The Company analyzed the conversion option for derivative accounting consideration under ASC 815, Derivatives and Hedging, and hedging, and determined that the instrument should be classified as a liability since the conversion option becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The Company accounts for warrants as a derivative liability due to there being no explicit limit to the number of shares to be delivered upon settlement of all conversion options.

Fair Value Assumptions Used in Accounting for Derivative Liabilities.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2019. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.

For the nine months ended September 30, 2019 and year ended December 31, 2018, the estimated fair values of the liabilities measured on a recurring basis are as follows:

	Nine Months Ended		Year ended
	September 30,		December 31,
	2019		2018
Expected term	0.47 - 1.43 years		1.22 - 2.01 years
Expected average volatility	229% - 320%		265% - 309%
Expected dividend yield		-		-
Risk-free interest rate	1.75% - 2.40%		2.27% - 2.88%

The following table summarizes the changes in the derivative liabilities during the nine months ended September 30, 2019.

Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance - December 31, 2018	$	662,038

Gain on change in fair value of the derivative		(155,080	)
Balance - September 30, 2019	$	506,958

The aggregate (gain) loss on derivatives during the nine months ended September 30, 2019 and 2018 was as follows;

	Nine Months Ended
	September 30,
	2019			2018
Day one loss due to derivative liabilities on convertible notes	$	-		$	404,339
(Gain) loss on change in fair value of the derivative liabilities		(155,080	)		3,560
	$	(155,080	)	$	407,899