Note 5 – Warrant Liability

2023 Warrants

On January 4, 2023, as part of the private placement offering, the Company issued common stock, warrants to purchase up to an aggregate of 216,667 shares of the Company’s common stock (the “2023 Common Warrants”), and placement agent warrants to purchase up to 13,000 shares of the Company’s common stock (the “2023 Placement Agents Warrants”).

The 2023 Common Warrants and the 2023 Placement Agents Warrants (collectively the “2023 Warrants”), provide for a value calculation for the warrants using the Black Scholes model in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders 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. Therefore, pursuant to ASC 815, the Company has classified the 2023 Warrants as a liability in its consolidated balance sheet. The classification of the 2023 Warrants, including whether they should be recorded as liability or as equity, is evaluated at the end of each reporting period.

The 2023 Warrants were initially recorded at a fair value at $5.8 million at the grant date, and upon the closing of placement, was recorded as a cost of capital. The fair value of the 2023 Warrants classified as a liability in the Company’s unaudited condensed consolidated balance sheets and will be re-measured at the end of every reporting period with the change in value reported in the unaudited condensed consolidated statements of operations until they are either exercised or expired.

The 2023 Warrant liability is valued using a Binomial pricing model with the following assumptions:

Schedule of Derivative Liabilities Assumptions

2020 Warrants

The Company issued warrants underlying 58,824 shares of common stock during the year ended December 31, 2020 (the “2020 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 the 2020 Warrants is classified as a liability in the Company’s unaudited condensed consolidated balance sheets and will be re-measured at the end of every reporting period with the change in value reported in the unaudited condensed consolidated statements of operations until they are either exercised or expire.

The 2020 Warrant liability is valued using a Binomial pricing model with the following assumptions:

Schedule of Derivative Liabilities Assumptions

Warrant Liability

The details of warrant liability transactions were as follows:

Schedule of Derivative Liability Transactions