Quarterly report [Sections 13 or 15(d)]

DERIVATIVE LIABILITIES

v3.25.1
DERIVATIVE LIABILITIES
3 Months Ended
Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE LIABILITIES

13. DERIVATIVE LIABILITIES

 

Warrant Liabilities

 

As at March 31, 2025, the Warrant Liabilities represent aggregate fair value of 200 warrants issued in a private placement (“Private Placement Warrants”), 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, 54,145 Seventh Tranche Warrants, 1,910,306 January 2025 Tranche Warrants, and 431,159 March 2025 Tranche Warrants (“Debenture Warrants”).

 

As of March 31, 2025, the fair value of the IPO Warrants and Rep Warrants amounted to $22 (December 31, 2024 - $21). 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.

 

 

As of March 31, 2025, the fair value of the Private Placement Warrants amounted to $23 (December 31, 2024 - $23). As at March 31, 2025 the Company utilized the Black-Scholes option-pricing model for the Private Placement Warrants and used the following assumptions: stock price $1.10 (December 31, 2024 - $0.47), dividend yield – nil (December 31, 2024 – nil), expected volatility 100% (December 31, 2024 – 105%), risk free rate of return 3.82% (December 31, 2024 – 3.88%), and expected term of 1 year (December 31, 2024 – expected term of 1.50 years).

 

As at March 31, 2025 the First Tranche Warrants had a fair value that amounted to $761 (December 31, 2024 - $24,000). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the First Tranche Warrants using the following assumptions: stock price $1.10 (December 31, 2024 - $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 105.0% (December 31, 2024 – 90.0%), risk free rate of return 3.90% (December 31, 2024 – 4.16%), and expected term of 0.75 years (December 31, 2024 – expected term of 1 year).

 

As at March 31, 2025 the Second Tranche Warrants had a fair value that amounted to $591 (December 31, 2024 - $15,000). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Second Tranche Warrants using the following assumptions: stock price $1.10 (December 31, 2024 - $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 105.0% (December 31, 2024 – 95.0%), risk free rate of return 3.72% (December 31, 2024 – 4.21%), and expected term of 1.80 years (December 31, 2024 – expected term of 1.55 years).

 

As at March 31, 2025 the Third Tranche Warrants had a fair value that amounted to $4,230 (December 31, 2024 - $192,000). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Third Tranche Warrants using the following assumptions: stock price $1.10 (December 31, 2024 - $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 105.0% (December 31, 2024 – 95.0%), risk free rate of return 3.89% (December 31, 2024 – 4.26%), and expected term 2.05 years (December 31, 2024 – expected term of 2.30 years).

 

As at March 31, 2025 the Fourth Tranche Warrants had a fair value that amounted to $12,380 (December 31, 2024 - $724,000). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Fourth Tranche Warrants using the following assumptions: stock price $1.10 (December 31, 2024 - $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 100.0% (December 31, 2024 – 90.0%), risk free rate of return 3.89% (December 31, 2024 – 4.20%), and expected term of 2.17 years (December 31, 2024 – expected term of 2.42 years).

 

As at March 31, 2025 the Fifth Tranche Warrants had a fair value that amounted to $22,560 (December 31, 2024 - $111,000). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Fifth Tranche Warrants using the following assumptions: stock price $1.10 (December 31, 2024 - $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 105.0% (December 31, 2024 – 95.0%), risk free rate of return 3.89% (December 31, 2024 – 4.26%), and expected term of 2.39 years (December 31, 2024 – expected term of 2.64 years).

 

As at March 31, 2025 the Sixth Tranche Warrants had a fair value that amounted to $15,670 (December 31, 2024 - $73,000). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Sixth Tranche Warrants using the following assumptions: stock price $1.10 (December 31, 2024 – $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 105.0% (December 31, 2024 – 95.0%), risk free rate of return 3.89% (December 31, 2024 – 4.27%), and expected term of 2.53 years (December 31, 2024 – expected term of 2.78 years).

 

As at March 31, 2025 the Seventh Tranche Warrants had a fair value that amounted to $36,620 (December 31, 2024 - $170,000). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Seventh Tranche Warrants using the following assumptions: stock price $1.10 (December 31, 2024 – $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 105.0% (December 31, 2024 – 95.0%), risk free rate of return 3.89% (December 31, 2024 – 4.27%), and expected term of 2.64 years (December 31, 2024 – expected term of 2.89 years).

 

As at March 31, 2025 the January 2025 Tranche Warrants had a fair value that amounted to $1,364,830 (January 16, 2025 - $3,722,310). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Eighth Tranche Warrants using the following assumptions: stock price $1.10 (January 16, 2025 – $2.63), dividend yield – nil (January 16, 2025 – nil), expected volatility 100.0% (January 16, 2025 – 100.0%), risk free rate of return 3.90% (January 16, 2025 – 4.32%), and expected term of 3.30 years (January 16, 2025 – expected term of 3.50 years).

 

As at March 31, 2025 the March 2025 Tranche Warrants had a fair value that amounted to $329,850 (March 21, 2025 - $428,350). As at March 31, 2025 the Company utilized the Monte Carlo option-pricing model to value the Ninth Tranche Warrants using the following assumptions: stock price $1.10 (March 21, 2025 – $1.42), dividend yield – nil (March 21, 2025 – nil), expected volatility 100.0% (March 21, 2025 – 100.0%), risk free rate of return 3.91% (March 21, 2025 – 3.94%), and expected term of 3.47 years (March 21, 2025 – expected term of 3.49 years).

 

Debenture Convertible Feature

 

As at March 31, 2025 the fair value of the First Tranche Debentures’ convertible feature amounted to $2,057 (December 31, 2024 – $164,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $1.10 (December 31, 2024 - $0.47), dividend yield – nil (December 31, 2024 – nil), expected volatility 100.0% (December 31, 2024 – 100.0%), risk free rate of return 3.82% (December 31, 2024 – 5.03%), discount rate 12.25% (December 31, 2024 – 17.50%), and expected term of 0.15 year (December 31, 2024 – 1 year).

 

As at March 31, 2025 the fair value of the Second Tranche Debentures’ convertible feature amounted to $1,714 (December 31, 2024 – $429,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $1.10 (December 31, 2024 – $0.47), dividend yield – nil (December 31, 2024 – nil), expected volatility 100.0% (December 31, 2024 – 105.0%), risk free rate of return 3.82% (December 31, 2024 – 4.51%), discount rate 12.25% (December 31, 2024 – 17.50%), and expected term of 0.15 years (December 31, 2024 – 1.55 years).

 

 

As at March 31, 2025 the fair value of the Fourth Tranche Debentures’ convertible feature amounted to $91,000 (December 31, 2024 – $317,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $1.10 (December 31, 2024 - $2.37), dividend yield – nil (December 31, 2024 – nil), expected volatility 100.0% (December 31, 2024 – 90%), risk free rate of return 4.01% (December 31, 2024 – 4.20%), discount rate 11.25% (December 31, 2024 – 11.25%), and expected term of 1.17 years (December 31, 2024 – 1.42 years).

 

As at March 31, 2025 the fair value of the Eighth Tranche Debentures’ convertible feature amounted to $728,000 (January 16, 2025 - $1,012,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $1.10 (January 16, 2025 – $2.63), dividend yield – nil (January 16, 2025 – nil), expected volatility 100.0% (January 16, 2025 – 100.0%), risk free rate of return 4.11% (January 16, 2025 – 4.18%), discount rate 11.25% (January 16, 2025 – 10.75%), and expected term of 0.79 years (January 16, 2025 – 1.00 years).

 

As at March 31, 2025 the fair value of the Ninth Tranche Debentures’ convertible feature amounted to $165,000 (March 21, 2025 - $171,000). The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $1.10 (March 21, 2025 – $1.42), dividend yield – nil (March 21, 2025 – nil), expected volatility 100.0% (March 21, 2025 – 100.0%), risk free rate of return 4.04% (March 21, 2025 – 4.04%), discount rate 11.25% (March 21, 2025 – 11.00%), and expected term of 0.98 years (March 21, 2025 – 1.00 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 $618,000. The Company utilized the Monte Carlo option-pricing model for valuing the convertible feature using the following assumptions: stock price $0.18, 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.

 

During the three months ended March 31, 2025, a debt extinguishment of $115,384 occurred for the increase in principal of tranche 4 of 15%.

 

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 three months ended March 31, 2025 and 2024 were as follows:

 

    Level 1     Level 3     Level 3        
   

IPO and Rep

Warrants

   

Debenture

Warrants

   

Debenture

Convertible

Feature

    Total  
Balance at January 1, 2025   $ 21     $ 191,880     $ 293,762     $ 485,663  
Additions     -       4,150,660       1,183,000       5,333,660  
Conversions     -       -       (74,186 )     (74,186 )
Change in fair value             (2,560,523 )     (416,388 )     (2,976,911 )
Effect of exchange rate changes     1       5,475       1,583       7,059  
Balance at March 31, 2025   $ 22     $ 1,787,492     $ 987,771     $ 2,775,285  

 

    Level 1     Level 3     Level 3        
   

Equity

Warrants

   

Debenture

Warrants

   

Debenture

Convertible

Feature

    Total  
Balance at January 1, 2024   $ 11,308     $ 955,000     $ 1,724,000     $ 2,690,308  
Additions     -       564,000       359,000       923,000  
Conversions     -       -       (630,106 )     (630,106 )
Change in fair value     17,273       (736,181 )     742,677       23,769  
Effect of exchange rate changes     (285 )     (23,819 )     (43,571 )     (67,675 )
Balance at March 31, 2024   $ 28,296     $ 759,000     $ 2,152,000     $ 2,939,296  

 

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