DERIVATIVE LIABILITIES

6 Months Ended

May 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

NOTE 8 - DERIVATIVE LIABILITIES

The Company accounts for derivative financial instruments in accordance with ASC 815, which requires that all derivative financial instruments be recorded in the balance sheets either as assets or liabilities at fair value.

The Company’s derivative liability is an embedded derivative associated with one of the Company’s convertible promissory notes. The convertible promissory notes were issued at various times but with similar terms and are therefore being termed as one instrument for this footnote, (the “Note”), is a hybrid instruments which contain an embedded derivative feature which would individually warrant separate accounting as a derivative instrument under Paragraph 815-10-05-4. The embedded derivative feature includes the conversion feature to the Note. Pursuant to Paragraph 815-10-05-4, the value of the embedded derivative liability has been bifurcated from the debt host contract and recorded as a derivative liability resulting in a reduction of the initial carrying amount (as unamortized discount) of the notes, which are amortized as debt discount to be presented in other (income) expenses in the statements of operations using the effective interest method over the life of the notes.

The embedded derivative within the note have been valued using the Black Scholes approach, recorded at fair value at the date of issuance; and marked-to-market at each reporting period end date with changes in fair value recorded in the Company’s statements of operations as “change in the fair value of derivative instrument”.

As of May 31, 2022 and November 30, 2021, the estimated fair value of derivative liability was determined to be $1,081,206 and $875,487, respectively.

Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed at November 30, 2021:

	Carrying		Fair Value Measurement Using
	Value		Level 1		Level 2		Level 3		Total
Derivative liabilities on conversion feature	$	875,487	$	–	$	–	$	875,487	$	875,487
Total derivative liabilities	$	875,487	$	–	$	–	$	875,487	$	875,487

Summary of Fair Value of Financial Assets and Liabilities Measured on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed at May 31, 2022:

	Carrying		Fair Value Measurement Using
	Value		Level 1		Level 2		Level 3		Total
Derivative liabilities on conversion feature	$	1,081,206	$	–	$	–	$	1,081,206	$	1,081,206
Total derivative liabilities	$	1,081,206	$	–	$	–	$	1,081,206	$	1,081,206

Summary of the Changes in Fair Value of Level 3 Financial Liabilities

The table below provides a summary of the changes in fair value of derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended May 31, 2022:

	Derivative
	Liabilities
Balance - November 30, 2021	$	875,487
Addition of new derivative liabilities from issuance of series B preferred stock		53,592
Relief of derivative liabilities from conversion of convertible notes		(156,120	)
Relief of derivative liabilities from conversion of series B preferred stock		(371,405	)
Loss (Gain) on change in fair value of the derivative		679,652
Balance - May 31, 2022	$	1,081,206

Daniels Corporate Advisory Company, Inc. 10-Q