Derivative Liabilities

12 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Liabilities

NOTE 9 – DERIVATIVE LIABILITIES

At December 31, 2020 and December 31, 2019, the Company had warrants that contain net cash settlement provisions or do not have fixed settlement provisions because their conversion and exercise prices may be lowered if the Company issues securities at lower prices in the future. The Company concluded that the warrants should be accounted for as derivative liabilities. In determining the fair value of the derivative liabilities, the Company used the Black-Scholes option pricing model on December 31, 2020 and 2019:

	December 31, 2020
Common stock issuable upon exercise of warrants		295,000
Market value of common stock on measurement date	$	1.53
Exercise price	$	0.42
Risk free interest rate (1)		0.13	%
Expected life in years		1 year
Expected volatility (2)		160.03	%
Expected dividend yields (3)		0	%

	December 31, 2019
Common stock issuable upon exercise of warrants		295,000
Market value of common stock on measurement date	$	1.11
Exercise price	$	1.20
Risk free interest rate (1)		1.58	%
Expected life in years		2 years
Expected volatility (2)		86.66	%
Expected dividend yields (3)		0	%

(1)	The risk-free interest rate was determined by management using the applicable Treasury Bill as of the measurement date.
(2)	The historical trading volatility was determined by calculating the volatility of the Company’s peers’ common stock.
(3)	The Company does not expect to pay a dividend in the foreseeable future.

The following table shows the change in the Company’s derivative liabilities rollforward for the years ended December 31, 2020 and 2019 (in thousands):

	Amount
Balance, December 31, 2018	$	326
Initial valuation of derivative liabilities upon issuance of warrants		66
Change in fair value of derivative liabilities		(245	)
Balance, December 31, 2019	$	147

	Amount
Balance, December 31, 2019	$	147
Change in fair value of derivative liabilities		216
Balance, December 31, 2020	$	363

The change in fair value of derivative liabilities includes losses from exercise price modifications.