| DERIVATIVE LIABILITIES |
12.
DERIVATIVE LIABILITIES
Due
to the change in the Company’s functional currency (Note 2), effective April 1, 2025, the Derivative Liabilities, consisting of
Warrant Liabilities and Debenture Conversion Feature were reclassified to equity.
Warrant
Liabilities
As
of April 1, 2025 the Company utilized the Monte Carlo option-pricing model to value the Warrant Liabilities. The Warrant Liabilities
reclassified to equity as of April 1, 2025, as well as the assumptions used by the Company to value the Warrant Liabilities are summarized
in the table below:
SCHEDULE
OF WARRANT LIABILITIES
| | |
| | |
Monte-Carlo Option Pricing Assumptions - April 1, 2025 | | |
| |
| | |
# of Warrants | | |
Stock Price | | |
Dividend Yield | | |
Expected Volatility | | |
Risk Free Rate of Return | | |
Expected Term | | |
FV of Warrant Liability | |
| 1st Tranche | |
| 91 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 105.00 | % | |
| 3.90 | % | |
| 0.75 | | |
$ | 761 | |
| 2nd Tranche | |
| 59 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 105.00 | % | |
| 3.72 | % | |
| 1.80 | | |
| 591 | |
| 3rd Tranche | |
| 689 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 105.00 | % | |
| 3.89 | % | |
| 2.05 | | |
| 4,230 | |
| 4th Tranche | |
| 2,207 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 3.89 | % | |
| 2.17 | | |
| 12,380 | |
| 5th Tranche | |
| 3,712 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 105.00 | % | |
| 3.89 | % | |
| 2.39 | | |
| 22,560 | |
| 6th Tranche | |
| 2,437 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 105.00 | % | |
| 3.89 | % | |
| 2.53 | | |
| 15,670 | |
| 7th Tranche | |
| 6,016 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 105.00 | % | |
| 3.89 | % | |
| 2.64 | | |
| 36,620 | |
| Jan-25 Tranche | |
| 212,256 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 3.90 | % | |
| 3.30 | | |
| 1,364,830 | |
| Mar-25 Tranche | |
| 47,907 | | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 3.91 | % | |
| 3.47 | | |
| 329,850 | |
| Warrant Liability Reclassified to equity | | |
| | | |
| | | |
| | | |
| | | |
$ | 1,787,492 | |
As
of December 31, 2024, the Company utilized the Monte Carlo option-pricing model to value the Warrant Liabilities. The Warrant Liabilities
reflected on the December 31, 2024 balance sheet, as well as the assumptions used by the Company to value the Warrant Liabilities are
summarized in the table below:
| | |
| | |
Monte-Carlo Option Pricing Assumptions -
December 31, 2024 | | |
| |
| | |
# of Warrants | | |
Stock Price | | |
Dividend Yield | | |
Expected Volatility | | |
Risk Free Rate of Return | | |
Expected Term | | |
FV of Warrant Liability | |
| 1st Tranche | |
| 91 | | |
$ | 2.37 | | |
| 0.00 | % | |
| 90.00 | % | |
| 4.16 | % | |
| 1.00 | | |
$ | 756 | |
| 2nd Tranche | |
| 59 | | |
$ | 2.37 | | |
| 0.00 | % | |
| 95.00 | % | |
| 4.21 | % | |
| 1.55 | | |
| 596 | |
| 3rd Tranche | |
| 689 | | |
$ | 2.37 | | |
| 0.00 | % | |
| 95.00 | % | |
| 4.26 | % | |
| 2.30 | | |
| 8,125 | |
| 4th Tranche | |
| 2,207 | | |
$ | 2.37 | | |
| 0.00 | % | |
| 90.00 | % | |
| 4.20 | % | |
| 2.42 | | |
| 25,621 | |
| 5th Tranche | |
| 3,712 | | |
$ | 2.37 | | |
| 0.00 | % | |
| 95.00 | % | |
| 4.26 | % | |
| 2.64 | | |
| 47,444 | |
| 6th Tranche | |
| 2,437 | | |
$ | 2.37 | | |
| 0.00 | % | |
| 95.00 | % | |
| 4.27 | % | |
| 2.78 | | |
| 30,268 | |
| 7th Tranche | |
| 6,016 | | |
$ | 2.37 | | |
| 0.00 | % | |
| 95.00 | % | |
| 4.27 | % | |
| 2.89 | | |
| 79,052 | |
| December 31, 2024 Warrant Liability - Debentures | | |
| | | |
| | | |
| | | |
$ | 191,860 | |
| Fair value of Equity Warrants | | |
| | | |
| | | |
| | | |
| 42 | |
| December 31, 2024 Warrant Liability | | |
| | | |
| | | |
| | | |
$ | 191,902 | |
Debenture
Convertible Feature
As
of April 1, 2025 the Company utilized the Monte Carlo option-pricing model to value the Debenture Conversion Feature. The liability reclassified
to equity as of April 1, 2025, as well as the assumptions used by the Company to value the Debenture Conversion feature are summarized
in the table below:
SCHEDULE
OF DEBENTURE CONVERTIBLE FEATURE
| | |
Monte-Carlo Option Pricing Assumptions - April 1, 2025 | | |
| |
| | |
Stock Price | | |
Dividend Yield | | |
Expected Volatility | | |
Risk Free Rate of Return | | |
Discount Rate | | |
Expected Term | | |
FV of Conversion Feature | |
| 1st Tranche | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 3.82 | % | |
| 12.25 | % | |
| 0.15 | | |
$ | 2,057 | |
| 2nd Tranche | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 3.82 | % | |
| 12.25 | % | |
| 0.15 | | |
| 1,714 | |
| 4th Tranche | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 4.01 | % | |
| 11.25 | % | |
| 1.17 | | |
| 91,000 | |
| Jan-25 Tranche | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 4.11 | % | |
| 11.25 | % | |
| 0.79 | | |
| 728,000 | |
| Mar-25 Tranche | |
$ | 1.10 | | |
| 0.00 | % | |
| 100.00 | % | |
| 4.04 | % | |
| 11.25 | % | |
| 0.98 | | |
| 165,000 | |
| Conversion Feature Reclassified to equity | | |
| | | |
| | | |
| | | |
| | | |
$ | 987,771 | |
At
December 31, 2024, the Company utilized the Monte Carlo option-pricing model to value the Debenture Conversion Feature. The liability
reflected on the December 31, 2024 balance sheet, as well as the assumptions used by the Company to value the Debenture Conversion Feature
are summarized in the table below:
| | |
Monte-Carlo Option Pricing Assumptions - December 31, 2024 | | |
| |
| | |
Stock Price | | |
Dividend Yield | | |
Expected Volatility | | |
Risk Free Rate of Return | | |
Discount Rate | | |
Expected Term | | |
FV of Conversion Feature | |
| 1st Tranche | |
$ | 0.47 | | |
| 0.00 | % | |
| 100.00 | % | |
| 5.03 | % | |
| 17.50 | % | |
| 1.00 | | |
$ | 4,778 | |
| 2nd Tranche | |
$ | 0.47 | | |
| 0.00 | % | |
| 105.00 | % | |
| 4.51 | % | |
| 17.50 | % | |
| 1.55 | | |
| 3,983 | |
| 4th Tranche | |
$ | 0.47 | | |
| 0.00 | % | |
| 90.00 | % | |
| 4.20 | % | |
| 11.25 | % | |
| 1.42 | | |
| 285,000 | |
| December 31, 2024 Conversion Feature | |
| | | |
| | | |
| | | |
| | | |
$ | 293,761 | |
During
the nine months ended September 30, 2025, a debt extinguishment of $115,384 occurred for the increase in principal of Tranche 4 of 15%.
As
of September 30, 2025, the IPO Warrants, Rep Warrants, and Private Placement Warrants (the “Equity Warrants”) are classified
as equity due to the Company changing its functional currency to USD as of April 1, 2025. The strike prices of the warrants and the Company’s
functional currency are both denominated in USD. The Company reassessed that the warrants met the classification criteria to be recorded
as equity and the warrants were reclassified to additional-paid-in capital.
As
of December 31, 2024, 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 September 30, 2025 and 2024 were as follows:
SCHEDULE OF CHANGES IN FAIR VALUE OF COMPANY'S LEVEL 3 FINANCIAL INSTRUMENTS
| | |
Level 1 | | |
Level 3 | | |
Level 3 | | |
| |
| | |
IPO and Rep Warrants | | |
Debenture Warrants | | |
Debenture Convertible Feature | | |
Total | |
| Balance at January 1, 2025 | |
$ | 22 | | |
$ | 191,880 | | |
$ | 293,761 | | |
$ | 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 | |
| - | | |
| 1,693 | | |
| 1,584 | | |
| 3,277 | |
| Reclassification to equity | |
| (22 | ) | |
| (1,783,710 | ) | |
| (987,771 | ) | |
| (2,771,503 | ) |
| Balance at September 30, 2025 | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| | |
Level 1 | | |
Level 3 | | |
Level 3 | | |
| |
| | |
IPO and Rep Warrants | | |
Debenture Warrants | | |
Debenture Convertible Feature | | |
Total | |
| Balance at January 1, 2024 | |
$ | 11,308 | | |
$ | 955,000 | | |
$ | 1,724,000 | | |
$ | 2,690,308 | |
| Balance | |
$ | 11,308 | | |
$ | 955,000 | | |
$ | 1,724,000 | | |
$ | 2,690,308 | |
| Additions | |
| - | | |
| 1,175,000 | | |
| 854,000 | | |
| 2,029,000 | |
| Conversions | |
| - | | |
| - | | |
| (2,572,123 | ) | |
| (2,572,123 | ) |
| Expiries | |
| (14,769 | ) | |
| - | | |
| - | | |
| (14,769 | ) |
| Change in fair value | |
| 4,102 | | |
| (1,669,763 | ) | |
| 467,106 | | |
| (1,198,555 | ) |
| Effect of exchange rate changes | |
| (617 | ) | |
| (23,237 | ) | |
| (55,985 | ) | |
| (79,839 | ) |
| Balance at September 30, 2024 | |
$ | 24 | | |
$ | 437,000 | | |
$ | 416,998 | | |
$ | 854,022 | |
| Balance | |
$ | 24 | | |
$ | 437,000 | | |
$ | 416,998 | | |
$ | 854,022 | |
|