Fair Value Measurement Total Level 1 Level 2 Level 3 Warrant Liability $ 95,371 $ - $ - $ 95,371 Investment in Debt Securities 128,259 128,259 - - Fair Value at September 30, 2017: $ 223,630 $ 128,259 $ - $ 95,371 Warrant Liability December – 31, 2016 $ 246,451 $ - $ - $ 246,451 Because these warrants have full reset adjustments tied to future issuance of equity securities by the Company, it is subject to derivative liability treatment under ASC 815-40-15. The warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other (Income) Expense on the Company’s Consolidated Statement of Operations until the warrants are exercised, expire, or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability is determined each reporting period by utilizing the Black-Scholes option pricing model. The investments in debt securities are recorded at amortized cost since they are considered held-to-maturity. The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the nine months ended September 30, 2017: Beginning Balance January 1, 2017 $ 246,451 Change in Fair Value of Warrant Liability Ending Balance, September 30, 2017 $ 95,371 The significant assumptions used in the Black-Scholes option pricing model as of September 30, 2017 and December 31, 2016 include the following: September 30, 2017 December 31, 2016 Volatility 81.0% - 105.3% - Risk-free Interest Rate 0.81% - 0.44% - Exercise Price $ 0.60 - $1.37 $ 0.50 - $1.37 Fair Value of Common Stock $ 0.44 $ 0.57 Expected Life 0.03 2.0 years 0.1 2.7 years – – 10. PROCEEDINGS The Company and/or its affiliated subsidiaries are involved in the following litigation: District Court of Tulsa County, State of Southern LLC v. Healthcare Management of Oklahoma, LLC, Oklahoma, Case No. CJ 01781. –
Fair Value Measurement Total Level 1 Level 2 Level 3 Warrant Liability $ 95,371 $ - $ - $ 95,371 Investment in Debt Securities 128,259 128,259 - - Fair Value at September 30, 2017: $ 223,630 $ 128,259 $ - $ 95,371 Warrant Liability – December 31, 2016 $ 246,451 $ - $ - $ 246,451 Because these warrants have full reset adjustments tied to future issuance of equity securities by the Company, it is subject to derivative liability treatment under ASC 815-40-15. The warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other (Income) Expense on the Company’s Consolidated Statement of Operations until the warrants are exercised, expire, or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. The fair value of the warrant liability is determined each reporting period by utilizing the Black-Scholes option pricing model. The investments in debt securities are recorded at amortized cost since they are considered held-to-maturity. The table presented below is a summary of changes in the fair value of the Company’s Level 3 valuation for the nine months ended September 30, 2017: Beginning Balance January 1, 2017 $ 246,451 Change in Fair Value of Warrant Liability Ending Balance, September 30, 2017 $ 95,371 The significant assumptions used in the Black-Scholes option pricing model as of September 30, 2017 and December 31, 2016 include the following: September 30, 2017 December 31, 2016 Volatility 81.0% - 105.3% - Risk-free Interest Rate 0.81% - 0.44% - Exercise Price $ 0.60 - $1.37 $ 0.50 - $1.37 Fair Value of Common Stock $ 0.44 $ 0.57 Expected Life 0.03 – 2.0 years 0.1 – 2.7 years 10. PROCEEDINGS The Company and/or its affiliated subsidiaries are involved in the following litigation: Southern LLC v. Healthcare Management of Oklahoma, LLC, District Court of Tulsa County, State of Oklahoma, Case No. CJ – 01781.
11-20-2017-10Q.docx