Derivative liability

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Derivative liability

14. Derivative liability

The short-term convertible notes, together with certain warrants issued to Leonite and the short term convertible notes issued to Power Up disclosed in note 12 above and note 16 below, have variable priced conversion rights with no fixed floor price and will reprice dependent on the share price performance over varying periods of time. This gives rise to a derivative financial liability, which was initially valued at inception of the convertible notes at $1,335,709 using a Black-Scholes valuation model.

The following assumptions were used in the Black-Scholes valuation model: 

	Year ended December 31, 2018
Calculated stock price		$0.024 to $0.10
Risk free interest rate		1.60% to 3.05%
Expected life of convertible notes and warrants		1 month to 5 years
expected volatility of underlying stock		105.24% to 219.40%
Expected dividend rate		0	%

The movement in derivative liability is as follows: 

	December 31, 2018		December 31, 2017
Opening balance	$	2,859,832	$	—
Derivative liability on convertible notes and variable priced warrants		1,335,709		1,826,500
Fair value adjustments to derivative liability		422,539		1,033,332
Closing balance	$	4,618,080	$	2,859,832