Note 12: Derivative Liabilities

Certain of the Company’s convertible notes and warrants contain features that create derivative liabilities. The pricing model the Company uses for determining fair value of its derivatives is the Monte Carlo Model. Valuations derived from this model are subject to ongoing internal and external verification and review. The model uses market-sourced inputs such as interest rates and stock price volatilities. Selection of these inputs involves management’s judgment and may impact net income. The derivative components of these notes are valued at issuance, at conversion, at restructuring, and at each period end.

Derivative liability activity for the years ended December 31, 2024, and 2023, is summarized in the table below:

The Company uses a Monte Carlo model to value the true-up obligation features of its notes payable that create derivative liabilities. The following tables summarize the assumptions for the valuations:

During the year ended December 31, 2023, certain of our notes payable contain a commitment fee obligation with a true-up feature. During the year ended December 31, 2024, the true-up period expired and all remaining amounts were reclassified to equity. The following assumptions were used for the valuation of the derivative liability associated with this obligation using a valuation based on the intrinsic conversion value:

Certain of our notes payable contain a provisions that in the event of default the note will become convertible at a price per share equal to the lowest trading price during the previous twenty trading days prior to the conversion date. The following assumptions were used for the valuation of the derivative liability associated with this obligation: