11. DERIVATIVE LIABILITIES

Warrant Liabilities

As at March 31, 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”), 82,129 First Tranche Warrants, 53,226 Second Tranche Warrants, 620,230 Third Tranche Warrants, 1,986,112 Fourth Tranche Warrants and 20,000 warrants issued in a private placement (“Private Placement Warrants”).

The fair value of the IPO Warrants, Rep Warrants and Private Placement Warrants amounted to $28,296 (December 31, 2023 - $11,308). As at March 31, 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 $0.18 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 105% to 155% (December 31, 2023 – 105% to 117%), risk free rate of return 3.91% to 4.17% (December 31, 2023 – 3.67% to 3.88%), and expected term of 1.25 to 3 years (December 31, 2023 – expected term of 1.50 to 3 years).

As at March 31, 2024 the First Tranche Warrants had a fair value that amounted to $9,000 (December 31, 2023 - $24,000). As at March 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the First Tranche Warrants using the following assumptions: stock price $0.18 (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 4.70% (December 31, 2023 – 4.23%), and expected term of 1.75 years (December 31, 2023 – expected term of 2 years).

As at March 31, 2024 the Second Tranche Warrants had a fair value that amounted to $6,000 (December 31, 2023 - $15,000). As at March 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Second Tranche Warrants using the following assumptions: stock price $0.18 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 97.5% (December 31, 2023 – 105.0%), risk free rate of return 4.50% (December 31, 2023 – 4.12%), and expected term of 2.30 years (December 31, 2023 – expected term of 2.55 years).

As at March 31, 2024 the Third Tranche Warrants had a fair value that amounted to $76,000 (December 31, 2023 - $192,000). As at March 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Third Tranche Warrants using the following assumptions: stock price $0.18 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 95.0% ((December 31, 2023 – 107.5%), risk free rate of return 4.40% ((December 31, 2023 – 3.98%), and expected term of 3.05 years ((December 31, 2023 – expected term of 3.30 years).

As at March 31, 2024 the Fourth Tranche Warrants had a fair value that amounted to $272,000 (December 31, 2023 - $724,000). As at March 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fourth Tranche Warrants using the following assumptions: stock price $0.18 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 95.0% (December 31, 2023 – 107.5%), risk free rate of return 4.38% (December 31, 2023 – 3.97%), and expected term of 3.17 years (December 31, 2023 – expected term of 3.42 years).

As at March 31, 2024 the Fifth Tranche Warrants had a fair value that amounted to $396,000 (February 21, 2024 - $564,000). As at March 31, 2024 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $0.18 (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 4.36% (February 21, 2024 – 4.40%), and expected term of 3.39 years (February 21, 2024 – expected term of 3.50 years).

Debenture Convertible Feature

As at March 31, 2024 the fair value of the First Tranche Debentures’ convertible feature amounted to $137,000 (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 $0.18 (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 5.21% (December 31, 2023 – 5.03%), discount rate 18.25% (December 31, 2023 – 17.50%), and expected term of 0.75 year (December 31, 2023 – 1 year).

As at March 31, 2024 the fair value of the Second Tranche Debentures’ convertible feature amounted to $252,000 (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 $0.18 (December 31, 2023 – $0.47), dividend yield – nil December 31, 2023 – nil), expected volatility 97.5% (December 31, 2023 – 105.0%), risk free rate of return 4.81% (December 31, 2023 – 4.51%), discount rate 18.00% (December 31, 2023 – 17.50%), and expected term of 1.30 years (December 31, 2023 – 1.55 years).

As at March 31, 2024 the fair value of the Third Tranche Debentures’ convertible feature amounted to $618,000 (December 31, 2023 – $491,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.18 (December 31, 2023 – $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 95.0% (December 31, 2023 – 107.5%), risk free rate of return 4.59% (December 31, 2023 – 4.12%), discount rate 18.00% (December 31, 2023 – 17.25%), and expected term of 2.05 years (December 31, 2023 – 2.30 years).

As at March 31, 2024 the fair value of the Fourth Tranche Debentures’ convertible feature amounted to $786,000 (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 $0.18 (December 31, 2023 - $0.47), dividend yield – nil (December 31, 2023 – nil), expected volatility 95.0% (December 31, 2023 – 107.5%), risk free rate of return 4.50% (December 31, 2023 – 4.12%), discount rate 17.75% (December 31, 2023 – 17.25%), and expected term of 2.17 years (December 31, 2023 – 2.42 years).

As at March 31, 2024 the fair value of the Fifth Tranche Debentures’ convertible feature amounted to $359,000 (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 $0.18 (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 4.50% (February 21, 2024 – 4.54%), discount rate 17.75% (February 21, 2024 – 16.00%), and expected term of 2.39 years (February 21, 2024 – 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 March 31, 2024 and 2023 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 greater than one year, the liabilities have been classified as non-current.