11. DERIVATIVE LIABILITIES

Warrant Liabilities

As at June 30, 2024, the Warrant Liabilities represent aggregate fair value of publicly traded 61,765 Series A warrants (“IPO Warrants”), 2,721 representative’s warrants (“Rep Warrants”), 20,000 warrants issued in a private placement (“Private Placement Warrants”), 82,129 First Tranche Warrants, 53,226 Second Tranche Warrants, 620,230 Third Tranche Warrants, 1,986,112 Fourth Tranche Warrants, 3,341,122 Fifth Tranche Warrants, 2,193,253 Sixth Tranche Warrants and 5,414,500 Seventh Tranche Warrants (“Debenture Warrants”).

The fair value of the IPO Warrants, Rep Warrants and Private Placement Warrants amounted to $31,940 (December 31, 2023 - $11,308). As at June 30, 2024 the Company utilized the Black-Scholes option-pricing model for the IPO Warrants, Rep Warrants and Private Placement Warrants and used the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 91% to 183% (December 31, 2023 – 105% to 117%), risk free rate of return 3.83% to 3.99% (December 31, 2023 – 3.67% to 3.88%), and expected term of 1 to 3 years (December 31, 2023 – expected term of 1.50 to 3 years).

As at June 30, 2024 the First Tranche Warrants had a fair value that amounted to $4,000 (December 31, 2023 - $24,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the First Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 110.0% (December 31, 2023 – 100.0%), risk free rate of return 4.90% (December 31, 2023 – 4.23%), and expected term of 1.50 years (December 31, 2023 – expected term of 2 years).

As at June 30, 2024 the Second Tranche Warrants had a fair value that amounted to $3,000 (December 31, 2023 - $15,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Second Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 105.0% (December 31, 2023 – 105.0%), risk free rate of return 4.71% (December 31, 2023 – 4.12%), and expected term of 2.05 years (December 31, 2023 – expected term of 2.55 years).

As at June 30, 2024 the Third Tranche Warrants had a fair value that amounted to $32,000 (December 31, 2023 - $192,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Third Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 85.0% (December 31, 2023 – 107.5%), risk free rate of return 4.56% (December 31, 2023 – 3.98%), and expected term of 2.80 years (December 31, 2023 – expected term of 3.30 years).

As at June 30, 2024 the Fourth Tranche Warrants had a fair value that amounted to $107,000 (December 31, 2023 - $724,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fourth Tranche Warrants using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 85.0% (December 31, 2023 – 107.5%), risk free rate of return 4.54% (December 31, 2023 – 3.97%), and expected term of 2.92 years (December 31, 2023 – expected term of 3.42 years).

As at June 30, 2024 the Fifth Tranche Warrants had a fair value that amounted to $191,000 (February 21, 2024 - $564,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $0.088 (February 21, 2024 - $0.21), dividend yield – nil (February 21, 2024 – nil), expected volatility 85.0% (February 21, 2024 – 105.0%), risk free rate of return 4.51% (February 21, 2024 – 4.40%), and expected term of 3.14 years (February 21, 2024 – expected term of 3.50 years).

As at June 30, 2024 the Sixth Tranche Warrants had a fair value that amounted to $117,000 (April 11, 2024 - $242,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $0.088 (April 11, 2024 – $0.16), dividend yield – nil (April 11, 2024 – nil), expected volatility 85.0% (April 11, 2024 – 95.0%), risk free rate of return 4.49% (April 11, 2024 – 4.73%), and expected term of 3.28 years (April 11, 2024 – expected term of 3.50 years).

As at June 30, 2024 the Seventh Tranche Warrants had a fair value that amounted to $297,000 (May 22, 2024 - $369,000). As at June 30, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $0.088 (May 22, 2024 – $0.10), dividend yield – nil (May 22, 2024 – nil), expected volatility 85.0% (May 22, 2024 – 95.0%), risk free rate of return 4.48% (May 22, 2024 – 4.60%), and expected term of 3.39 years (May 22, 2024 – expected term of 3.50 years).

Debenture Convertible Feature

As at June 30, 2024 the fair value of the First Tranche Debentures’ convertible feature amounted to $6,000 (December 31, 2023 – $164,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 110.0% (December 31, 2023 – 100.0%), risk free rate of return 5.33% (December 31, 2023 – 5.03%), discount rate 20.25% (December 31, 2023 – 17.50%), and expected term of 0.50 year (December 31, 2023 – 1 year).

As at June 30, 2024 the fair value of the Second Tranche Debentures’ convertible feature amounted to $5,000 (December 31, 2023 – $429,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (December 31, 2023 – $0.47), dividend yield – nil December 31, 2023 – nil), expected volatility 105.0% (December 31, 2023 – 105.0%), risk free rate of return 5.09% (December 31, 2023 – 4.51%), discount rate 20.00% (December 31, 2023 – 17.50%), and expected term of 1.05 years (December 31, 2023 – 1.55 years).

As at June 30, 2024 the fair value of the Fourth Tranche Debentures’ convertible feature amounted to $430,000 (December 31, 2023 – $640,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 85.0% (December 31, 2023 – 107.5%), risk free rate of return 4.71% (December 31, 2023 – 4.12%), discount rate 19.75% (December 31, 2023 – 17.25%), and expected term of 1.92 years (December 31, 2023 – 2.42 years).

As at June 30, 2024 the fair value of the Fifth Tranche Debentures’ convertible feature amounted to $327,000 (February 21, 2024 - $359,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (February 21, 2024 – $0.21), dividend yield – nil (February 21, 2024 – nil), expected volatility 85.0% (February 21, 2024 – 105.0%), risk free rate of return 4.62% (February 21, 2024 – 4.54%), discount rate 19.50% (February 21, 2024 – 16.00%), and expected term of 2.14 years (February 21, 2024 – 2.50 years).

As at June 30, 2024 the fair value of the Sixth Tranche Debentures’ convertible feature amounted to $80,000 (April 11, 2024 - $198,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.088 (April 11, 2024 – $0.16), dividend yield – nil (April 11, 2024 – nil), expected volatility 85.0% (April 11, 2024 – 95.0%), risk free rate of return 4.62% (April 11, 2024 – 4.85%), discount rate 19.50% (April 11, 2024 – 19.00%), and expected term of 2.28 years (April 11, 2024 – 2.50 years).

On June 17, 2024, the Investors converted the full principal balance of the Seventh Tranche Debenture which resulted in an extinguishment of the existing debt and convertible feature. On May 22, 2024 the fair value of the Seventh Tranche Debentures’ convertible feature amounted to $297,000. The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.10, dividend yield – nil, expected volatility 95.0%, risk free rate of return 4.75%, discount rate 19.00%, and expected term of 2.50 years.

The IPO Warrants, Rep Warrants, and Private Placement Warrants (the “Equity Warrants”) are classified as Level 1 financial instruments, while the Debenture Warrants and Debenture Convertible Feature are classified as Level 3 financial instruments.

Changes in the fair value of the Company’s financial instruments for the nine months ended June 30, 2024 and 2023 were as follows:

SCHEDULE OF CHANGES IN FAIR VALUE OF COMPANY'S LEVEL 3 FINANCIAL INSTRUMENTS  

Due to the expiry date of the warrants and conversion feature being greater than one year, the liabilities have been classified as non-current.