Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

NOTE 6 – FAIR VALUE MEASUREMENTS

The Company has adopted the guidance under ASC Topic 820 for financial instruments measured on a fair value on a recurring basis. ASC Topic 820 establishes a fair value hierarchy, giving the highest priority to quoted prices in active markets and the lowest priority to unobservable data and requires disclosures for assets and liabilities measured at fair value based on their level in the hierarchy. Further authoritative accounting guidance (ASU No. 2009-05) under ASC Topic 820, provides clarification that in circumstances in which a quoted price in an active market for the identical liabilities is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update.

The standard describes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Level 1 – Quoted prices in active markets for identical assets and liabilities.

Level 2 – Input other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets of liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity” and ASC 815, “Derivatives and Hedging”. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the over- all fair value of the financial instruments. In addition, the fair value of free-standing derivative instruments such as warrant and option derivatives are valued using the Black-Scholes modes.

The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair value were determined by using the Black Scholes option-pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2019:

			Fair Value Measurements at Reporting Date Using
			Quoted prices in	Significant Other	Significant
			Active Markets for	Observable	Unobservable
			Identical Assets	Inputs	Inputs
Description	12/31/2019		(Level l)	(Level 2)	(Level 3)
Convertible promissory notes with embedded conversion option	$	2,191,745	—	—	$	2,191,745
Total	$	2,191,745	—	—	$	2,191,745

The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2020:

			Fair Value Measurements at Reporting Date Using
			Quoted prices in	Significant Other	Significant
			Active Markets for	Observable	Unobservable
			Identical Assets	Inputs	Inputs
Description	12/31/2020		(Level l)	(Level 2)	(Level 3)
Convertible promissory notes with embedded conversion option	$	2,298,820	—	—		2,298,820
Total	$	2,298,820	—	—		2,298,820

The following table sets forth a summary of change in fair value of our derivative liabilities for the years ended December 31, 2020 and 2019:

Beginning balance, January 1, 2019	$	1,899,209
Change in fair value of embedded conversion features of convertible promissory notes included in earnings	$	292,536
Embedded conversion option liability recorded in connection with the issuance of convertible promissory notes	$	—
Ending balance, December 31, 2019	$	2,191,745
Change in fair value of embedded conversion features of convertible promissory notes included in earnings	$	(104,386	)
Embedded conversion option liability recorded in connection with the issuance of convertible promissory notes	$	211,461
Ending balance, December 31, 2020	$	2,298,820