Annual report pursuant to Section 13 and 15(d)

Note 18 ??? Derivatives

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Note 18 – Derivatives
12 Months Ended
Apr. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Note 18 – Derivatives

Note 18 – Derivatives

 

The Company completed financings in October 2020 and January 2021 which included notes and warrants containing embedded features subject to derivative accounting. See Note 12 for a full description of these financings. Both the notes and the warrants included provisions which provided for a reduction in the conversion and exercise prices, respectively, if the Company completed a future qualified offering at a lower price. These provisions represent embedded derivatives which are valued separately from the host instrument (meaning the notes and warrants) and recognized as derivative liabilities on the Company's balance sheet. The Company initially measures these financial instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company also measures these financial instruments on the date of settlement (meaning when the note is converted, or the warrant is exercised) at their estimated fair value and recognizes changes in their estimated fair value in results of operations. Any discount in the carrying value of the note is fully amortized on the date of settlement and recognized as interest expense. The Company estimated the fair value of these embedded derivatives using a multinomial lattice mode1. The range of underlying assumptions used in the binomial model to determine the fair value of the derivative warrant liability upon settlement of the derivative liability and as of April 30, 2022 and 2021 are set forth below. In addition, the Company's stock price on each measurement date was used in the model.  

 

      April 30, 2022       April 30, 2021  
Risk-free interest rate     0.522.87%       0.080.61%  
Expected dividend yield                  
Expected term (in years)      3.42 4.50       1.54 5.00  
Expected volatility      211.02292.28%       86.74 110.56%  

  

As of April 30, 2022, all of the notes had been converted into common stock and 806,666 of the warrants were outstanding. Changes in the derivative liability during the year ended April 30, 2022 and 2021 were as follows:

 

    2022   2021
Balance, beginning of period   $ 2,812,767     $     
Additions              5,710,288  
Eliminated upon conversion of notes/exercise of warrants     (163,141 )     (5,390,415 )
Changes in fair value     (1,042,129 )     2,492,894  
Balance, end of period   $ 1,607,497     $ 2,812,767  

 

Changes in fair value primarily related to changes in the Company’s stock price during the period with increases in the stock price increasing the liability and decreases in the stock price reducing the liability.