Quarterly report pursuant to Section 13 or 15(d)

Derivative Liabilities

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Derivative Liabilities
9 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Liabilities
7. Derivative Liabilities

 

The Company has identified derivative instruments arising from embedded conversion features in the Company’s convertible notes payable and accounts payable at September 30, 2018.

 

The following summarizes the Binomial-lattice model 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 nine months ended September 30, 2018.

 

    Low     High  
Annual dividend rate     0 %     0 %
Expected life in years     0       1.00  
Risk-free interest rate     1.93 %     2.59 %
Expected volatility     112 %     182 %

 

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 convertible notes payable and accounts payable.

 

The following are the changes in the derivative liabilities during the nine months ended September 30, 2018.

 

    Nine Months Ended September 30, 2018  
    Level 1     Level 2     Level 3  
Derivative liabilities as January 1, 2018   $ -     $ -     $ 2,596,005  
Addition     -       -       300,585  
Gain on extinguishment of debt     -       -       (59,364 )
Loss on settlement of vendor liability     -       -       (516,734 )
Gain on changes in fair value     -       -       (1,817,014 )
Derivative liabilities as September 30, 2018   $ -     $ -     $ 503,478  

 

The following are the changes in the warrant liabilities during the nine months ended September 30, 2018.

 

    Nine Months Ended September 30, 2018  
    Level 1     Level 2     Level 3  
Loss on settlement of vendor liability   $ -     $ -     $ 3,517,577  
Gain on changes in fair value                -                  -       (1,091,663 )
Derivative liabilities as September 30, 2018   $ -     $ -     $ 2,425,914