Derivative Liabilities

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liabilities

NOTE 11 – DERIVATIVE LIABILITIES

The Company had issued warrants that contain net cash settlement provisions or do not have fixed settlement provisions because their conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future. The Company concluded that the warrants should be accounted for as derivative liabilities. In determining the fair value of the derivative liabilities, the Company used the Black-Scholes option pricing model at September 30, 2019 and 2018:

	September 30, 2019
Common stock issuable upon exercise of warrants		1,189,949
Market value of common stock on measurement date	$	1.84
Exercise price	$	1.20-2.23
Risk free interest rate (1)		1.63-1.88	%
Expected life in years		0.25-2.25 years
Expected volatility (2)		73.69-87.03	%
Expected dividend yields (3)		0	%

	September 30, 2018
Common stock issuable upon exercise of warrants		1,129,121
Market value of common stock on measurement date	$	2.92
Exercise price	$	3.10
Risk free interest rate (1)		2.59 - 2.88	%
Expected life in years		1.3 – 3.3 years
Expected volatility (2)		67 – 68	%
Expected dividend yields (3)		0	%

(1)	The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.
(2)	The expected volatility was determined by calculating the volatility of the Company’s peers’ common stock.
(3)	The Company does not expect to pay a dividend in the foreseeable future.

The following table shows the change in the Company’s derivative liabilities rollforward for the nine months ended September 30, 2019 and 2018:

	Amount
Balance, December 31, 2018	$	326,452
Initial valuation of derivative liabilities upon issuance of warrants		42,585
Change in fair value of derivative liabilities		527,058
Balance, September 30, 2019	$	896,095

	Amount
Balance, December 31, 2017	$	1,857,252
Initial valuation of derivative liabilities upon issuance of warrants		149,321
Cancellation of warrants		(1,253,140	)
Change in fair value of derivative liabilities		334,990
Balance, September 30, 2018	$	1,088,423

The change in fair value of derivative liabilities includes losses from exercise price modifications.