|12 Months Ended|
Dec. 31, 2022
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
11. DERIVATIVE LIABILITIES
The Company’s derivative liabilities consist of warrants, denominated in a currency other than the Company’s functional currency (the “Warrant Liabilities”) and conversion rights embedded in the Debentures, see Note 9 (the “Debenture Convertible Features”).
As of December 31, 2022, the Warrant Liabilities represent aggregate fair value of publicly traded 3,088,198 Series A warrants (“IPO Warrants”), 135,999 representative’s warrants (“Rep Warrants”) and 4,106,418 Debenture Warrants.
The fair value of the IPO Warrants and Rep Warrants amount to $275,115 (December 31, 2021 - $1,418,964) and were categorized as a Level 1 financial instrument. The Rep Warrants are exercisable one year from the effective date of the IPO registration statement and will expire three years after the effective date.
The fair value of the Debenture Warrants amounted to $2,917,000 (June 30, 2022 - $4,080,958) and were categorized as a Level 3 financial instrument. As at December 31, 2022 the Company utilized the Monte Carlo option-pricing model (June 30, 2022 – Black-Scholes option-pricing model) to value the Debenture Warrants using the following assumptions: stock price $ (June 30, 2022 - $ ), dividend yield – (June 30, 2022 – ), expected volatility 95.0% (June 30, 2022 – 58.3%), risk free rate of return 4.22% (June 30, 2022 – 3.14%), and expected term of 3 years (June 30, 2022 – expected term of 3.5 years).
The changes in the fair value of the Bridge Warrants ($203,456 – 2021) was charged to the statement of comprehensive loss. The warrants were exercised on October 27, 2021 and accordingly, the warrant liability was extinguished. The fair value of the warrants prior to exercise was estimated at $, determined using the Black-Scholes option pricing model and the following assumptions; stock price $, dividend yield – nil, expected volatility 73%, risk free rate of return 0.94%, expected term of 3 years.
Debenture Convertible Features
On June 30, 2022, the Company issued Debentures with an equity conversion feature, see Note 9. The fair value of the Debentures’ convertible features was $3,336,535 on the issuance date and $1,457,000 as at December 31, 2022. These conversion features are categorized as a Level 3 financial instrument. As at December 31, 2022 the Company utilized the Monte Carlo option-pricing model (June 30, 2022 – Black-Scholes option-pricing model) for valuing the convertible feature using the following assumptions: stock price $ (June 30, 2022 - $ ), dividend yield – (June 30, 2022 – ), expected volatility 95.0% (June 30, 2022 – 101.0%), risk free rate of return 4.41% (June 30, 2022 – 3.14%), discount rate 13.65% (June 30, 2022 – not applicable), and expected term of 2 years (June 30, 2022 – 1 year).
Changes in the fair value of Company’s Level 1 and 3 financial instruments for the year ended December 31, 2022 were as follows:
SCHEDULE OF CHANGES IN THE FAIR VALUE OF COMPANY'S LEVEL 3 FINANCIAL INSTRUMENTS
Due to the expiry date of the warrants and conversion feature being subsequent to December 31, 2023, the liabilities have been classified as non-current.
No definition available.
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef