Note 5 - Derivatives

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 5 - DERIVATIVES

The Company concluded the Promissory Note 2020 contained a conversion feature and a put each of which was an embedded derivative and are required to be bifurcated. In accordance with ASC 815, Derivatives and Hedging, the Company combined these two embedded derivatives into a single derivative and determined the fair value to record within the derivative liability on the consolidated balance sheets. At inception, the fair value of the derivative liability was $68,796, $52,125 and $20,542 for the first, second and third tranches, respectively. The Company recorded a gain on the fair value of the derivative of $104,529 during the year ended December 31, 2021. As a result of the repayment of the note as of March 1, 2021, the embedded derivative had a fair value of zero prior to the repayment.

The Company concluded the A, B and agent warrants issued in connection with the March 2020 Private Placement discussed above are a derivative liability due to certain features of the warrants which could, in certain circumstances, result in the holder receiving the Black Scholes value of the outstanding warrants in the same type of consideration as the common stockholders. As a result, in those circumstances, the amount of consideration would differ from that provided to holders of common stock, therefore, the warrants were classified as a liability. At inception, the A, B and agent warrants had a fair value of $2,669,995. During the third quarter of 2020, the A and B warrants were amended and as a result of this amendment, the warrants no longer represented a liability to the Company and were reclassified to equity. As of December 31, 2022, the fair value of the agent warrants was determined to be $3,355 and the Company recorded a gain on the change in fair value of $37,981 during the year ended December 31, 2022. As of December 31, 2021, the fair value of the agent warrants was determined to be $41,336 and the Company recorded a loss on the change in fair value of $7,683 during the year ended December 31, 2021.

The Company concluded the warrants and agent warrants issued in connection with the May 2020 Offering discussed above are a derivative liability due to certain features of the warrants which could, in certain circumstances, result in the holder receiving the Black Scholes value of the outstanding warrants in the same type of consideration as the common stockholders. As a result, in those circumstances, the amount of consideration would differ from that provided to holders of common stock, therefore, the warrants were classified as a liability. At inception, the warrants and agent warrants had a fair value of $1,324,184. The Company recorded a loss on the change in fair value of the warrants of $460,065 during the year ended December 31, 2020. During June 2020, the investors exercised the warrants and exchanged the warrants for shares of common stock as discussed above. The fair value of the agent warrants was determined to be $4,479 and $31,120 as of December 31, 2022 and as of December 31, 2021, respectively. The Company recorded a gain on the change in fair value of the agent warrants of $38,167 during the year ended December 31, 2022 and a loss on the change in fair value of the agent warrants of $8,827 during the year ended December 31, 2021.

In connection with the June 2020 Warrant exercise and issuance, the Company concluded the warrants and agent warrants issued in connection with the June 2020 Warrant exercise and issuance, discussed above, are a derivative liability due to certain features of the warrants which could, in certain circumstances, result in the holder receiving the Black Scholes value of the outstanding warrants in the same type of consideration as the common stockholders. As a result, in those circumstances, the amount of consideration would differ from that provided to holders of common stock, therefore, the warrants were classified as a liability. At inception, the warrants and agent warrants had a fair value of $1,749,721. During the year ended December 31, 2020, the June warrants were amended. As a result of this amendment, the warrants no longer represented a liability to the Company and were reclassified to equity. Prior to reclassification, the Company recorded a gain on the change in fair value of the warrants of $834,520 during the year ended December 31, 2020. The Company recorded a gain on the change in fair value of the agent warrants of $39,499 during the year ended December 31, 2022 and a loss on the change in fair value of the agent warrants of $12,797 during the year ended December 31, 2021. The fair value of the agent warrants was $5,999 and $45,498 as of December 31, 2022 and as of December 31, 2021, respectively.

On September 30, 2020, the Promissory Note 2019 was amended. The Company concluded the Promissory Note 2019 contained a conversion feature which is an embedded derivative and is required to be bifurcated. In accordance with ASC 815, Derivatives and Hedging, the Company determined the fair value to record within the derivative liability on the consolidated balance sheet. The Company recorded a gain on the fair value of the derivative of $89,680 during the year ended December 31, 2021. At inception, the fair value of the derivative liability was $495,100. As a result of the repayment of the note as of March 1, 2021, the embedded derivative had a fair value of zero prior to the repayment.

The table below discloses changes in value of the Company’s embedded derivative liabilities discussed above.

Derivative liability balance at December 31, 2020	$	294,382
Gain recognized to revalue derivative instrument at fair value		(164,902	)
Derivative liability balance at December 31, 2021	$	129,480
Gain recognized to revalue derivative instrument at fair value		(115,647	)
Derivative liability balance at December 31, 2022	$	13,833