NOTE 9 - DERIVATIVE LIABILITIES

As of June 30, 2022 and December 31, 2021, the Company had a $258,100 and $1,778,100, respectively, derivative liability balance on the condensed consolidated balance sheet and recorded a gain from change in fair value of derivative liabilities of $1,463,000 and $1,520,000 for the three months and six months ended June 30, 2022, respectively. The derivative liability activity comes from the convertible notes payable. The Company analyzed the conversion features and warrants of the various note agreements for derivative accounting consideration under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion features should be classified as a derivative because the exercise price of these Convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the notes and recorded a derivative liability. As disclosed in note 18, with the conversion of the notes payable in July 2022, the value of the embedded conversion features decreased significantly at June 30, 2022.

The embedded derivatives for the notes are carried on the Company’s condensed consolidated balance sheet at fair value. The derivative liability is marked-to-market each measurement period and any unrealized change in fair value is recorded as a component of the condensed consolidated statement of operations and the associated fair value carrying amount on the consolidated balance sheet is adjusted by the change. The Company fair values the embedded derivative using a lattice-based valuation model or Monte Carlo simulation.

The following table summarizes the derivative liabilities included in the condensed consolidated balance sheet at June 30, 2022 and December 31, 2021:

Fair Value of Embedded Derivative Liabilities:

SCHEDULE OF DERIVATIVE LIABILITIES