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Derivative Liabilities

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 7. Derivative Liabilities

As discussed in Note 6, Convertible Notes, the Company issued Series CN Note acceleration offer convertible notes payable that provide variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock, therefore the number of shares of common stock issuable upon conversion of the promissory note is indeterminate.

The fair values of the Company’s derivative liabilities are estimated at the issuance date and are revalued at each subsequent reporting date. The Company recognized a derivative liability and debt discount of $569,588 at March 14, 2018 related to the Series CN Convertible notes 1 of 2; $69,400 at April 11, 2018 related to the Series CN Notes Warrant Acceleration; and $697,186 at November 30, 2018 related to the Series CN Convertible note 2 of 2. The derivative liability was revalued at December 31, 2019 and 2018 with a value of $211,028 and $1,325,653. The Company recorded a net gain of $1,114,625 and a net loss of $87,630 for the years ended December 31, 2019 and 2018 respectively related to the derivative liability. The 2018 net loss consists of a $110,829 gain for a portion of the derivative liability being settled upon a noteholders decision to convert their outstanding principal to equity under the terms of the convertible note agreement, and a loss of $198,459 from the change in fair value.

The fair value of the derivative liability for CN Convertible Note 1 of 2 and CN Note Warrant Acceleration was calculated using the Black-Scholes model using the following assumptions.

	31-Dec-19			31-Dec-18
Expected life		0.21			1.2
Volatility (based on comparable company)		86.4	%		72.03	%
Risk Free interest rate		1.58	%		2.48	%
Dividend yield (on common stock)		-			-

The fair value of the derivative liability for CN Convertible Note 2 of 2 was calculated using the Black-Scholes model using the following assumptions.

	31-Dec-19			31-Dec-18
Expected life		0.93			1.92
Volatility (based on comparable company)		104.89	%		63.7	%
Risk Free interest rate		1.58	%		2.48	%
Dividend yield (on common stock)		-			-

Reconciliation of the derivative liability measured at fair value on a recurring basis with the use of significant unobservable inputs (level 3) from December 31, 2018 to December 31, 2019:

January 1, 2018	$	-
Initial value - March 14, 2018		569,588
Initial value - April 18, 2018		69,400
Initial value – November 30, 2018		697,186
Fair value of settlement from debt conversion		(208,980	)
Loss from change in value		198,459
For the period ended December 31, 2018	$	1,325,653
Loss from change in value		(1,114,625	)
For the period ended December 31, 2019	$	211,028

The following table presents the Company’s fair value hierarchy for applicable assets and liabilities measured at fair value as of December 31, 2019 and December 31, 2018.

	Level 1		Level 2		Level 3		Total
Derivative Liability December 2019	$	-		-		211,028	$	211,028

	Level 1		Level 2		Level 3		Total
Derivative Liability December 2018	$	-		-		1,325,653	$	1,325,653