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Fair Value Measurements
 9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Fair Value Disclosures [Abstract]    
Fair Value Measurements

Note 5 - Fair Value Measurements

 

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.

 

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of September 30, 2017 and December 31, 2016:

 

    Fair value measured at September 30, 2017  
    Total carrying value
at September 30, 2017		     Quoted prices in
active markets
(Level 1)		     Significant other
observable inputs
(Level 2)		     Significant
unobservable inputs
(Level 3)		  
Assets                                
Digital Currencies   $ 2     $             2       -       -  
                                 
Liabilities                                
Derivative liabilities   $ 4,341,334       -       -     $ 4,341,334  


 

    Fair value measured at December 31, 2016  
    Total carrying value
at December 31, 
2016		     Quoted prices in
active markets
(Level 1)		     Significant other
observable inputs
(Level 2)		     Significant
unobservable inputs
(Level 3)		  
Assets                                
Digital Currencies   $ 199     $ 199                     -       -  
                                 
Liabilities                                
Derivative liabilities   $ 23,231,938       -       -     $ 23,231,938  
Derivative liabilities for shortfall of shares     14,915,419       -       -       14,915,419  
Convertible notes inclusive of derivative liabilities     3,283,034       -       -       3,283,034  


 

There were no transfers between Level 1, 2 or 3 during the three months ended September 30, 2017.

 

The following table presents additional information about Level 3 assets and liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

 

Changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2017:

 

Derivative liabilities balance - January 1, 2017   $ 23,231,938  
Conversion of warrant liabilities     (51,325,017 )
Fair value adjustments for warrant liabilities     40,338,368  
Cashless warrant exercise     (11,638,566 )
Loss on issuance of Preferred C     2,809,497  
Net proceeds from May fund raising     925,114  
Derivative liabilities balance - September 30, 2017   $ 4,341,334  

 

Derivative liabilities for shortfall of shares balance - January 1, 2017   $ 14,915,419  
Conversion of shortfall shares liabilities     (14,915,419 )
Derivative liabilities for shortfall of shares balance - September 30, 2017   $ -  

 

Convertible notes at fair value - January 1, 2017   $ 3,283,034  
Conversion of convertible notes     (20,132,105 )
Change in fair value of convertible notes (including OID discount)     16,849,071  
Convertible notes at fair value - September 30, 2017   $ -  

 

The Company’s derivative liabilities are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the nine months ended September 30, 2017 is as follows:

 

Warrant Liabilities

 

Date of valuation   March 2, 2017     May 24, 2017     September 30, 2017  
Strike Price     0.025 - 18.000       0.085       0.025 - 18.000  
Volatility     186.7% - 208.3%       210.10% - 254.70%       207.65% - 295.61%  
Risk-free interest rate     1.25% - 1.83%       1.24% - 1.79%       1.34% - 1.87%  
Contractual life (in years)     1.79 to 3.79       1.52 to 5.00       1.17 to 4.65  
Dividend yield (per share)     0       0       0  

 

Convertible Notes at Fair Value

 

Date of valuation   March 2, 2017  
Strike Price     0.32  
Volatility     267.8%  
Risk-free interest rate     0.68%  
Dividend yield (per share)     0  

 

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Management.

Note 10 – Fair Value Measurements

 

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.

 

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2016 and 2015:

 

    Fair value measured at December 31, 2016  
    Total carrying
value at		     Quoted prices in active markets     Significant other observable inputs     Significant unobservable inputs  
    December 31, 2016     (Level 1)     (Level 2)     (Level 3)  
Assets                                
Digital Currencies   $ 199     $ 199                  
                                 
Liabilities                                
Derivative liabilities   $ 23,231,938                     $ 23,231,938  
Derivative liabilities for shortfall of shares   $ 14,915,419                     $ 14,915,419  
Convertible notes at fair value   $ 3,283,034                     $ 3,283,034  

  

    Fair value measured at December 31, 2015  
    Total carrying
value at		     Quoted prices in active markets     Significant other observable inputs     Significant unobservable inputs  
    December 31, 2015     (Level 1)     (Level 2)     (Level 3)  
Assets                        
Digital Currencies   $ 17,036     $ 17,036     $ -     $ -  
                                 
Liabilities                                
Derivative liabilities   $ 3,794,153                     $ 3,794,153  
Convertible notes at fair value     1,781,156       -       -       1,781,156  

 

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2016 and 2015.

 

The following table presents additional information about Level 3 assets and liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

 

Changes in Level 3 liabilities measured at fair value for the years ended December 31, 2016 and 2015:

 

Derivative liabilities Balance - January 1, 2015   $ -  
Fair value of derivative liability on date of issuance (January 19, 2015)     952,600  
Fair value of derivative liability on date of issuance (April 20, 2015)     2,843,811  
Fair value of derivative liability on date of issuance (April 20, 2015)     537,152  
Change in fair value of derivative liability     (482,666 )
Cashless warrants exercise related to derivative liability (October 15, 2015)     (56,744 )
Derivative liabilities Balance - December 31, 2015   $ 3,794,153  
Change in fair value of derivative liability     (5,921,409 )
Reclassification from derivative liability     92,601  
Fair value adjustments for warrant liabilities     25,266,593  
Derivative liabilities Balance - December 31, 2016   $ 23,231,938  

 

 

Convertible notes at fair value Balance - January 1, 2015   $ -  
Fair value of senior convertible notes on date of issuance (December 16, 2015)     1,777,408  
Change in fair value of senior convertible notes     3,748  
Convertible notes at fair value - December 31, 2015   $ 1,781,156  
Addition of convertible notes     320,002  
Conversion of notes into common stock     4,208,546  
Gain on extinguishment of debt     (837,369 )
Change in fair value of convertible notes (including OID discount)     (2,096,700 )
Reclassification to derivative liability     (92,601 )
Convertible notes at fair value - December 31, 2016   $ 3,283,034  

 

Derivative liabilities for shortfall of shares Balance - January 1, 2016   $ -  
Change in fair value of derivative liability shortfall of shares     14,915,419  
Derivative liabilities for shortfall of shares Balance - December 31, 2016   $ 14,915,419  

  

The Company’s derivative liabilities are measured at fair value using the Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the year ended December 31, 2016 is as follows:

 

Warrant Liabilities

 

Date of valuation   December 31, 2016
Strike Price   0.03 - 60.0
Volatility   118% - 230%
Risk-free interest rate   0.35% - 2.23%
Contractual life (in years)   0.10 to 3.96
Dividend yield (per share)   0

 

Derivative Liabilities for shortfall of shares

 

Date of valuation   December 31, 2016
Strike Price   0.0252
Volatility   268.69%
Risk-free interest rate   1.78%
Contractual life (in years)   3.75
Dividend yield (per share)   0%

 

Senior Convertible Notes at Fair Value

 

Date of valuation   December 31, 2016
Strike Price   0.0252
Volatility   300.42% - 328.04%
Risk-free interest rate   0.51% - 0.63%
Dividend yield (per share)   0%

 

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Management.