authID Inc. Fair Value Disclosure
NOTE 15 – FAIR VALUE MEASUREMENTS
The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value as previously defined in the summary of accounting policies and procedures.
The Company’s financial liabilities as of December 31 that are measured at fair value on a recurring basis were as follows:
| Level 1 | Level 2 | Level 3 | |||||||||||
| 2017 | |||||||||||||
| Derivative instruments (included in current liabilities) | — | — | — | ||||||||||
| 2016 | |||||||||||||
| Derivative instruments (included in current liabilities) | — | — | $ | 18,056,631 | |||||||||
We classified the derivative liability as Level 3 due to the lack of relevant observable market data over fair value inputs such as the probability-weighting of the various scenarios in the arrangement. The change in the derivative activity for the years ended December 31, 2017 and 2016 is included in Note 8 to the consolidated financial statements.
During the year ended December 31, 2017, no non-financial assets and liabilities were measured at fair value. The Company’s non-financial assets and liabilities that were measured at fair value during the year ended December 31, 2016 were as follows:
| Level 1 | Level 2 | Level 3 | ||||||||||
| Property and equipment | $ | — | $ | 100,339 | — | |||||||
| Current assets | $ | 311,867 | — | — | ||||||||
| Accounts payables and other current liabilities | $ | 914,218 | — | — | ||||||||
| Intangible assets | $ | 112,408 | — | $ | 2,401.208 | |||||||
| Goodwill | $ | — | — | $ | 6,569,354 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2017 | Mar 15, 2018 | Showing above |
| 2016 | Jul 12, 2017 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.