Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

24. Derivative Financial Liabilities

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24. Derivative Financial Liabilities
12 Months Ended
Dec. 31, 2017
Derivative Financial Liabilities  
Derivative Financial Liabilities

Note 24 — Derivative Financial Liabilities

 

The fair value of derivative financial liabilities from a derivative financial instrument is considered current.

 

The fair value of the Group’s interest rate derivatives is determined by Management using inputs based on bank quotes. The fair value of the Group’s convertible promissory notes derivatives is determined by Management using a valuation model based on certain inputs that are observable.

 

    2017     2016     2015  
Derivatives not designated as hedging instruments                        
Conversion feature on promissory notes   $ 1,859,700     $ 794,235     $ 2,568,188  
Interest rate swaps         $     $ 165,648  
Total derivatives not designated as hedging instruments   $ 1,859,700     $ 794,235     $ 2,733,836  

  

Interest rate swaps

 

The Group entered into interest rate swap contracts by using floating-to-fixed interest rate swaps. The interest rate swap contracts were linked to a part of a leasing contract. The interest rate swap contract was closed during 2016. As a result of the termination of the interest rate swap contract the amount owed to the financial institution is $163,741 at December 31, 2017 and is included in loans and borrowings in the accompanying consolidated statements of financial position. The notional value as at December 31, 2015 was $1,432,225. The change in fair value during the years ended December 31, 2016 and 2015 amounted to $18,096 and $33,558, respectively.

 

The convertible promissory notes issued to a certain director were classified as convertible promissory notes with an embedded derivative liability. The host notes are accounted for at amortized cost, with an embedded derivative liability being measured at fair value with changes in value being recorded in the accompanying consolidated statements of loss and comprehensive loss. The notional value as of December 31, 2017 was $1,859,700. The change in fair value during the year ended December 31, 2017 was $292,562.

 

The summary of the observable inputs used for the year ended December 31, 2017, 2016 and 2015 are as follow:

 

    Year ended
December 31,
2017
    Year ended
December 31,
2016
    Year ended
December 31,
2015
 
                     
Conversion price     $1.30 - $1.80       $1.40 - $3.55       $1.40 - $3.55  
Stock price     $1.30 - $1.98       $1.80 - $3.55       $1.25 - $4.00  
Risk-free interest rate     0.82% - 1.90%       0.44% - 0.92%       0.09% - 0.71%  
Expected term (in years)     0.01 - 1       0.01 - 1       0.09 - 1  
Average stock price volatility     80.08%       100.60%       141.03%