• Filing Date: 2018-01-12
  • Form Type: 10-Q
  • Description: Quarterly report
v3.8.0.1
DERIVATIVE FINANCIAL INSTRUMENTS
9 Months Ended
Sep. 30, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 5 DERIVATIVE FINANCIAL INSTRUMENTS

 

The following table presents the components of the Company’s derivative financial instruments associated with convertible promissory notes (See Note 4) which have no observable market data and are derived using the Black-Scholes option pricing model measured at fair value on a recurring basis, using Level 1 and 3 inputs to the fair value hierarchy, at September 30, 2017 and December 31, 2016:

 

   September 30,
2017
   December 31,
2016
 
Embedded conversion features  $1,638,733   $963,688 
Insufficient shares   260,681    561,447 
Derivative liability  $1,899,414   $1,525,135 


These derivative financial instruments arise as a result of applying ASC 815 Derivative and Hedging (“ASC 815”), which requires the Company to make a determination whether an equity-linked financial instrument, or embedded feature, is indexed to the entity’s own stock. This guidance applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own stock.

 

During the nine months ended September 30, 2017, the Company had outstanding notes with embedded conversion features and the Company did not, at this date, have a sufficient number of authorized and available shares of common stock to settle the outstanding contracts which triggered the requirement to account for these instruments as derivative financial instruments until such time as the Company has sufficient authorized shares.