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Derivative Liabilities | 9 Months Ended
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Sep. 30, 2024
Derivative Liabilities [Abstract] |
Derivative liabilities |
| 12. | Derivative liabilities
On July 15, 2022, the Company issued 231,828 common stock purchase warrants with an exercise price of $2.01 as part of the conversion of promissory notes. On November 21, 2023, the Company completed its Initial Public Offering (“IPO”) and issued 75,000 warrants (the “IPO warrants”). Each IPO warrant is exercisable into one share of common stock of the Company at $4 per share and expire on November 21, 2028. We analyzed the common stock purchase warrants issued as partial settlement of the promissory notes payable and the IPO warrants against the requirements of ASC 480, Distinguishing Liabilities from Equity, and determined that the warrants should be classified as financial liabilities. ASC 815, Derivatives and Hedging, requires that the warrants be accounted for as derivative liabilities with initial and subsequent measurement at fair value with changes in fair value recorded as other income (expense). A continuity of the Company’s common stock purchase derivative liability warrants is as follows:
|  | Derivative liabilities |
Outstanding, December 31, 2022 |  | $ | 68,455 |
Addition of new derivatives during IPO |  |  | 229,437 |
Change in fair value of derivative liabilities |  |  | 71,266 |
Outstanding, December 31, 2023 |  | $ | 369,158 |
Change in fair value of derivative liabilities |  |  | (367,277 | )
Outstanding, September 30, 2024 |  | $ | 1,881 |
We determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes Option Pricing Model to calculate the fair value as of initial recognition and as of September 30, 2024, and December 31, 2023. The Black-Scholes Option Pricing Model requires six basic data inputs: the exercise or strike price, expected time to expiration or exercise, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The following assumptions were used in the Black-Scholes option pricing model:
|  | September 30, 2024 |  |  | December 31, 2023 |  |  | November 21, 2023 |  |  | December 31, 2022 |  |  | July 15, 2022 |
Risk-free interest rate |  |  | 3.58 | % |  |  | 3.84 - 4.01% |  |  |  | 4.41 | % |  |  | 4.73 | % |  |  | 3.12 | %
Expected life 1 |  |  | 2.57 – 4.15 years |  |  |  | 3.32 – 4.90 years |  |  |  | 5 years |  |  |  | 0.75 years |  |  |  | 0.6 years |
Expected dividend rate |  |  | 0 | % |  |  | 0 | % |  |  | 0.00 | % |  |  | 0.00 | % |  |  | 0.00 | %
Expected volatility |  |  | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | % |  |  | 100 | %
As of September 30, 2024, the following derivative liability warrants were outstanding:
Outstanding |  |  | Expiry date1 |  | Weighted average exercise price ($) |
| 75,840 |  |  | April 27, 2027 |  |  | 2.01 |
| 63,037 |  |  | April 27, 2027 |  |  | 2.01 |
| 80,388 |  |  | April 27, 2027 |  |  | 2.01 |
| 12,563 |  |  | April 27, 2027 |  |  | 2.01 |
| 75,000 |  |  | November 21, 2028 |  |  | 4.00 |
| 306,828 |  |  |  |  |  | 2.50 |
As of September 30, 2024, and December 31, 2023, the weighted average life of derivative liability warrants outstanding was 2.96 and 3.71 years, respectively.
| 1 | On April 28, 2023, the Company amended the warrant agreements for the 231,828 derivative liability warrants outstanding. The amendment removed the clause to automatically convert warrants to shares on IPO date and all warrants were given an expiry date of April 27, 2027. This led to an increase in the expected life input in the Black-Scholes model as of December 31, 2023, compared to December 31, 2022, when the Company used the expected IPO date to calculate the expected life of the warrants.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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