8 DERIVATIVE LIABILITY
The derivative liability is a non-cash liability that is not associated with any form of debt or convertible instrument. The derivative liability represents the Black-Scholes valuation of the Company’s Financing warrants that are subject to currency fluctuation as the exercise price of the Company’s Financing warrants is fixed in Canadian dollars and the functional currency of the Company is the U.S. dollar. This results in the warrants being considered a derivative as a variable amount of cash in the Company’s functional currency will be received on exercise. The fair value of this derivative liability fluctuates from period to period based on fluctuations in the share price, changing Black-Scholes inputs and changes in foreign exchange rates. These fair value changes are recognized through profit and loss.
|
|
| Financing Warrants |
|
|
|
|
| Balance, December 31, 2014 | $ | 1,613,526 |
| Change in fair value and warrant exercises |
| 153,298 |
| Value of exercised warrants |
| (1,711,824) |
| Balance, December 31, 2015 | $ | 55,000 |
|
|
| (31,834) |
| Value of exercised warrants |
| (23,166) |
| Balance, December 31, 2016 and 2017 | $ | - |
The following assumptions were used for the Black-Scholes derivative liability valuation of the Financing warrants at December 31, 2016:
|
|
| Financing warrants (1) | Financing warrants (2) | |||
|
| Risk-free interest rate | 0.43% | (2015 – 0.48%) | 0.43% | (2015 – 0.48%) | |
|
| Expected life of warrants | 0.00 years | (2015 – 0.07 years) | 0.00 years | (2015 – 0.07 years) | |
|
| Annualized volatility | 125% | (2015 – 125%) | 125% | (2015 – 125%) | |
|
| Dividend rate | 0.00% | (2015 – 0.00%) | 0.00% | (2105 – 0.00%) | |
(1) 3,175,000 financing warrants issued on January 24, 2014
(2) 1,200,000 financing warrants issued on December 31, 2013