Derivative Liability

9 Months Ended

Sep. 30, 2025

Derivative Liability

Derivative Liability

Note 8 – Derivative Liability

Fair Value Assumptions Used in Accounting for Derivative Liabilities

ASC 815 requires us to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Binomial Lattice model to calculate the fair value as of September 30, 2025 and December 31, 2024.

For the nine months ended September 30, 2025 and the year ended December 31, 2024, the estimated fair values of the liabilities measured on a recurring basis, used the following significant assumptions: 

	September 30,			December 31
	2025			2024
Expected term	0.13 - 1 year			0.29 years
Risk-free interest rate	4.02 - 4.34		%		4.15	%
Stock price at valuation date	$	5.34 - 11.7			4.38
Expected average volatility	60.5 - 146.5		%		95.41	%
Expected dividend yield		-			-

The following table summarizes the changes in the derivative liabilities during the nine months ended September 30, 2025:

Fair Value Measurements Using Significant Observable Inputs (Level 3)
Balance - December 31, 2024	$	1,055,233
Addition of new derivatives recognized as debt discounts		1,027,000
Settled on issuance of common stock		(2,481,000	)
Reclassification to additional paid in capital		(1,604,000	)
Loss on fair value of derivative liability		2,002,767
Balance - September 30, 2025	$	-