DERIVATIVE LIABILITIES

3 Months Ended

Mar. 31, 2022

Derivative Liabilities

DERIVATIVE LIABILITIES

NOTE 6–DERIVATIVE LIABILITIES

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. In addition, the Company issued warrants with variable conversion provisions. The conversion terms of the convertible notes and warrants 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. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants were recorded as derivative liabilities on the issuance date and revalued at March 31, 2022 and December 31, 2021.

Based on the convertible notes described in Note 6, the derivative liability day one loss is $390 thousand and the change in fair value at March 31, 2022 and December 31, 2021 is $136 thousand and ($26 thousand), respectively. The fair value of applicable derivative liabilities on note, warrants and change in fair value of derivative liability are as follows for the three months ended March 31, 2022 (in thousands).

	Derivative Liability   Convertible Notes			Derivative   Liability Warrants			Total
Balance as of December 31, 2021	$	274		$	325		$	599
Change in fair value		(76	)		(60	)		(136	)
Balance as of March 31, 2022	$	198		$	265		$	463

As of March 31, 2022, the fair value of the derivative liability convertible notes is estimated using a Monte Carlo pricing model with the following assumptions:

Market value of common stock	$	1.35
Expected volatility		104.8	%
Expected term (in years)		0.25
Risk-free interest rate		1.37	%

As of March 31, 2022, the fair value of the derivative liability – warrants is estimated using a Monte Carlo pricing model with the following assumptions:

Market value of common stock	$	1.35
Expected volatility		108.9	%
Expected term (in years)		3.64
Risk-free interest rate		1.67	%