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Fair Value Measurements
 12 Months Ended
Dec. 31, 2017
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 8 - 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, 2017 and 2016:

 

    Fair value measured at December 31, 2017
      Total carrying value at December 31,      

Quoted prices in active

markets

       Significant other observable inputs       Significant unobservable inputs  
      2017       (Level 1)       (Level 2)       (Level 3)  
Liabilities                                
Derivative liabilities   $ -       -       -     $ -  

 

    Fair value measured at December 31, 2016
    Total carrying value at December 31,    

Quoted prices in active

markets

    

Significant other observable

inputs

     Significant unobservable inputs  
    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 inclusive of derivative liabilities     3,283,034       -       -       3,283,034  

 

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2017 and 2016.

 

Level 3 Valuation Techniques

 

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, 2017 and 2016:

 

Derivative liabilities balance - January 1, 2016   $ 3,794,153  
Change in fair value of derivative liability     (5,921,409 )
Reclassification from derivative     92,601  
Fair value adjustments for warrant liabilities     25,266,593  
Derivative liabilities balance - December 31, 2016   $ 23,231,938  
Conversion of warrant liabilities     (51,325,017 )
Fair value adjustments for warrant liabilities     39,222,099  
Cashless warrant exercise     (12,277,968 )
Loss on issuance of Series C Convertible Preferred stock     2,809,497  
Net proceeds from issuance of Series C Convertible Preferred Stock and warrants for cash in an offering     925,115  
Loss on issuance of Series C-1 Convertible Preferred stock     478,035  
Net cash proceeds from issuance of Series C-1 Convertible Preferred Stock and warrants for cash and digital currency in an offering     825,005  
Net digital currency proceeds from issuance of Series C-1 Convertible Preferred Stock and warrants for cash and digital currency in an offering     250,000  
Reclassification between convertible notes and derivative liabilities     (4,138,704 )
Derivative liabilities balance - December 31, 2017     -  
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  
Conversion of shortfall shares liabilities     (14,915,419 )
Derivative liabilities for shortfall of shares balance - December 31, 2017   $ -  
Convertible notes at fair value - January 1, 2016   $ 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  
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 - December 31, 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 year ended December 31, 2017 is as follows:

 

Warrant Liabilities

 

Date of valuation   March 2, 2017     May 24, 2017     December 7, 2017     December 31, 2016  
Strike Price     0.025 - 18.000       0.085       0.025 - 0.085       0.03 - 60.0  
Volatility     186.7% - 208.3 %     210.10% - 254.70 %     255.89% - 465.94 %     118% - 230 %
Risk-free interest rate     1.25% - 1.83 %     1.24% - 1.79 %     1.67% - 2.14 %     0.35% - 2.23 %
Contractual life (in years)     1.79 to 3.79       1.52 to 5.00       0.98 to 4.88       0.10 to 3.96  
Dividend yield (per share)     0       0       0       0  

 

Senior Convertible Notes at Fair Value

 

Date of valuation   March 2, 2017     December 31, 2016  
Strike Price     0.32       0.0252  
Volatility     267.8 %     300.42% - 328.04 %
Risk-free interest rate     0.68 %     0.51% - 0.63 %
Dividend yield (per share)     0       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.