Derivative liability

12 Months Ended

Dec. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

9. Derivative liability

During the year ended December 31, 2022, the Company issued warrants in connection with convertible notes payable (see Note 12). 2,250,000 of the warrants provide for a Black Scholes value calculation in the event of certain transactions ("Fundamental Transactions," as defined), which includes a floor on volatility utilized in the value calculation at 100% or greater. The Company has determined that this provision introduces leverage to the holders of the warrants that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company's own equity shares. Accordingly, pursuant to ASC 815, the Company has classified the fair value of the warrants as a liability to be re-measured at the end of every reporting period with the change in value reported in the statement of operations. The fair value on the date of issuance was $591,590. As a derivative, the warrant is adjusted to its fair value at the end of each reporting period. During the period from the note issuance through December 31, 2022, the fair value of the warrant decreased resulting in recognition of a gain on the change in fair value of $191,429. The fair value of the warrant at December 31, 2022 is $400,161.

Fair value of warrants were calculated using a Black-Scholes model with the following inputs:

	December 31, 2022	October 27, 2022 (Date issued)
Stock price on valuation date	$0.19 - $	0.28
Exercise price	$0.32	$0.32
Expected term	4.8 years	5.0 years
Discount rate	3.73%	4.19%
Volatility	173.44%	175.24%

Fair value
Warrant liability	400,161	591,590