Quarterly report pursuant to Section 13 or 15(d)

Derivative Liabilities

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Derivative Liabilities
6 Months Ended
Jun. 30, 2020
Derivative Liability [Abstract]  
Derivative Liabilities
10 DERIVATIVE LIABILITIES

 

As discussed above in Note 9, during the six months ended June 30, 2020, the Company executed convertible notes with lenders and received gross proceeds of $1,912,000. The Company identified certain features embedded in the notes requiring the Company to classify the features as derivative liabilities. The conversion price of the notes are 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 six months ended June 30, 2020:

 

   

Fair Value

Measurement
Using Level 3
Inputs

 
    Total  
Balance, December 31, 2019   $ 190,846  
Change in fair value of derivative liabilities     192,562  
Derivative liabilities recorded on issuance of convertible notes     1,800,179  
Write-off of derivative liabilities upon settlement of debt     (349,151 )
Balance, June 30, 2020   $ 1,449,312  

 

 

During the six months ended June 30, 2020, the fair value of the derivative feature was calculated using the following weighted average assumptions:

 

    June 30, 2020  
Risk-free interest rate     0.14 – 1.51 %
Expected life of grants     0.75 year  
Expected volatility of underlying stock     96 - 115 %
Dividends     0 %

  

As of June 30, 2020 and December 31, 2019, the derivative liability was $1,449,312 and $190,846, respectively. In addition, for the six months ended June 30, 2020, the Company recorded $192,562 as a gain on 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 $496,055 on the condensed consolidated income statements.