Derivative Liability |
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Dec. 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Derivative Liability | Note 11. Derivative Liability
On August 22, 2025, the Company recorded a derivative liability of $3,425,796 related to an anti-dilution provision in the CEO employment agreement. This provision protects the CEO from ownership dilution below 3.6% fully diluted.
The derivative liability was remeasured at December 31, 2025 using a Monte Carlo simulation (Level 3 measurement). The change in fair value of the derivative resulted in a gain of $1,480,990 for the year ended December 31, 2025.
The following table summarizes the activity of the derivative liability for the year ended December 31, 2025:
The fair value of the derivative liability was estimated using a Monte Carlo simulation model with the following key inputs and assumptions:
The expected volatility was based on the historical volatility of the Company’s stock. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the valuation date for maturities consistent with the expected term.
The derivative liability will continue to be remeasured at fair value at each reporting period until the underlying obligation is settled or the anti-dilution provision expires.
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