Derivative Liabilities |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Liabilities |
Note 6 – Derivative Liabilities
The above convertible notes contained an embedded conversion option with a conversion price that could result in issuing an undeterminable amount of future common stock to settle the host contract. Accordingly, the embedded conversion option is required to be bifurcated from the host instrument (convertible note) and treated as a liability, which is calculated at fair value, and marked to market at each reporting period.
The Company used the binomial pricing model to estimate the fair value of its embedded conversion option liabilities with the following inputs:
A reconciliation of the beginning and ending balances for the derivative liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows at June 30, 2021 and December 31, 2020:
Changes in fair value of derivative liabilities are included in other income (expense) in the accompanying consolidated statements of operations.
SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021
During the three months ended June 30, 2021 and 2020, the Company recorded a change in fair of derivative liabilities of $645,830 and $224,378, respectively.
During the six months ended June 30, 2021 and 2020, the Company recorded a change in fair of derivative liabilities of $949,680 and $192,562, respectively.
In connection with bifurcating the embedded conversion option and accounting for this instrument at fair value, the Company computed a fair value on the commitment date, and upon the initial valuation of this instrument, determined that the fair value of the liability exceeded the proceeds of the debt host instrument.
As a result, the Company recorded a debt discount at the maximum amount allowed (the face amount of the debt), which required the overage to be recorded as a derivative expense.
For the three months ended June 30, 2021 and 2020, the Company recorded a derivative expense of $0 and $147,721, respectively.
For the six months ended June 30, 2021 and 2020, the Company recorded a derivative expense of $1,775,057 and $496,055, respectively.
SURGEPAYS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021
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