Note 10 - Derivative Liability

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE

10

– DERIVATIVE LIABILITY

As discussed in Note

1,

on a recurring basis, we measure certain financial assets and liabilities based upon the fair value hierarchy. The following table presents information about the Company’s liabilities measured at fair value as of

December 31, 2018

and

2017:

	Level 1		Level 2		Level 3		Fair Value at December 31, 2018
Liabilities		-		-		-		-
Derivative Liability		-		-		$608,598		$608,598

	Level 1		Level 2		Level 3		Fair Value at December 31, 2017
Liabilities		-		-		-		-
Derivative Liability		-		-		$238,674		$238,674

As of

December 31, 2018,

and

2017,

the Company had a

$608,598

and

$238,674

derivative liability balance on the balance sheets, respectively and recorded a loss from derivative liability fair value adjustment of

$197,982

and

$148,396

during the year ended

December 31, 2018

and

2017,

respectively. The Company assessed its outstanding convertible credit line payable as summarized in Note

9

 – Convertible Credit Line Payable- Related Party and determined certain convertible credit lines payable with variable conversion features contain embedded derivatives and are therefore accounted for at fair value under ASC

920,

Fair Value Measurements and Disclosures and ASC

825,

Financial Instruments.

Utilizing Level

3

Inputs, the Company recorded fair market value adjustments related to convertible notes payable for the year ended

December 31, 2017

of

$148,396.

The derivative liability was initially measured at

$90,278,

resulting in a loss on initial measurement of

$2,912,

on

September 1, 2017

using the following assumptions: exercise price of

$1.50,

58,244

common share equivalents, and a fair value of the common stock of

$1.55

per share. The fair market value adjustments as of

December 31, 2017

were calculated utilizing a max valuation method using the following assumptions: exercise price of

$1.50,

60,577

common share equivalents, and a fair value of the common stock of

$3.94

per share.

Utilizing Level

3

Inputs, the Company recorded fair market value adjustments related to convertible notes payable for the year ended

December 31, 2018

of

$197,982.

The derivative liabilities were initially measured at

$171,942,

resulting in a loss on initial measurement of

$122,362,

using the following assumptions: exercise price of

$1.50,

33,053

common share equivalents, and a weighted average fair value of the common stock of

$5.20

per share. The fair market value adjustments as of

December 31, 2018

were calculated utilizing a max valuation method using the following assumptions: exercise price of

$1.50,

93,630

common share equivalents, and a fair value of the common stock of

$6.50

per share.

A summary of the activity of the derivative liability is shown below:

Balance at December 31, 2016	$	-
Derivative liabilities recorded		87,366
Day one loss		2,912
Change due to note conversion		-
Loss on change in derivative fair value adjustment		148,396
Balance at December 31, 2017	$	238,674
Derivative liabilities recorded		49,580
Day one loss		122,362
Loss on change in derivative fair value adjustment		197,982
Balance at December 31, 2018		608,598