Derivative Liabilities

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Derivative Liabilities

13. Derivative liabilities

The short-term convertible notes, together with certain warrants issued to Leonite and the short term convertible notes disclosed in note 11 above and note 15 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 derivative liability is marked-to-market on a quarterly basis. As of June 30, 2019, the derivative liability was valued at $3,924,231.

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

	Six months ended June 30, 2019
Calculated stock price		$0.07 to $0.09
Risk free interest rate		1.71% to 2.56%
Expected life of convertible notes and warrants		3 to 60 months
expected volatility of underlying stock		124.7% to 206.8%
Expected dividend rate		0	%

The movement in derivative liability is as follows:

	June 30, 2019			December 31, 2018
Opening balance (January 1)	$	4,618,080		$	2,859,832
Derivative liability on issued convertible notes and variable priced warrants		561,022			1,335,709
Fair value adjustments to derivative liability		(1,254,871	)		422,539
Closing balance	$	3,924,231		$	4,618,080