NOTE 10 - WARRANT LIABILITY

3 Months Ended

Mar. 31, 2022

Note 10 - Warrant Liability

NOTE 10 - WARRANT LIABILITY

NOTE 10 - WARRANT LIABILITY

The Company analyzed the warrants issued in connection with the Series C Convertible Preferred Stock (see Note 11) for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined that the instrument should be classified as a liability due to reset provisions and variability in exercise price resulting in there being no fixed value or explicit limit to the number of shares to be delivered upon exercise.

ASC 815 requires we assess the fair market value of derivative liability at the end of each reporting period and recognize any change in the fair market value as other income or expense item.

The Company determined our warrant liabilities to be a Level 3 fair value measurement during the year based on management’s estimate of the expected future cash flows required to settle the liabilities and used the Black Scholes pricing model to calculate the fair value as of March 31, 2022. The Black Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each warrant is estimated using the Black Scholes valuation model.

For the period ended March 31, 2022, the estimated fair values of the warrant liabilities measured on a recurring basis are as follows:

	Three Months Ended
	March 31,
	2022
Expected term		2.46 - 2.50 years
Expected average volatility		216 - 220%
Expected dividend yield		8.33%
Risk-free interest rate		1.50 - 2.28%

The following table summarizes the changes in the warrant liabilities during the period ended March 31, 2022:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Warrant liability as of December 31, 2021	$	—
Addition of new warrants		421,000
Additional day-one loss		28,043
Change in fair value of warrant liability		(4,152	)
Warrant liability as of March 31, 2022	$	444,891