v3.25.1
Fair Value Measurement
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurement [Text Block]

12. Fair Value Measurement

The following table presents information about the Company's financial assets and liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation:

    Fair Value Measurements as of December 31, 2024 and 2023  
    Using                 Total     Total  
    Level 1     Level 2     Level 3     2024     2023  
Assets: $ -     -     -   $ -   $ -  
Liabilities:                              
Convertible promissory notes   -     -     12,088,911     12,088,911     10,519,824  
  $ -     -     12,088,911   $ 12,088,911   $ 10,519,824  

During the years ended December 31, 2024 and 2023, there were no transfers between Level 1, Level 2, or Level 3. There were no other financial assets or liabilities measured at fair value on a recurring basis as of December 31, 2024.

The following table summarizes the change in Level 3 financial instruments during the year ended December 31, 2024.

    2024     2023  
Fair value at December 31, 2023 $ 10,519,824   $ 7,796,433  
Fair value at issuance   182,143        
Amendments   13,191     2,180,923  
Conversions/repayments   -     (336,578 )
Mark to market adjustment   1,373,753     879,046  
Fair value at December 31, 2024 $ 12,088,911   $ 10,519,824  

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the convertible promissory notes at issuance and subsequent financial reporting dates was estimated based on significant inputs not observable in the market, which represent level 3 measurements within the fair value hierarchy.

The fair value of the convertible promissory notes at issuance and at each reporting period was estimated based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based

binomial model to estimate the fair value of the convertible promissory notes. The model determines the fair value from a market participant's perspective by evaluating the payouts under hold, convert, or call decisions. The most significant estimates and assumptions used as inputs are those concerning type, timing and probability of specific scenario outcomes. Specifically, the Company assigned a probability of default, which would increase the required payout as described in Note 11 and calculated the fair value under each scenario.

At the issuance dates of the convertible promissory notes, the probability of default ("PD") was assumed to be 75% (2023-75%), except for those which were amended post maturity, which were assumed to be 100%. The probability of default was determined in reference to a 1-year PD rate for a 'CCC+' rating at issuance, and a combination of 'CC' and 'CCC-' credit ratings at December 31, 2024 and 2023. Increasing (decreasing) the probability of default would result in a significantly higher (lower) fair value measurement.

Other significant unobservable inputs include the expected volatility and the credit spread. The expected volatility was based on the historical volatility over a look-back period that was consistent with the balance-remaining term of the instruments. A range of 220.4% to 247.8% was used for the expected volatility (2023-162.4% to164.8%). The discount for lack of marketability was determined using a range of option pricing methodologies using the remaining restriction term corresponding to each instrument on the relevant valuation date. The credit spread was determined in reference to credit yields of companies with similar credit risk at the date of valuation. A premium of 10% (2023-10%) was added to the credit spread as an instrument specific adjustment to reflect the Company's risk of default. A range of 22.95% to 22.95% (2023-22.95% to 22.95%) was used for the credit spread.