Quarterly report pursuant to Section 13 or 15(d)

Derivative Liabilities Disclosure

v3.10.0.1
Derivative Liabilities Disclosure
9 Months Ended
Sep. 30, 2018
Notes  
Derivative Liabilities Disclosure

NOTE 11 - DERIVATIVE LIABILITIES

 

The following table summarizes fair value measurements by level at September 30, 2018 for assets and liabilities measured at fair value on a recurring basis:

 

 

Level I

Level II

Level III

Total

Derivative liability on note payable

$

--

$

--

$

807,362

$

807,362

Derivative liability on note payable - related party

$

--

$

--

$

498,457

$

498,457

 

The following table summarizes fair value measurements by level at December 31, 2017 for assets and liabilities measured at fair value on a recurring basis:

 

 

Level I

Level II

Level III

Total

Derivative liability on note payable - related party

$

--

$

--

$

261,784

$

261,784

 

The Company issued a convertible promissory note in January 2018 and a convertible promissory note to a related party in 2017. The convertible notes require us to record the value of the conversion features as liabilities, at fair value, pursuant to ASC 815, including provisions in the notes that protect the holder from declines in our stock price, which is considered outside the control of the Company. The derivative liabilities are marked-to-market each reporting period and changes in fair value are recorded as a non-operating gain or loss in our statement of operations, until they are completely settled. The fair value of the conversion features is determined each reporting period using the Black-Scholes option pricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility, interest rates and expected term. The assumptions used in valuing the derivative liabilities at September 30, 2018 were as follows:

 

September 30, 2018

December 31, 2017

Significant assumptions (weighted-average):

Risk-free interest rate at grant date

2.59%

1.41% - 1.76%

Expected stock price volatility

275.63%

187.14% - 198.52%

Expected dividend payout

--

--

Expected option life (in years)

1

1

Expected forfeiture rate

0%

0%

 

The following is a reconciliation of the derivative liabilities at September 30, 2018 and December 31, 2017:

 

Notes Payable

Notes Payable

Related Party

Value at December 31, 2017

$

--

$

261,784

Initial value at debt issuance

622,399

--

Increase in value

184,963

236,673

Value at September 30, 2018

$

807,362

$

498,457