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DERIVATIVE FINANCIAL INSTRUMENTS
12 Months Ended
Dec. 31, 2022
Investments, All Other Investments [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 12 – DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company determined that the conversion feature of the 7% Convertible Debentures represented an embedded derivative since the Debentures were convertible into a variable number of shares upon conversion. Accordingly, the Debentures are not considered to be conventional debt under ASC 815 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability.

 

The fair value of the derivatives embedded in the 7% Convertible Debentures as of December 31, 2020 was determined using the Monte Carlo simulation method based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 167%, (3) weighted average risk-free interest rate of 9.0%, (4) expected life until January 31, 2024, and (5) the quoted market price of the Company’s common stock at each valuation date.

 

At March 31, 2021, the Company marked to market the fair value of the nine derivatives and determined a fair value of $359,608. The Company recorded a gain resulting from change in fair value of debt derivatives by $7,215 for the three months ending March 31, 2021.

At May 6, 2021, just prior to settlement, the Company marked-to-market the fair value of the nine derivatives and determined a fair value of $3,296,997.  The Company recorded a loss from change in fair value of debt derivatives of $2,940,950 for the three months ended June 30, 2021.  Upon the issuance of 3,507,164 shares of common stock (see Note 10), the balance of the derivative liability of $3,296,997 and the principal totaling $681,581 were reduced to $0.

 A summary of changes in Convertible Debentures for the period ending June 30, 2021 was as follows:

     
Balance at December 31, 2020  $337,874 
Issuance in February 2021  $25,388 
Change in fair value   (7,215)
Balance at March 31, 2021  $356,047 
Change in fair value   2,940,950 
Settlement upon exchange for Common Stock   (3,296,997)
Balance at June 30, 2021