Annual report pursuant to Section 13 and 15(d)

Derivative Liabilities

v3.7.0.1
Derivative Liabilities
12 Months Ended
Dec. 31, 2016
Derivative Liabilities [Abstract]  
Derivative Liabilities
9. Derivative Liabilities

 

The Company has identified derivative instruments arising from embedded conversion features in the Company’s Convertible Notes Payable and Accounts Payable at December 31, 2016. The Company had no financial assets measured at fair value on a recurring basis as of December 31, 2015.

 

The following summarizes the Black-Scholes assumptions used to estimate the fair value of the derivative liability and warrant liability at the date of issuance and for the convertible notes converted during the year ended December 31, 2016.

 

    Low     High  
Annual dividend rate     0 %     0 %
Expected life     0.25       2.00  
Risk-free interest rate     0.01 %     0.92 %
Expected volatility     163.80 %     314.11 %

 

Risk-free interest rate: The Company uses the risk-free interest rate of a U.S. Treasury Note with a similar term on the date of the grant.

 

Dividend yield: The Company uses a 0% expected dividend yield as the Company has not paid dividends to date and does not anticipate declaring dividends in the near future.

 

Volatility: The volatility was estimated using the historical volatilities of the Company’s common stock.

 

Remaining term: The Company’s remaining term is based on the remaining contractual maturity of the warrants.

 

The following are the changes in the derivative liabilities during the year ended December 31, 2016.

 

    Year Ended December 31, 2016  
    Level 1     Level 2     Level 3  
Derivative liabilities as January 1, 2016   $ -     $ -     $ -  
Addition     -       -       5,119,921  
Conversion     -       -       (4,321,381 )
Loss on changes in fair value     -       -       1,013,901  
Derivative liabilities as December 31, 2016   $ -     $ -     $ 1,812,441  

 

The following are the changes in the warrant liability during the year ended December 31, 2016.

 

    Year Ended December 31, 2016  
    Level 1     Level 2     Level 3  
Fair value as January 1, 2016   $ -     $ -     $ -  
Warrants granted     -       -       132,867  
Loss on changes in fair value     -       -       114,336  
Fair value as December 31, 2016   $ -     $ -     $ 247,203