DERIVATIVE LIABILITIES

9 Months Ended

Sep. 30, 2023

NOTE 6.DERIVATIVE LIABILITIES

The Company’s convertible promissory notes contain variable conversion provisions upon default, Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion options and shares to be issued were recorded as derivative liabilities on the default dates.

Based on the various convertible promissory notes described in Note 4, the fair value of applicable derivative liabilities on notes and the change in fair value of derivative liabilities are as follows for the nine months ended September 30, 2023:


Fair value- December 31, 2022	$	—
Derivative liabilities in conjunction with convertible promissory note defaults		491,846
Conversion of convertible promissory notes		(80,122)
Change in fair value of derivative liabilities		63,889
Fair value- September 30, 2023	$	475,613

The fair value of the derivative liabilities – convertible promissory notes is estimated using a Lattice pricing model with the following assumptions:


	2023
Market value of common stock		$0.0007-$0.005
Expected volatility		99.5-145.6	%
Expected term (in years)		0.5-1.0
Risk-free interest rate		4.37-5.23	%

Electromedical Technologies, Inc 10-Q