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Fair Value Measurements | 3 Months Ended
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Sep. 30, 2019
Fair Value Disclosures [Abstract] |
Fair Value Measurements |
6. | Fair Value Measurements
At September 30, 2019, the estimated fair value of derivative liabilities measured on a recurring basis are as follows:
|  | Fair Value Measurements at
|  | September 30, 2019
|  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Derivative liability – Warrants |  | $ | — |  |  | $ | — |  |  | $ | 8,109,724 |  |  | $ | 8,109,724 |
Derivative liability -Conversion option on convertible debenture |  |  | — |  |  |  | — |  |  |  | 2,533,668 |  |  |  | 2,533,668 |
Total derivatives |  | $ | — |  |  | $ | — |  |  | $ | 10,643,392 |  |  | $ | 10,643,392 |
The following table presents the activity for liabilities measured at fair value using unobservable inputs for the three months ended September 30, 2019:
|  | Derivative liabilities - Warrants |  | Derivative liability - Conversion Option on Convertible Debenture
Beginning balance at July 1, 2019 |  | $ | — |  |  | $ | — |
Additions to level 3 liabilities |  |  | 8,367,012 |  |  |  | 2,638,966 |
Change in in fair value of level 3 liability |  |  | (257,288 | ) |  |  | (105,298 | )
Transfer in and/or out of Level 3 |  |  | — |  |  |  | — |
Balance at September 30, 2019 |  | $ | 8,109,724 |  |  | $ | 2,533,668 |
Derivative liability – Warrants The Company accounts for stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Under applicable accounting guidance, stock warrants that are precluded from being indexed to the Company’s own stock because of full-rachet anti-dilution provisions or the adjustments to the strike price due to an occurrence of a future event; are accounted for as derivative financial instruments. The stock warrants issued September 24, 2019 were not considered indexed to the Company’s own stock because of the adjustment to strike price, an occurrence of a future event such as the Company’s pending capital raise. The warrants associated with the level 3 liability were issued on September 24, 2019 and were valued using the Black-Scholes-Merton model with the following assumptions: stock price of $8.95, exercise price of $4.00, term of 5 years expiring September 2024, volatility of 71.44%, dividend yield of 0%, and risk-free interest rate of 1.52%. The valuation at September 30, 2019 used the following assumptions: stock price of $8.73, exercise price of $4.00, term of 5 year expiring September 2024, volatility of 71.42%, dividend yield of 0%, and risk-free interest rate of 1.55%. (See note 5 “Related Party Transactions - Convertible debenture transactions”) Derivative liability – Conversion option in convertible debenture The Company valued the conversion option of the $2 million 10% OID Convertible Delayed Draw Debenture which may be convertible into shares of common stock at $4.00 per share prior to the completion of an offering or, subsequent to the closing of the offering, the lower of $4.00 or 80% of the offering price per unit to the public in this offering and are mandatorily redeemable upon such closing at 100% of the accrued principal amount and unpaid interest to the date of redemption. (See note 5 “Related Party Transactions - Convertible debenture transactions with Acuitas” as of September 24, 2019). The conversion option was valued on September 24, 2019 using the Black Scholes-Mertons model with the following assumptions: stock price of $8.95, conversion price of $4.00, term of 1 year expiring September 2020, volatility of 75.48%, dividend yield of 0%, and risk-free interest rate of 1.78%. The valuation at September 30, 2019 used the following assumptions: stock price of $8.73, conversion price of $4.00, term of 1 year expiring September 2020, volatility of 75.5%, dividend yield of 0%, and risk-free interest rate of 1.75%.

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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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