Quarterly report pursuant to Section 13 or 15(d)

DERIVATIVE FINANCIAL INSTRUMENTS

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DERIVATIVE FINANCIAL INSTRUMENTS
6 Months Ended
Jun. 30, 2021
DERIVATIVE FINANCIAL INSTRUMENTS  
Note 9 - Derivative Financial Instruments

NOTE 9 – DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company determined the conversion feature of the 7% Convertible Debentures represented an embedded derivative since the Debentures were convertible into a variable number of shares upon conversion. Accordingly, the Debentures are not considered to be conventional debt under ASC 815 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability.

 

The fair value of the derivatives embedded in the 7% Convertible Debentures as of December 31, 2020 was determined using the Monte Carlo simulation method based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 167%, (3) weighted average risk-free interest rate of 9.0%, (4) expected life until January 31, 2024, and (5) the quoted market price of the Company’s common stock at each valuation date.

 

At March 31, 2021, the Company marked to market the fair value of the nine derivatives and determined a fair value of $359,608. The Company recorded a gain resulting from change in fair value of debt derivatives of 7,215 for the three months ending March 31, 2021.

 

At May 6, 2021, just prior to settlement, the Company marked-to-market the fair value of the nine derivatives and determined a fair value of $3,296,997.  The Company recorded a loss from change in fair value of debt derivatives of $2,940,950 for the three months ended June 30, 2021.  Upon the issuance of 3,507,164 shares of common stock (see Note 7), the balance of the derivative liability of $3,296,997 and the principal totaling $681,581 were reduced to $0.

 

A summary of changes in derivative liabilities for the six months ended June 30, 2021 was as follows:

 

Balance at December 31, 2020

 

$ 337,874

 

Issuance in February 2021

 

$ 25,388

 

Change in fair value

 

 

(7,215 )

Balance at March 31, 2021

 

 

356,047

 

Change in fair value

 

 

2,940,950

 

Settlement upon exchange for Common Stock

 

 

(3,296,997 )

Balance at June 30, 2021

 

 

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