| DERIVATIVE WARRANTS LIABILITIES |
NOTE
10 – DERIVATIVE WARRANTS LIABILITIES
| a. |
On
December 21, 2023, the Company issued 2,884,616 warrants (183,414 warrants at an exercise price of US $8.1782 post reverse splits)
in connection with its December 2023 Registered direct public offering (“December 2023 Warrants”). The warrant includes
a cashless exercise provision and repricing adjustments for offerings at a price lower than the existing exercise price of the warrants,
stock splits, reclassifications, subdivisions, and other similar transactions and also the exercise price of the warrant is not denominated
in the functional currency of the Company, therefore, these warrants were recorded at their fair value as a derivative liability
at the time of the grant and revalued at the end of each reporting period. |
On
March 27, 2024, following the March 2024 Public offering, which included the offering of subordinate voting shares at a price lower than
the exercise price of the December 2023 Warrants, the exercise price of the December 2023 Warrants was reduced to US $1.3643, and each
December 2023 Warrant became convertible into 72.42 subordinate voting shares of the Company.
On
August 27, 2024, following the 1:17 reverse stock split, the exercise price of the December 2023 Warrants was updated to $8.1782, and
each December 2023 warrant became convertible into 31.7 subordinate voting shares of the Company.
| b. |
On
March 14, 2024, the Company issued 134,166,665 Series A Warrants (41,538 A warrants post reverse splits) and 268,333,330 Series B
Warrants (83,075 B warrants post reverse splits) in connection with its March 2024 public offering (“March 2024 A Warrants
and B Warrants”). The B warrants include a cashless exercise provision, the A warrants included an alternative cashless provision
that allows the holder to exercise the warrant to a share for no consideration, the warrants also include provisions for repricing
adjustments for offerings at a price lower than the existing exercise price of the warrants, stock splits, reclassifications, subdivisions,
and other similar transactions and also the exercise price of the warrant is not denominated in the functional currency of the Company,
therefore, these warrants were recorded at their fair value as a derivative liability at the time of the grant and revalued at the
end of each reporting period. As of March 14, 2024, the value of the A warrant was $0.023 and the B warrant was $0.0209, therefore
the value of net proceedings of $7,360,662 was allocated to the derivative liability. |
On
March 27, 2024, following the 1:190 reverse stock split, the exercise price of the March 2024 A Warrants and B Warrants was reduced to
$1.3643, and each B warrant became convertible into 14.21 subordinate voting shares of the Company.
On
August 27, 2024, following the 1:17 reverse stock split, the exercise price of the March 2024 A Warrants and B Warrants was reduced to
$8.1782, and each B warrant became convertible into 31.7 subordinate voting shares of the Company.
c.
On February 26, 2025, the Company entered into an exchange agreement with certain holders of tranches of warrants previously issued by the Company in March 2024 and December 2023. Under the Exchange Agreement, such holders agreed to
exchange with the Company some of the outstanding Old Warrants for 2,495,933 new warrants to purchase subordinate voting shares, substantially
similar to the Feb 2025 Series B Warrants issued in the Private Placement. If the exercise price of the Exchange Warrants are adjusted
to the floor of US$0.76, up to 123,253,146 subordinate voting shares would be issuance upon the exercise of the Exchange Warrants. As
a result of the Exchange Agreement, Old Warrants that were exchanged were cancelled as of that date.
d.
On February 28, 2025, the Company issued 4,076,736 Series A Warrants and 4,076,736 Series B Warrants in connection with its February
2025 private placement (“February 2025 A Warrants and B Warrants”). If the exercise price of the Warrants are adjusted to
the floor of US$0.76, up to 201,315,663 subordinate voting shares would be issuance upon the exercise of the Series B Warrants and up
to 27,960,512 subordinate voting shares would be issuance upon the exercise of the Series A Warrants. The warrants include a cashless
exercise provision and repricing adjustments for offerings at a price lower than the existing exercise price of the warrants, stock splits,
reclassifications, subdivisions, and other similar transactions and also the exercise price of the warrant is not denominated in the
functional currency of the Company, therefore, these warrants were recorded at their fair value as a derivative liability at the time
of the grant and revalued at the end of each reporting period.
| e. |
During
the year ended December 31, 2025, the Company recorded a gain on the revaluation of the total derivative liabilities of $30,414,880
(December 31, 2024 – loss of $28,866,166), in the consolidated statements of Operations and Comprehensive Loss. |
FEMTO
TECHNOLOGIES INC.
Notes
to the Consolidated Financial Statements
For
the Years Ended for December 31, 2025, 2024 and 2023
(Expressed
in Canadian dollars, unless otherwise noted)
NOTE
10 – DERIVATIVE WARRANTS LIABILITIES (continued)
| f. |
The
Company engaged an outside valuation company to calculate the fair value of the derivative warrants, the March 2024 A Warrants and
the February 2025 B Warrants were valued at the share price for the day of valuation due to the alternative cashless provision while
Valuation for the March 2024 B Warrants, the February 2025 A Warrants and the December 2023 Warrants was based on the Monte Carlo
simulation model with the following assumptions: |
SCHEDULE OF DERIVATIVE WARRANT LIABILITY
| | |
December 31, 2024 | | |
December 31, 2025 | |
| Share Price | |
US$ | 7.95 | | |
US$ | 0.34 | |
| Exercise Price | |
US$ | 8.1782 | | |
US$ | 380 | |
| Expected life | |
| 1.7-
4.2 years | | |
| 3.20-4.27
years | |
| Risk-free interest rate | |
| 4.34 | % | |
| 3.66 | % |
| Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
| Expected volatility | |
| 95 | % | |
| 95 | % |
| Early exercise threshold | |
US$ | 12.2673 | | |
US$ | 570 | |
The
following table presents the Monte Carlo assumptions for the dates on which B warrants were exercised:
| | |
April 1, 2024 | | |
April 9, 2024 | | |
May 17, 2024 | | |
May 21, 2024 | | |
August 29, 2024 | | |
September 3, 2024 | |
| Share Price | |
US$ | 1.43 | | |
US$ | 1.06 | | |
US$ | 1.1107 | | |
US$ | 1.25 | | |
US$ | 8.3 | | |
US$ | 8.5 | |
| Exercise Price | |
US$ | 1.3643 | | |
US$ | 1.3643 | | |
US$ | 1.3643 | | |
US$ | 1.3643 | | |
US$ | 8.1782 | | |
US$ | 8.1782 | |
| Expected life | |
| 4.9534
years | | |
| 4.9315
years | | |
| 4.8274
years | | |
| 4.8164
years | | |
| 4.5425
years | | |
| 4.5288
years | |
| Risk-free interest rate | |
| 4.35 | % | |
| 4.38 | % | |
| 4.46 | % | |
| 4.45 | % | |
| 3.69 | % | |
| 3.66 | % |
| Dividend yield | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
| Expected volatility | |
| 100.9 | % | |
| 102.26 | % | |
| 107.28 | % | |
| 107.25 | % | |
| 100.03 | % | |
| 99.86 | % |
| Early exercise threshold | |
US$ | 2.0465 | | |
US$ | 2.0465
| | |
US$ | 2.0465
| | |
US$ | 2.0465 | | |
US$ | 12.2673
| | |
US$ | 12.2673
| |
| | |
January 3, 2025 | | |
January 6, 2025 | | |
February 25, 2025 | |
| Share Price | |
US$ | 7.94 | | |
US$ | 7.41 | | |
US$ | 5.28 | |
| Exercise Price | |
US$ | 8.1782 | | |
US$ | 8.1782 | | |
US$ | 8.1782 | |
| Expected life | |
| 4.19
years | | |
| 4.19
years | | |
| 4.05
years | |
| Risk-free interest rate | |
| 4.37 | % | |
| 4.37 | % | |
| 4.10 | % |
| Dividend yield | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
| Expected volatility | |
| 95 | % | |
| 95 | % | |
| 95 | % |
| Early exercise threshold | |
US$ | 12.2673 | | |
US$ | 12.2673 | | |
US$ | 12.2673 | |
The
following table presents the changes in the warrant liability during the period:
SCHEDULE OF CHANGES IN THE WARRANT LIABILITY
| | |
| | |
| Balance as of December 31, 2023 | |
$ | 958,146 | |
| Issuance of March 2024 warrants | |
| 7,360,662 | |
| Reclassification to equity on exercise of warrants | |
| (12,667,047 | ) |
| Changes in fair value and modification of warrants* | |
| 28,866,166 | |
| Balance as of December 31, 2024 | |
$ | 24,517,927 | |
| Issuance of February 2025 warrants | |
| 20,552,190 | |
| Reclassification to equity on exercise of warrants | |
| (14,649,434 | ) |
| Changes in fair value and modification
of warrants* | |
| (30,414,881 | ) |
| Balance as of December 31, 2025 | |
$ | 5,802 | |
| * | | The warrants were
modified after each reverse split due to reverse split provision which has impacted the number of warrants, their exercise price and
value which is included in the changes in fair value and modification of warrants. |
FEMTO TECHNOLOGIES INC.
Notes to the Consolidated Financial Statements
For the Years Ended for December 31, 2025, 2024
and 2023
(Expressed in Canadian dollars, unless otherwise noted)
NOTE 10 – DERIVATIVE WARRANTS LIABILITIES
(continued)
A
summary of the warrants outstanding for the year ended December 31, 2025 are summarized as follows:
SCHEDULE
OF WARRANTS OUTSTANDING
| |
|
Number of December 2023 Warrants |
|
|
Number of Series March 2024 A Warrants |
|
|
Number of Series March 2024 B Warrants |
|
|
Number of Series February 2025 A Warrants |
|
|
Number of Series February 2025 B Warrants |
|
|
Number of Pre Funded
2025
Warrants |
|
|
Number of
2025
Exchange Warrants |
|
| Outstanding at January 1, 2023 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issued during the period |
|
|
2,884,616 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercised during the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cancelled during the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at December 31, 2023 |
|
|
2,884,616 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Issued during the period |
|
|
|
|
|
|
134,166,665 |
|
|
|
268,333,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustment following the March 2024 reverse split |
|
|
(1,785,151 |
) |
|
|
(127,101,046 |
) |
|
|
(248,271,760 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercised during the period |
|
|
|
|
|
|
(7,020,384 |
) |
|
|
(172,766 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustment following the August 2024 reverse split |
|
|
(916,051 |
) |
|
|
(37,689 |
) |
|
|
(16,570,923 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Exercised during the period |
|
|
- |
|
|
|
|
|
|
|
(5,299 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Expired during the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at December 31, 2024 |
|
|
184,314 |
|
|
|
7,546 |
|
|
|
3,312,582 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Exchange warrants |
|
|
(183,414 |
) |
|
|
|
|
|
|
(3,286,179 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
123,142,329 |
|
| Issued during the period |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
27,960,512 |
|
|
|
201,315,663 |
|
|
|
2,011,616 |
|
|
|
- |
|
| Exercised during the period |
|
|
- |
|
|
|
(2,462 |
) |
|
|
(15,575 |
) |
|
|
|
|
|
|
(171,760,603 |
) |
|
|
(2,011,616 |
) |
|
|
(123,142,329 |
) |
| Adjustment following the April 2025 reverse split |
|
|
- |
|
|
|
(4,975 |
) |
|
|
(10,595 |
) |
|
|
(27,904,592 |
) |
|
|
(29,494,780 |
) |
|
|
- |
|
|
|
- |
|
| Exercised during the period |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
(59,289 |
) |
|
|
|
|
|
|
|
|
| Abandonment of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,934 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| Outstanding at December 31, 2025 |
|
|
- |
|
|
|
109 |
|
|
|
233 |
|
|
|
50,986 |
|
|
|
991 |
|
|
|
0 |
|
|
|
0 |
|
| Exercise price at December 31, 2025 |
|
US$ |
- |
|
|
US$ |
- |
|
|
US$ |
380 |
|
|
|
380 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Remaining life in years |
|
|
- |
|
|
|
0.7 |
|
|
|
3.2 |
|
|
|
4.27 |
|
|
|
1.77 |
|
|
|
|
|
|
|
|
|
|