DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Dec. 31, 2021

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 11. DERIVATIVE FINANCIAL INSTRUMENTS

The following tables summarize the components of the Company’s derivative liabilities and linked common shares As of December 31 and June 30, 2021 and the amounts that were reflected in income related to derivatives for the three months ended December 31, 2021 and 2020:

	December 31, 2021
	Indexed		Fair
The financings giving rise to derivative financial instruments	Shares		Values
Compound embedded derivative		585,842	$	(288,518	)

	June 30, 2021
	Indexed		Fair
The financings giving rise to derivative financial instruments	Shares		Values
Compound embedded derivative		405,106	$	(254,700	)

The following tables summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the six months ended December 31, 2021 and 2020:

The financings giving rise to derivative financial instruments and the income effects:

	Six Months Ended
	December 31, 2021			December 31, 2020
Compound embedded derivative	$	(33,818	)	$	(132,545	)
Day one derivative loss		-			-
Total derivative gain (loss)	$	(33,818	)	$	(132,545	)

The Company’s Convertible Notes gave rise to derivative financial instruments. The Notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.

Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. In addition, the standards do not permit an issuer to account separately for individual derivative terms and features embedded in hybrid financial instruments that require bifurcation and liability classification as derivative financial instruments. Rather, such terms and features must be bundled together and fair valued as a single, compound embedded derivative. The Company has selected the Monte Carlo Simulations valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Monte Carlo Simulations technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.

Significant inputs and results arising from the Monte Carlo Simulations process are as follows for the compound embedded derivative that has been bifurcated from the Convertible Notes and classified in liabilities:

				December 31,			December 31,
	Inception			2021			2020
Quoted market price on valuation date	$	0.01		$	1.01		$	0.0002
Contractual conversion rate	$	0.0054 - $0.0081		$	$0.486 - $0.817		$	0.00010 - $0.00016
Range of effective contractual conversion rates		-			-			-
Contractual term to maturity		1.00 Year			0.25 Years			0.25 Years
Market volatility:
Volatility		138.28%-238.13	%		138.28%-238.13	%		138.28%-238.13	%
Contractual interest rate		5%-12	%		5%-12	%		5%-12	%

The following table reflects the issuances of compound embedded derivatives and changes in fair value inputs and assumptions related to the compound embedded derivatives during the periods ended December 31, 2021 and June 30, 2021.

	December 31, 2021		June 30, 2021
Beginning balance	$	254,700	$	257,493
Issuances:
Convertible Note Financing		-		-
Removals		-		-
Changes in fair value inputs and assumptions reflected		33,818		223,264
Conversions		-		(226,057	)
Ending balance	$	288,518	$	254,700

The fair value of the compound embedded derivative is significantly influenced by the Company’s trading market price, the price volatility in trading and the interest components of the Monte Carlo Simulation technique.