11. WARRANT LIABILITY |
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Jun. 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| 11. WARRANT LIABILITY | 11.WARRANT LIABILITY
The details of warrant liability transactions for the six months ended June 30, 2025 and December 31, 2024, are as follows:
On August 27, 2024, as consideration for the reduction of weekly payments to certain lenders during the Company’s Reg A Offering, the Company issued common stock, warrants to purchase (“Purchase Warrant”) up to an aggregate of 625,000 shares of the Company’s common stock (the “Common Warrants”) at $4.50 per share.
The Purchase Warrant provides for a value calculation for the Purchase Warrant using the Black Scholes model in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders of the Purchase Warrant that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrant as a liability in its condensed consolidated balance sheet. The classification of the Purchase Warrant, including whether the Purchase Warrant should be recorded as a liability or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the condensed consolidated statements of operations and comprehensive loss. The Purchase Warrant was initially recorded at a fair value at $1,936,937 at the grant date and is re-valued at each reporting date. Upon the issuance of warrants, the fair value of the Purchase Warrant liability was recorded as a loss on debt modification.
During the three and six months ended June 30, 2025, the Company recognized change in fair value of the warrant liability of $174,354 and $(100,626). As of December 31, 2024, the fair value of the warrant liability was $459,067.
All changes in the fair value of the warrant liabilities are recognized as a change in fair value of warrant liability in the Company’s consolidated statements of operations until they are either exercised or expire.
The warrant liabilities for the Common Warrants were valued using a Black Scholes pricing model with the following weighted average assumptions:
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