Annual report pursuant to Section 13 and 15(d)

Derivative Liability

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Derivative Liability
12 Months Ended
Dec. 31, 2020
Derivative Liability  
Derivative Liability

NOTE 8 - DERIVATIVE LIABILITY

 

The Company determined that the conversion features of the long-term convertible notes payable represented embedded derivatives since the notes are convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt and the embedded conversion feature is bifurcated from the debt host and accounted for as a derivative liability. Accordingly, the fair value of these derivative instruments is recorded as liabilities on the balance sheet with the corresponding amount recorded as a discount to each note and any excess of the fair value of the derivative component over the face amount of the note recorded as an expense on the date of issuance. Discounts are amortized from the date of issuance to the maturity dates of the notes. Fair value of derivative liabilities is evaluated at the end of each reporting period with any change in value reported in other income or expenses on the statements of operations for the period.

 

The following table represents the Company's derivative liability activity for the year ended December 31, 2020:

 

    Year Ended
December 31,
    2020
Derivative liability balance, December 31, 2019   $ —    
Issuance of derivative liability during the period     1,514,000  
Change in derivative liability during the period     (132,000 )
Derivative liability balance, December 31, 2020   $ 1,382,000  

 

The table below represents the average assumptions used in valuing the derivative liability at December 31, 2020:

 

    Year Ended
December 31,
    2020
Expected life in years     4.76 – 4.90  
Stock price volatility     180.45% - 182.99%  
Risk free interest rate     0.17 %
Expected dividends     —    
Forfeiture rate     —