Derivative Instrument

3 Months Ended

Mar. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instrument

13. DERIVATIVE INSTRUMENT

The Company has note payables with elements that qualify as a derivative instrument. The note payable are convertible at the lowest trading price during the previous 15-25 days ending on the last trading day prior to notice. This variable conversion feature requires bifurcation from the convertible debenture and measurement at fair value.

The derivative liability, as it relates to the instrument, is shown in the following table:

Fair Value, December 31, 2019	$	383,852
Change in value of derivative liability		242,266
Fair Value, March 31, 2020	$	626,118

The derivative liability was valued using the Black-Scholes method with the following inputs:

Expected life	9 months
Stock price volatility		245	%
Annual risk-free interest rate		2.63	%
Expected dividends		None

ASC 820, “Fair Value Measurements” and ASC 825, “Financial Instruments”, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument is categorized within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Assets and liabilities measured at fair value on a recurring basis were presented on the Company’s consolidated balance sheet as of March 31, 2020 and December 31, 2019 as follows:

	Fair Value Measurements at
	March 31, 2020
	Using Fair Value Hierarchy
Description	Total		Level 1		Level 2		Level 3
Derivative liability	$	626,118	$	-	$	-	$	626,118
Total	$	626,118	$	-	$	-	$	626,118

	Fair Value Measurements at
	December 31, 2019
	Using Fair Value Hierarchy
Description	Total		Level 1		Level 2		Level 3
Derivative liability	$	383,852	$	-	$	-	$	383,852
Total	$	383,852	$	-	$	-	$	383,852