14. 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 (the “Debenture Convertible Features”), see Note 12.

Warrant Liabilities

As at December 31, 2024, the Warrant Liabilities represent aggregate fair value of 200 warrants issued in a private placement (“Private Placement Warrants”) (Note 16), 822 First Tranche Warrants, 532 Second Tranche Warrants, 6,202 Third Tranche Warrants, 19,861 Fourth Tranche Warrants, 33,411 Fifth Tranche Warrants, 21,933 Sixth Tranche Warrants and 54,145 Seventh Tranche Warrants (“Debenture Warrants”).

The fair value of the IPO Warrants and Rep Warrants amounted to $21 To (December 31, 2023 - $11,308). The Rep Warrants were exercisable one year from the effective date of the IPO registration statement, expiring three years after the effective date. As of July 16, 2024, 645 Company warrants issued as part of its IPO expired which consisted of publicly traded 618 Series A warrants (“IPO Warrants”) and 27 representative’s warrants (“Rep Warrants”). The expiry resulted in a gain on extinguishment of warrant liability of $14,769.

The fair value of the Private Placement Warrants amounted to $23 (December 31, 2023 - $23). As at December 31, 2024 the Company utilized the Black-Scholes option-pricing model for the Private Placement Warrants and used the following assumptions: stock price $0.47 (December 31, 2023 - $47.00 ), dividend yield – nil (December 31, 2023 – nil), expected volatility 105% (December 31, 2023 – 105% to 117%), risk free rate of return 3.88% (December 31, 2023 – 3.67% - 3.88% ), and expected term of 1.50 years (December 31, 2023 – expected term of 1.50 years to 3 years).

As at December 31, 2024 the First Tranche Warrants had a fair value that amounted to $24,000 (December 31, 2023 - $24,000). As at December 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the First Tranche Warrants using the following assumptions: stock price $2.37 (December 31, 2023 - $47.00), dividend yield – nil (December 31, 2023 – nil), expected volatility 90.0% (December 31, 2023 – 100.0%), risk free rate of return 4.16% (December 31, 2023 – 4.23%), and expected term of 1 year (December 31, 2023 – expected term of 2 years).

As at December 31, 2024 the Second Tranche Warrants had a fair value that amounted to $15,000 (December 31, 2023 - $15,000). As at December 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Second Tranche Warrants using the following assumptions: stock price $2.37 (December 31, 2023 - $47.00), dividend yield – nil (December 31, 2023 – nil), expected volatility 95.0% (December 31, 2023 – 105.0% ), risk free rate of return 4.21% (December 31, 2023 – 4.12% ), and expected term of 1.55 years (December 31, 2023 – expected term of 2.55 years).

As at December 31, 2024 the Third Tranche Warrants had a fair value that amounted to $192,000 (December 31, 2023 - $192,000). As at December 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Third Tranche Warrants using the following assumptions: stock price $2.37 (December 31, 2023 - $47.00), dividend yield – nil (December 31, 2023 – nil), expected volatility 95.0% (December 31, 2023 – 107.5%), risk free rate of return 4.26% (December 31, 2023 – 3.98%), and expected term of 2.3 years (December 31, 2023 – expected term of 3.3 years).

As at December 31, 2024 the Fourth Tranche Warrants had a fair value that amounted to $724,000 (December 31, 2023 - $724,000). As at December 31, 2023 the Company utilized the Monte Carlo option-pricing model to value the Fourth Tranche Warrants using the following assumptions: stock price $2.37 (December 31, 2023 - $47.00), dividend yield – nil (December 31, 2023 – nil), expected volatility 90.0% (December 31, 2023 – 107.5%), risk free rate of return 4.20% (December 31, 2023 – 3.97% ), and expected term of 2.42 years (December 31, 2023 – expected term of 3.42 years).

As at December 31, 2024 the Fifth Tranche Warrants had a fair value that amounted to $111,000 (February 21, 2024 - $564,000). As at December 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $2.37 (February 21, 2024 - $21.00), dividend yield – nil (February 21, 2024 – nil), expected volatility 95.0% (February 21, 2024 – 105.0%), risk free rate of return 4.26% (February 21, 2024 – 4.40%), and expected term of 2.64 years (February 21, 2024 – expected term of 3.50 years).

As at December 31, 2024 the Sixth Tranche Warrants had a fair value that amounted to $73,000 (April 11, 2024 - $242,000). As at December 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Sixth Tranche Warrants using the following assumptions: stock price $2.37 (April 11, 2024 – $16.00), dividend yield – nil (April 11, 2024 – nil), expected volatility 95.0% (April 11, 2024 – 95.0%), risk free rate of return 4.27% (April 11, 2024 – 4.73%), and expected term of 2.78 years (April 11, 2024 – expected term of 3.50 years).

As at December 31, 2024 the Seventh Tranche Warrants had a fair value that amounted to $170,000 (May 22, 2024 - $369,000). As at December 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Seventh Tranche Warrants using the following assumptions: stock price $2.37 (May 22, 2024 – $10.00), dividend yield – nil (May 22, 2024 – nil), expected volatility 95.0% (May 22, 2024 – 95.0%), risk free rate of return 4.27% (May 22, 2024 – 4.60%), and expected term of 2.89 years (May 22, 2024 – expected term of 3.50 years).

Debenture Convertible Feature

As at December 31, 2024 the fair value of the First Tranche Debentures’ convertible feature amounted to $164,000 (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 $0.47 (December 31, 2023 - $0.47 ), dividend yield – nil (December 31, 2023 – nil), expected volatility 100.0% (December 31, 2023 – 100.0% ), risk free rate of return 5.03% (December 31, 2023 – 5.03% ), discount rate 17.50% (December 31, 2023 – 17.50% ), and expected term of 1 year (December 31, 2023 – 1 year).

As at December 31, 2024 the fair value of the Second Tranche Debentures’ convertible feature amounted to $429,000 (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 $0.47 (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 4.51% (December 31, 2023 – 4.51%), discount rate 17.50% (December 31, 2023 – 17.50%), and expected term of 1.55 years (December 31, 2023 – 1.55 years).

As at December 31, 2024 the fair value of the Fourth Tranche Debentures’ convertible feature amounted to $317,000 (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 $2.37 (December 31, 2023 - $47.00), dividend yield – nil (December 31, 2023 – nil), expected volatility 90.0% (December 31, 2023 – 107.5%), risk free rate of return 4.20% (December 31, 2023 – 4.12%), discount rate 11.25% (December 31, 2023 – 17.25%), and expected term of 1.42 years (December 31, 2023 – 2.42 years).

As at December 31, 2024 the fair value of the Fifth Tranche Debentures’ convertible feature amounted to $92,000 (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 $0.05 (February 21, 2024 – $0.21), dividend yield – nil (February 21, 2024 – nil), expected volatility 95.0% (February 21, 2024 – 105.0%), risk free rate of return 3.66% (February 21, 2024 – 4.54%), discount rate 12.25% (February 21, 2024 – 16.00%), and expected term of 1.89 years (February 21, 2024 – 2.50 years).

During the year ended December 31, 2024, the Investors converted the full principal balance of the Third, Sixth and Seventh Tranche Debenture which resulted in an extinguishment of the existing debt and convertible feature. On March 31, 2024, the fair value of the Third Tranche Debentures’ convertible feature amounted to $614,000. The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $18.00, dividend yield – nil, expected volatility 95.0%, risk free rate of return 4.59%, discount rate 18.00%, and expected term of 2.05 years. On April 11, 2024, the fair value of the Sixth Tranche Debentures’ convertible feature amounted to $197,000. The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $16.00, dividend yield – nil, expected volatility 95.0%, risk free rate of return 4.85%, discount rate 19.00%, and expected term of 2.50 years. On May 22, 2024, the fair value of the Seventh Tranche Debentures’ convertible feature amounted to $295,000. The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $10.00, 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 Company’s Level 1 and 3 financial instruments for the year ended December 31, 2024 were as follows:

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

Changes in the fair value of Company’s Level 1 and 3 financial instruments for the year ended December 31, 2023 were as follows:

Due to the expiry date of the warrants and conversion feature being subsequent to December 31, 2024, the liabilities have been classified as non-current.