Derivative Liabilities

3 Months Ended

Mar. 31, 2023

Disclosure Text Block [Abstract]

Derivatives and Fair Value [Text Block]

Note 11: Derivative Liabilities

Certain of the Company’s convertible notes and warrants contain features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Lattice Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative components of these notes are valued at issuance, at conversion, at restructuring, and at each period end.

Derivative liability activity for the for the period ended March 31, 2023 is summarized in the table below:

December 31, 2022	$	568,912
Loss on revaluation		110,778
March 31, 2023	$	679,690

The Company uses a Monte Carlo model to value certain features of its notes payable that create derivative liabilities. The following table summarizes the assumptions for the valuations:

	December 31,
	2022
Volatility		95.1% to 123.2	%
Stock Price	$	1.06 to 3.50
Risk-free interest rates		4.35% to 4.37	%
Term (years)		0.73 to 0.86

	March 31,
	2023
Volatility		159.6% to 169.9	%
Stock Price	$	1.24
Risk-free interest rates		4.40	%
Term (years)		0.52 to 0.61

Certain of our notes payable contain a commitment fee obligation with a true-up feature. The following assumptions were used for the valuation of the derivative liability associated with this obligation:

● The stock price would fluctuate with the Company projected volatility.

● The projected volatility curve from an annualized analysis for each valuation date was based on the historical volatility of the Company and the term remaining for the True-Up obligation.

● The Company expected the note would be repaid 90% of the time by the maturity date, at which point the Company would redeem the 1,000,000 redeemable commitment fee shares for $1.

● In the event the Company did not repay the note in time, the shareholders would sell their shares subject to volume restrictions.

● Discount rates were based on risk-free rates in effect based on the remaining term. 50,000 simulations were run for each Monte Carlo simulation.