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Derivative Liabilities

3 Months Ended

Mar. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liabilities

(11) Derivative Liabilities

The Company analyzed the warrant for derivative accounting consideration under ASC 815, “Derivatives and Hedging, and hedging,” and determined that the instrument should be classified as a liability since the warrant becomes effective at issuance resulting in there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of March 31, 2021. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black-Scholes valuation model. The following weighted-average assumptions were used in the March 31, 2021:

		Three months ended
		March 31, 2021
Expected term			2.30 - 2.75
Expected average volatility			85% - 105%
Expected dividend yield			-
Risk-free interest rate			0.19% - 0.35%

The following table summarizes the changes in the derivative liabilities during the three months ended March 31, 2021:  

Fair Value Measurements Using Significant Observable Inputs (Level 3)
Balance at December 31, 2020		$	1,115,260
Addition of new derivatives recognized as warrant			9,730,919
Addition of new derivatives recognized as loss on derivatives			10,813,347
Exercise of warrants			(2,902,119	)
Change in fair value of derivative liability			(7,176,380	)
Balance at March 31, 2021		$	11,581,027

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- References

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- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-URI http://asc.fasb.org/topic&trid=2229140

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