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Derivative Liability
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Derivative Liability

Note 8: Derivative Liability

 

The convertible notes payable discussed in Note 7 has a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.

 

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

 

The Company uses a weighted average Black-Scholes-Merton option pricing model with the following assumptions to measure the fair value of derivative liability at June 30, 2017:

 

Stock price   $0.36
Risk free rate   1.24%
Volatility   250%
Conversion/ Exercise price   $0.16 to $0.17
Dividend rate   0%
Term (years)   0.68 to 1.92

 

The following table represents the Company’s derivative liability activity for the six months ended June 30, 2017:  

       
Derivative liability balance, December 31, 2016   $  
Derivative expense at issuance     2,477,333  
Change in fair market value from issuance to June 30, 2017     (496,037 )
Derivative liability at June 30, 2017   $ 1,981,296  
         
Derivative expense at issuance on or around June 10, 2017   $ 2,477,333  
Debt discount at issuance     (960,132 )
Derivative expense at June 30, 2017   $ 1,517,201