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Derivative Liability | 12 Months Ended
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Dec. 31, 2024
Derivative Liability |
Derivative Liability | Note 13 – Derivative Liability During the year ended December 31, 2024, the Company had derivative warrant liabilities that were measured at fair value on a recurring basis. These fair value measurements were estimated using a Monte Carlo simulation model, with the key inputs described below. Each of these fair value measurements was considered to be a Level 3 measurement by the Company as they used significant unobservable inputs, including the probability and expected date of stockholder approval. The key inputs for each of these warrant liabilities were as follows: Schedule of Derivative Warrant Liabilities
Warrant Liability – Series A Warrants |  | Issuance Date |  |  | December 31, 2024 |
Stock price on valuation date |  | $ | 18.00 |  |  | $ | 18.00 |
Exercise price |  | $ | 34.00 |  |  | $ | 34.00 |
Number of warrants |  |  | 279,412 |  |  |  | 279,412 |
Remaining term (years) |  |  | 5.00 |  |  |  | 4.93 |
Annual equity volatility |  |  | 113.0 | % |  |  | 114.0 | %
Annual volume volatility |  |  | 377.0 | % |  |  | 379.0 | %
Risk-free interest rate |  |  | 3.95 | % |  |  | 4.29 | %
Expected stockholder approval date |  |  | January 14, 2025 |  |  |  | January 14, 2025 |
Expected stockholder approval probability |  |  | 50 | % |  |  | 50 | %
ALGORHYTHM HOLDINGS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023
Warrant Liability – Series B Warrants |  | Issuance Date |  |  | December 31, 2024 |
Stock price on valuation date |  | $ | 18.00 |  |  | $ | 18.00 |
Exercise price |  | $ | 68.00 |  |  | $ | 68.00 |
Number of warrants |  |  | 279,412 |  |  |  | 279,412 |
Remaining term (years) |  |  | 2.50 |  |  |  | 2.43 |
Annual equity volatility |  |  | 126.0 | % |  |  | 120.0 | %
Annual volume volatility |  |  | 409.0 | % |  |  | 416.0 | %
Risk-free interest rate |  |  | 4.00 | % |  |  | 4.17 | %
Expected stockholder approval date |  |  | January 14, 2025 |  |  |  | January 14, 2025 |
Expected stockholder approval probability |  |  | 50 | % |  |  | 50 | %
The following table details the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of December 31, 2024: Schedule of fair value on a recurring basis
December 31, 2024 |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Warrant liabilities |  | $ | — |  |  | $ | — |  |  | $ | 16,603,000 |
Total liabilities |  | $ | — |  |  | $ | — |  |  | $ | 16,603,000 |
The following table provides a roll-forward of the fair value of the derivative liabilities described above: Schedule of fair value of the Derivative Liabilities
|  | Series A Warrants |  |  | Series B Warrants |  |  | Total Warrant Liabilities |
Balance at December 31, 2023 |  | $ | — |  |  | $ | — |  |  | $ | — |
Issuances |  |  | 5,901,000 |  |  |  | 11,036,000 |  |  |  | 16,937,000 |
Exercises |  |  | — |  |  |  | — |  |  |  | — |
Loss (gain) on change in fair value |  |  | (445,000 | ) |  |  | 111,000 |  |  |  | (334,000 | )
Balance at December 31, 2024 |  | $ | 5,456,000 |  |  | $ | 11,147,000 |  |  | $ | 16,603,000 |
ALGORHYTHM HOLDINGS, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 and 2023 The following table provides a roll-forward of the number of shares of common stock underlying warrants issued during the year ended December 31, 2024 and the nine months ended December 31, 2023: Schedule of Shares of Common Stock Underlying Warrants
|  | Pre-Funded Warrants |  |  | Series A Warrants |  |  | Series B Warrants |  |  | Other Warrants |  |  | Total |
Balance at March 31, 2023 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,511 |  |  |  | 4,511 |
Issuances |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Exercises |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Balance at December 31, 2023 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,511 |  |  |  | 4,511 |
Issuances |  |  | 258,412 |  |  |  | 279,412 |  |  |  | 279,412 |  |  |  | — |  |  |  | 817,236 |
Exercises |  |  | (258,412 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (258,412 | )
Balance at December 31, 2024 |  |  | — |  |  |  | 279,412 |  |  |  | 279,412 |  |  |  | 4,511 |  |  |  | 563,335 |
The Company did not issue any warrants during the nine month transition period ended December 31, 2023 and did not have any warrants outstanding as of December 31, 2023.

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