Quarterly report pursuant to Section 13 or 15(d)

Derivative Financial Instruments

v3.21.1
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2019
Investments, All Other Investments [Abstract]  
Derivative Financial Instruments

7. DERIVATIVE FINANCIAL INSTRUMENTS

 

On May 18, 2018, as an inducement to enter into an Amended and Restated Loan Agreement, the Company issued, among other instruments, warrants to acquire 320,000 shares of common stock with an exercise price of $0.10 per share in Canadian dollars (see Note 5). The warrants are valued using the Black Scholes Option Pricing Model and the derivative is fair valued at the end of each reporting period. The Company valued the derivative liability at initial recognition as $30,012.

 

June 30, 2019   Level 1     Level 2     Level 3     Total  
Derivative liabilities     —       —       19,249       19,249  
ARO liabilities     —       —       1,617,563       1,617,563  
                                 
December 31, 2018                                
Derivative liabilities     —       —       37,013       37,013  
ARO liabilities     —       —       1,509,622       1,509,622  

 

A summary of the activity of the Company’s derivative liabilities is shown below:

 

       
Balance, January 1, 2018   $ —  
Additions     30,012  
Fair value adjustments     7,001  
As at December 31, 2018     37,013  
Fair value adjustment     (17,764 )
As at June 30, 2019   $ 19,249  

 

Derivative liability classified warrants were valued using the Black Scholes Option Pricing Model with the range of assumptions outlined below. Expected life was determined based on historical exercise data of the Company.

 

    June 30, 2019     December 31, 2018  
Risk-free interest rate     2.27 %     2.48% - 2.88 %
Expected life     2.1 years       2.4 - 3.0 years  
Expected dividend rate     0 %     0 %
Expected volatility     208 %     202% - 293 %