Quarterly report pursuant to Section 13 or 15(d)

Derivative Liabilities

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Derivative Liabilities
3 Months Ended
Mar. 31, 2021
Derivative Liability [Abstract]  
Derivative Liabilities
10 DERIVATIVE LIABILITIES

 

As discussed above in Note 9, during the three months ended March 31, 2021, the Company executed a convertible note with a lender and received gross proceeds of $2,000,000. The Company identified certain features embedded in the note requiring the Company to classify the features as derivative liabilities. The conversion price of the note is subject to adjustment for issuances of the Company’s Common Stock, or any equity linked instruments or securities convertible into the Company’s Common Stock at a purchase price of less than the prevailing conversion price or exercise price. Such adjustment shall result in the conversion price and exercise price being reduced to such lower purchase price.

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2021:

 

   

Fair Value

Measurement
Using Level 3
Inputs

 
    Total  
Balance, December 31, 2020   $ 1,357,528  
Change in fair value of derivative liabilities     303,043  
Derivative liabilities recorded on issuance of convertible notes     1,612,053  
Write-off of derivative liabilities upon settlement of debt     (543,473 )
Balance, March 31, 2021   $ 2,729,151  

 

During the three months ended March 31, 2021, the fair value of the derivative feature was calculated using the following weighted average assumptions:

 

   

March 31,

2021

(unaudited)

 
Risk-free interest rate     0.03 – 0.08 %
Expected life of grants     0.75 year  
Expected volatility of underlying stock     169 - 291 %
Dividends     0 %

 

As of March 31, 2021 and December 31, 2020, the derivative liability was $2,729,151 and $1,357,528, respectively. In addition, for the three months ended March 31, 2021 and 2020, the Company recorded $303,850 and $(31,816) as the change in fair value of the derivative on the condensed consolidated statement of operations. The Company determined that upon measuring the fair value of the derivative features, the total amount recorded as a debt discount exceed the face value of the notes issued and the Company therefore recorded derivative expense of $1,775,057 and $348,334 on the condensed consolidated income statements for the three months ended March 31, 2021 and 2020.