DERIVATIVE LIABILITIES

12 Months Ended

Dec. 31, 2023

Derivative Liabilities

DERIVATIVE LIABILITIES

NOTE 7 – 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 each reporting period and upon extinguishment. The fair value of the derivative liability convertible notes is estimated using a Monte Carlo pricing model.

At the end of December 31, 2023, the derivative liabilities were zero as the Company settled the convertible note and also extinguished its warrants related to its derivative liability as a result of the settlement.

See Note 9 - Commitment and Contingencies.

Based on the convertible notes described in Note 5, the derivative liability day one loss is $390 thousand and the change in fair value for the year ended December 31, 2023 and 2022 is $27 thousand and $166 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 years ended December 31, 2023 and 2022.

	Derivative Liability Convertible Notes			Derivative Liability Warrants			Total
Balance as of December 31, 2021	$	274		$	325		$	599
Change in fair value		(8	)		(158	)		(166	)
Balance as of December 31, 2022		266			167			433
Change in fair value		1			(28	)		(27	)
Extinguishment of the derivative liability		(267	)		(139	)		(406	)
Balance as of December 31, 2023	$	–		$	–		$	–

During the year ended December 31, 2023, 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	$1.49
Expected volatility	52.6%
Expected term (in years)	0.25
Risk-free interest rate	4.42%

During the year ended December 31, 2023, 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	$1.49
Expected volatility	71.1%
Expected term (in years)	2.64
Risk-free interest rate	4.28%