Derivative Liabilities

9 Months Ended

Sep. 30, 2024

Derivative Liabilities

Derivative Liabilities

Note 7 – Derivative Liabilities

The above convertible notes contained embedded conversion options with a conversion price that could result in issuing an indeterminate amount of future common stock to settle the host contract. Accordingly, the embedded conversion options are required to be bifurcated from the host instrument (convertible note) and treated as a liability, which is calculated at fair value, and marked to market at each reporting period.

During the nine months ended September 30, 2024 and 2023, respectively, the Company used the Black-Scholes pricing model to estimate the fair value of its embedded conversion option liabilities on both the commitment date and the remeasurement date with the following inputs:

	September 30, 2024			December 31, 2023
Expected term (years)		1.00			1.00
Expected volatility		62	%		41	%
Expected dividends		0.00	%		0.00	%
Risk free interest rate		5.09	%		4.79	%

A reconciliation of the beginning and ending balances for the derivative liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows at September 30, 2024 and December 31, 2023:

Derivative liabilities - December 31, 2022	$	331,399
Fair value mark to market adjustment		(156,354	)
Derivative liabilities - December 31, 2023		175,045
Fair value mark to market adjustment		191,483
Derivative liabilities - September 30, 2024	$	366,528

Changes in fair value of derivative liabilities are included in other income (expense) in the accompanying consolidated statements of operations.

During the nine months ended September 30, 2024 and 2023, the Company recorded a change in fair of derivative liabilities – gains/(losses) of $(191,483) and $156,354 respectively.

In connection with bifurcating embedded conversion options and accounting for certain convertible notes payable, the Company computes a fair value on the commitment date, and upon the initial valuation of this instrument, determines that if the fair value of the liability exceeds the proceeds of the convertible debt host instrument; as a result, the Company records a debt discount at the maximum amount allowed (the face amount of the debt), which requires the excess to be recorded as a derivative expense.

For the nine months ended September 30, 2024 and 2023, the Company recorded a derivative expense of $0 and $0, respectively.