Derivative Liability

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Note 5 - Derivative Liability

Under the terms of the May 2016, December 2016, March 2017, April 2018, May 2018, August 2018 and December 2018 Convertible Notes, the Company identified derivative instruments arising from embedded conversion features, as well as warrants issued with the December 2015 Convertible Note.

The following summarizes the Black-Scholes assumptions used to estimate the fair value of the derivative liability at the dates of issuance and the revaluation dates:

	Year ended December 31,
	2018			2017
Volatility	102%-119		%	108%-199		%
Risk-free interest rate	1.7%-2.7		%	0.5%-1.8		%
Expected life (years)	0.0 - 1.3			0.2 - 1.7
Dividend yield		--			--

On March 22, 2017, Cool Technologies amended its certificate of incorporation to increase the number of authorized shares of its common stock. Subsequent to this amendment, the Company had a sufficient number of authorized but unissued shares of common stock available to settle all of its outstanding common share equivalents. Accordingly, the common share equivalents that were previously reclassified to derivative liabilities were subject to a final mark-to-market for their change in fair value as of the date of the increase in authorized shares and were then reclassified back to equity.

Changes in the derivative liability were as follows:

	Twelve Months Ended December 31, 2018
	Level 1		Level 2		Level 3
Convertible debt and other derivative liabilities at December 31, 2016		--		--		4,851,760
Conversions of convertible debt		--		--		(316,245	)
Issuance of convertible debt and other derivatives		--		--		306,901
Reclassification of common share equivalents to additional paid-in capital		--		--		(6,364,224	)
Change in fair value		--		--		1,529,312
Convertible debt and other derivative liabilities at December 31, 2017		--		--		7,504
Conversions of convertible debt		--		--		--
Issuance of convertible debt and other derivatives		--		--		346,821
Reclassification of common share equivalents to additional paid-in capital		--		--		--
Extinguishment of convertible debt		--		--		(120,603	)
Change in fair value		--		--		(83,963	)
Convertible debt and other derivative liabilities at December 31, 2018		--		--		149,759