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DERIVATIVE LIABILITIES

9 Months Ended

Sep. 30, 2021

NOTE 5 – DERIVATIVE LIABILITIES

During 2020, the Company established a sequencing policy to which common stock equivalents are exercisable to shares of common stock more than the Company’s authorized limit. It was determined that all options and warrants by the end of the year were no longer permitted to be classified as equity and were valued at fair market value using Black Scholes and recorded as derivative liabilities.

On April 6, 2021, the Company agreed to buy back 663,332 warrants from investors for a total of $368. The warrants had exercise prices between $0.88 and $0.94 per share. The value of the derivative liabilities associated with these warrants was $451. The Company recorded a $64 gain in connection with the buy back of the warrants.

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s purchase warrants that were categorized within Level 3 of the fair value hierarchy during the quarter ended September 30, 2021 is as follows:

Stock price	$	1.02 - 2.94
Conversion price	$	0.72 - 6.90
Contractual term (in years)		0.67 – 6.56
Volatility (annual)		82.7% - 211	%
Risk-free rate		0.09% - 1.21	%

The foregoing assumptions were reviewed quarterly and were subject to change based primarily on management’s assessment of the probability of the events described occurring.

Financial Liabilities Measured at Fair Value on a Recurring Basis

The fair value accounting standards define fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:

●	Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets;
●	Level 2 inputs: Inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly; and
●	Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

There were no transfers between Level 3 during the three and nine months ended September 30, 2021.

The following table presents changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2021.

	Derivative Liabilities
Balance – December 31, 2020	$	2,471
New issuances		1,819
Change in fair value of derivative liability		6,916
Reclassification liability to equity		(10,755	)
Buy back of warrants		(451	)
Balance – September 30, 2021	$	-