DERIVATIVE LIABILITIES

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE LIABILITIES

11. DERIVATIVE LIABILITIES

Grapefruit recorded derivative instruments in its acquisition of Imaging3, Inc. on July 10, 2019. The Company’s only asset or liability measured at fair value on a recurring basis was its derivative liability associated with related warrants to purchase common stock and the conversion features embedded in convertible promissory notes.

In connection with financing transactions, the Company issued warrants to purchase common stock and convertible promissory notes. These instruments included provisions that could result in a reduced exercise price based on specified full-ratchet anti-dilution provisions. The “reset” provisions were triggered in the event the Company subsequently issued common stock, stock warrants, stock options or convertible debt with a stock price, exercise price or conversion price lower than contractually specified amounts. Upon triggering the “reset” provisions, the exercise / conversion price of the instrument will be reduced. Accordingly, pursuant to ASC 815, these instruments were not considered to be solely indexed to the Company’s own stock and were not afforded equity treatment.

On April 15, 2021, the company renegotiated conversion terms on $4,502,750 of convertible notes with Auctus. All variable conversion prices were replaced with a fixed conversion price of $0.075. In addition, the Company issued an additional 20,000,000 warrants with an exercise price of $0.075 per share.

The following table summarizes activity in the Company’s derivative liability during the year ended December 31, 2021:

12-31-2020 Balance	$	118,641
Creation		-
Reclassification of equity		-
Settlement of debt		-
Change in Value		8,751
12-31-2021 Balance	$	127,392

The Company classifies the fair value of these derivative liabilities under level 3 of the fair value hierarchy of financial instruments. The fair value of the derivative liability was calculated using a Black Scholes model. The Company’s stock price and estimates of volatility are the most sensitive inputs in validation of assets and liabilities at fair value. The liabilities were measured using the following assumptions:

Term	0.01 years -5.0 years
Dividend Yield		0	%
Risk-free rate		2.33% - 2.49	%
Volatility		65-220	%