|9 Months Ended|
Sep. 30, 2022
Note 6 – Derivative Liability
During the year ended December 31, 2020, the Company issued certain warrants that contained a fundamental transaction provision that could give rise to an obligation to pay cash to the warrant holder upon occurrence of certain change in control type events. In accordance with ASC 480, the fair value of these warrants is classified as a liability in the Condensed Consolidated Balance Sheets and will be re-measured at the end of 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:
Schedule of Derivative Liabilities Assumptions
The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the expected volatility. The expected life was determined by using the remaining contractual life of the derivative instrument. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.
The Company recognized a gain of $58,000 and $81,000 to account for the change in fair value of the derivative liability between the reporting periods for the three months and nine months ended September 30, 2022.
The Company recognized a gain of $502,000 and $43,000 to account for the change in the fair value of the derivative liability between the reporting periods for the three months and nine months ended September 30, 2021.
No definition available.
The entire disclosure for derivatives and fair value of assets and liabilities.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef