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Derivative Liabilities

6 Months Ended

Jun. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Note 8. Derivative Liabilities

As discussed in Note 7, Convertible Notes, the Company issued Series CN Note acceleration offer convertible notes payable that provide variable conversion provisions. The conversion terms of the convertible notes 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, therefore the number of shares of common stock issuable upon conversion of the promissory note is indeterminate.

The Convertible Noteholders discussed in Note 7 were provided the option of extending their notes by 24 months or 12 months for the Milestone I March 14, 2020 and Milestone II November 30, 2020 Convertible Note maturities, respectively. Upon completion of the March 20, 2020 offering for common stock and debt restructuring, a balance of $110,167 of Series CN 1 and $168,000 in CN 2 was neither converted, nor extended under the terms of the amendments to both maturities. Consequently, the derivative liabilities referred to above survived outside of debt conversion and modified extension terms and were valued at $6,774 as of June 30, 2020.

The fair values of the Company’s derivative liabilities are estimated at the issuance date and are revalued at each subsequent reporting date. The Company recognized a debt discount and related derivative liability of $13,528 at March 20, 2020 related to the Series CN 2 extension. The derivative liability was revalued at June 30, 2020 with a value of $34,143.

The fair value of the derivative liabilities for CN Convertible Note 2 of 2 was calculated using the Black-Scholes model using the following assumptions.

	30-June-20			31-Dec-19
Expected life		0.42 - 1.68			0.93
Volatility		100.44 -133.12	%		104.89	%
Risk Free interest rate		0.16 - 0.18	%		1.58	%
Dividend yield (on common stock)		-			-

Reconciliation of the derivative liabilities measured at fair value on a recurring basis with the use of significant unobservable inputs (level 3) from December 31, 2019 to June 30, 2020:

December 31, 2019	$	211,028
Extinguishment change in derivative from conversion		(23,100	)
Extinguishment change in derivative from extension		(3,440	)
Initial derivative value – March 20, 2020		13,528
Net gain from change in value		(157,099	)
For the period ended June 30, 2020	$	40,917

The following table presents the Company’s fair value hierarchy for applicable assets and liabilities measured at fair value as of December 31, 2019 and June 30, 2020:

	Level 1		Level 2		Level 3		Total
Derivative Liability December 31, 2019	$	-		-		211,028	$	211,028

		Level 1				Level 2				Level 3				Total
Derivative Liability June 30, 2020		$	-				-				40,917			$	40,917