Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  



Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that do not have fixed settlement provisions are deemed to be derivative instruments. In prior years, the Company granted certain warrants that included a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder. As a result, the fundamental transaction clause of these warrants are accounted for as a derivative liability in accordance with ASC 815 and are being re-measured every reporting period with the change in value reported in the statement of operations.


The derivative liabilities were valued using a Binomial pricing model with the following average assumptions:


    September 30, 2023     December 31, 2022  
Stock Price   $ 0.70     $ 6.40  
Exercise Price   $ 8.00     $ 13.60  
Expected Life     1.23       1.98  
Volatility     203 %     107 %
Dividend Yield     0 %     0 %
Risk-Free Interest Rate     5.46 %     4.41 %
Total Fair Value   $ 12     $ 222  


The expected life of the warrants was based on the remaining contractual term of the instruments. The Company uses the historical volatility of its common stock to estimate the future volatility for its common stock. The expected dividend yield was based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank.


During the nine months ended September 30, 2023 and 2022, the Company recorded a gain of $210 and $2,360 respectively to account for the changes in the fair value of these derivative liabilities during the period. At September 30, 2023, the fair value of the derivative liability amounted to $12.


The details of derivative liability transactions for the nine months ended September 30, 2023 and 2022 are as follows:


    2023     2022  

Nine Months Ended September 30,

    2023     2022  
Beginning balance   $ 222     $ 3,155  
Change in fair value     (210 )     (2,360 )
Ending balance   $ 12     $ 795