Fair Value Measurement

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENT

NOTE 9 – FAIR VALUE MEASUREMENT

ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Also, ASC Topic 820 provides clarification that in circumstances, in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.

The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Level 1 - Quoted prices in active markets for identical assets and liabilities.

Level 2 - Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following table sets forth the liabilities at June 30, 2018 which were recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required, these are classified based on the lowest level of input that is significant to the fair value measurement:

			Fair Value Measurements at Reporting Date Using
	June 30, 2018		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Contingent liability – Verifi Acquisition	$	-		-		-	$	-
Derivative liability – ALB shortfall provision		1,433,578		-		-		1,433,578
Derivative liability – stock warrants		7,092,523		-		-		7,092,523
	$	8,526,101		-		-	$	8,526,1011

			Fair Value Measurements at Reporting Date Using
	December 31, 2017		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Contingent Liability – Verifi Acquisition		1,957,225						1,957,225
Derivative liability – ALB shortfall provision		2,307,363						2,307,363
	$	4,264,588		-		-	$	4,264,588

The roll forward of the Contingent liability – Verifi acquisition is as follows:

Balance December 31, 2017	$	1,957,226
Fair value adjustment		(27,290	)
Write-off contingent liability		(1,929,936	)
Balance June 30, 2018		--

During the second quarter of 2018, the nature of the business related to this acquisition changed. Specifically, the contracts, arrangements and initial activities of the business did not pan out as planned and accordingly, this portion of the business was abandoned. The personnel and sellers continue to be involved with the company working on other deals and projects. As a result of the abandonment of these specific business plans, management has concluded that there will be no payouts in the future as no targets will be met. Accordingly, the contingent liability is effectively zero. In determining the accounting for this write-down, the Company notes none of the facts discussed here are indicative of facts and circumstances that existed at acquisition or during Q1. Further, this is not considered a renegotiation or reneging of the original agreement. Thus, the write down of the contingent liability should be a period item (change in fair value of fair value liability)

The roll forward of the derivative liability – ALB shortfall provision is as follows:

Balance December 31, 2017	$	2,307,363
Fair value adjustment		151,143
Extinguishment due to modification		(1,408,154	)
Balance June 30, 2018	$	1,433,578

On May 25, 2018, the agreement with a holder of 400,000 shares of common stock was modified. The result was the issuance of a total of 1,000,000 shares of common stock, with no true-up, and the cancellation of 400,000 shares of common stock. Thus, the liability is fair valued one last time at May 25, 2018 and then one half of such liability is extinguished through the issuance of additional shares.

From time to time, certain assets may be recorded at fair value on a non-recurring basis. These non-recurring fair value adjustments typically are the result of impairment determinations or the initial determination of fair value of assets received and liabilities assumed upon the consummation of a business combination (see Note 3, Acquisitions and Note 12, Variable Interest Entity). Outside of such business combination assets and liabilities, there were no assets or liabilities held for use where the carrying value of such assets or liabilities were measured at fair value on a non-recurring basis.