DERIVATIVE LIABILITIES

6 Months Ended

Jun. 30, 2021

Derivative Liabilities

DERIVATIVE LIABILITIES

NOTE 7–DERIVATIVE LIABILITIES

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. In addition, the Company issued warrants with variable conversion provisions. The conversion terms of the convertible notes and warrants are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants were recorded as derivative liabilities on the issuance date and revalued at June 30, 2021 and December 31, 2020.

Based on the convertible notes described in Note 6, the derivative liability day one loss is $389,712 and the change in fair value at June 30, 2021 and December 31, 2020 is $30,351 and $71,464. The fair value of applicable derivative liabilities on note, warrants and change in fair value of derivative liability are as follows for the six months ended June 30, 2021.

	Derivative Liability Convertible Notes			Derivative Liability Warrants		Total
Balance as of December 31, 2020		378,134			219,814		597,948
Change in fair value		(21,186	)		76,285		55,099
Change in fair value due to conversion		(24,748	)		—		(24,748	)
Balance as of June 30, 2021	$	332,200		$	296,099	$	628,299

At June 30, 2021, the fair value of the derivative liability convertible notes is estimated using a Monte Carlo pricing model with the following assumptions:

Market value of common stock	$	1.67
Expected volatility		66.2	%
Expected term (in years)		0.11
Risk-free interest rate		0.13	%

At June 30, 2021, the fair value of the derivative liability – warrants is estimated using a Monte Carlo pricing model with the following assumptions:

Market value of common stock	$	1.67
Expected volatility		97.7	%
Expected term (in years)		4.39
Risk-free interest rate		0.59	%