embedded conversion features are classified as Level 3 within the fair-value hierarchy. Inputs to the valuation model include the Company’s publicly-quoted stock price, the stock volatility, the risk-free interest rate, the remaining life of the warrants, notes and debentures, the exercise price or conversion price, and the dividend rate. The Company uses the closing stock price of its common stock over an appropriate period of time to compute stock volatility. These assumptions are summarized as follows: L2 Warrants – 2019 assumptions: Black-Scholes option-pricing; expected life: 3.75 years; risk-free interest rate: 1.56%; volatility factor: 130.46%; dividend rate: 0.0%; transaction date closing market price: $0.89; exercise price: $0.50; and 2018 assumptions: Black-Scholes option-pricing; expected life: 4.44 years; risk-free interest rate: 2.49%; volatility factor: 124.40%; dividend rate: 0.0%; transaction date closing market price: $0.48; exercise price: $0.50. Strome Warrants – 2019 assumptions: Black-Scholes option-pricing; expected life: 3.45; risk-free interest rate: 1.62%; volatility factor: 144.56%; dividend rate: 0.0%; transaction date closing market price: $0.80; exercise price: $4.50; and 2018 assumptions: Black-Scholes option-pricing; expected life: 4.45 years; risk-free interest rate: 2.49%; volatility factor: 124.22%; dividend rate: 0.0%; transaction date closing market price: $0.48; exercise price: $0.50. B. Riley Warrants – 2019 assumptions: Black-Scholes option-pricing; expected life: 5.80 years; risk-free interest rate: 1.76%; volatility factor: 127.63%; dividend rate: 0.0%; transaction date closing market price:$0.80; exercise price: $1.00; and 2018 assumptions: Black-Scholes option-pricing; expected life: 6.80 years; risk-free interest rate: 2.59%; volatility factor: 121.65%; dividend rate: 0.0%; transaction date closing market price: $0.48; exercise price: $1.00. The following table represents the carrying amount, valuation and roll-forward of activity for the Company’s warrants accounted for as a derivative liability and classified within Level 3 of the fair-value hierarchy for the years ended December 31, 2019 and 2018:
|  | L2 Warrants |  |  | Strome Warrants |  |  | B. Riley Warrants |  |  | Total Warrant Derivative Liabilities |
Carrying value at January 1, 2018 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
Issuance of warrants on June 11, 2018 |  |  | 312,837 |  |  |  | - |  |  |  | - |  |  |  | 312,837 |
Issuance of warrants on June 15, 2018 |  |  | 288,149 |  |  |  | 1,344,648 |  |  |  | - |  |  |  | 1,632,797 |
Issuance of warrants on October 18, 2018 |  |  | - |  |  |  | - |  |  |  | 382,725 |  |  |  | 382,725 |
Change in valuation of warrant derivative liabilities |  |  | (182,772 | ) |  |  | (756,677 | ) |  |  | (24,675 | ) |  |  | (964,124 | )
Carrying value at December 31, 2018 |  |  | 418,214 |  |  |  | 587,971 |  |  |  | 358,050 |  |  |  | 1,364,235 |
Change in valuation of warrant derivative liabilities |  |  | 316,972 |  |  |  | 448,716 |  |  |  | 249,463 |  |  |  | 1,015,151 |
Exercise of warrants |  |  | (735,186 | ) |  |  | - |  |  |  | - |  |  |  | (735,186 | )
Carrying value at December 31, 2019 |  | $ | - |  |  | $ | 1,036,687 |  |  | $ | 607,513 |  |  | $ | 1,644,200 |
For the years ended December 31, 2019 and 2018, the change in valuation of warrant derivative liabilities recognized within other (expense) income on the consolidated statement of operations, as described in the above table of $(1,015,151) and $964,124, respectively. The L2 Warrants were fully exercised on a cashless basis during the year ended December 31, 2019, resulting in an offset within additional paid-in capital of $735,186 on the consolidated statements of stockholders’ deficiency. The following table represents the carrying amount, valuation and a roll-forward of activity for the conversion option features, buy-in features, and default remedy features, as deemed appropriate for each instrument (collectively the embedded derivative liabilities), with respect to the 8% Promissory Notes, 10% Convertible Debentures, 10% OID Convertible Debentures, 12% Convertible Debentures (refer to Note 17 for each instrument), and Series G Preferred Stock (as described in Note 19) accounted for as embedded derivative liabilities and classified within Level 3 of the fair-value hierarchy for the years ended December 31, 2019 and 2018:
|  | 8% Promissory Notes |  |  | 10% Convertible Debentures |  |  | 10% OID Convertible Debentures |  |  | 12% Convertible Debentures |  |  | Series G Preferred Stock |  |  | Total Embedded Derivative Liabilities |
Carrying value at January 1, 2018 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 72,563 |  |  | $ | 72,563 |
Recognition of embedded derivative liabilities (conversion feature) on June 11, 2018 |  |  | 78,432 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 78,432 |
Recognition of embedded derivative liabilities (conversion feature) on June 15, 2018 |  |  | 81,169 |  |  |  | 471,002 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 552,171 |
Recognition of embedded derivative liabilities (buy-in feature and default remedy feature) on October 18, 2018 |  |  | - |  |  |  | - |  |  |  | 49,000 |  |  |  | - |  |  |  | - |  |  |  | 49,000 |
Recognition of embedded derivative liabilities (conversion feature, buy-in feature, and default remedy feature) on December 12, 2018 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,760,000 |  |  |  | - |  |  |  | 4,760,000 |
Gain on extinguishment of embedded derivatives liabilities upon extinguishment of host instrument |  |  | (29,860 | ) |  |  | (1,042,000 | ) |  |  | (25,000 | ) |  |  | - |  |  |  | - |  |  |  | (1,096,860 | )
Change in valuation of embedded derivative liabilities |  |  | (129,741 | ) |  |  | 570,998 |  |  |  | (24,000 | ) |  |  | 2,627,000 |  |  |  | (72,563 | ) |  |  | 2,971,694 |
Carrying value at December 31, 2018 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 7,387,000 |  |  |  | - |  |  |  | 7,387,000 |
Recognition of embedded derivative liabilities (conversion feature, buy-in feature and default remedy feature) on March 18, 2018 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 822,000 |  |  |  | - |  |  |  | 822,000 |
Recognition of embedded derivative liabilities (conversion feature, buy-in feature and default remedy feature) on March 27, 2018 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 188,000 |  |  |  | - |  |  |  | 188,000 |
Recognition of embedded derivative liabilities (conversion feature, buy-in feature and default remedy feature) on April 8, 2018 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 64,000 |  |  |  | - |  |  |  | 64,000 |
Change in valuation of embedded derivative liabilities |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,040,000 |  |  |  | - |  |  |  | 5,040,000 |
Carrying value at December 31, 2019 |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 13,501,000 |  |  | $ | - |  |  | $ | 13,501,000 |
For the year ended December 31, 2019, the change in valuation of embedded derivative liabilities as described in the above table of $5,040,000 was recognized as other expense on the consolidated statements of operations. For the year ended December 31, 2018, the change in valuation of embedded derivative liabilities as described in the above table of $2,971,694 was recognized as other income on the consolidated statements of operations. In addition, the fair value requirement at each period-end for the Series G Preferred Stock embedded conversion feature was no longer required for the year ended December 31, 2018 since it is not considered a derivative liability, therefore, the carrying amount of $72,563 as of January 1, 2018 was recognized as other income of $72,563 during the year ended December 31, 2018 on the consolidated statements of operations.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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