DERIVATIVE LIABILITIES

12 Months Ended

Dec. 31, 2019

DERIVATIVE LIABILITIES

8. DERIVATIVE LIABILITIES

The fair value of the Company’s derivative liabilities is estimated at the issuance date and is revalued at each subsequent reporting date. We estimate the fair value of derivative liabilities associated with our convertible notes payable, Series B preferred stock and warrants using a multinomial lattice model based on projections of various potential future outcomes. Where the number of warrants or common shares to be issued under these agreements is indeterminate, the Company has concluded that the equity environment is tainted, and all additional warrants and convertible debt and equity are included in the value of the derivatives.

The significant assumptions used in the valuation of the derivative liabilities at September 30, 2019 are as follows:

Conversion to stock	Monthly
Stock price on the valuation date	$	0.0676
Conversion price	$	21.38 - $0.095
Risk free interest rates		1.49% - 2.74	%
Years to maturity		15.0
Expected volatility		185%–363	%

The value of our derivative liabilities was estimated as follows at December 31:

	2019		2018
Convertible notes payable	$	3,606,194	$	7,809,054
Series B preferred stock		2,535,359		2,339,898
Warrants		19,342		214,153
Total	$	6,160,895	$	10,363,105

The calculation input assumptions are subject to significant changes from period to period and to management’s judgment; therefore, the estimated fair value of the derivative liability will fluctuate from period to period, and the fluctuation may be material.