Note 12 – Embedded Derivative Liability

As described in “Note 12 – Embedded Derivative Liability” to the unaudited condensed consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, the Company bifurcated and recorded embedded derivative liabilities in connection with the issuance of Series A Preferred Stock related to the GTG Financial acquisition and the Mercurius Media Capital LP (“MMC”) media-for-equity transaction. These derivative liabilities represent the fair value of the shortfall settlement features embedded in the agreements relating to the issuance of Series A Preferred Stock to GTG Financial and MMC, pursuant to which the Company is required to settle in cash or additional shares of common stock if the value of conversion shares upon automatic conversion of the Series A Preferred Stock is less than the paid consideration for such shares of Series A Preferred Stock.

The derivative liabilities are classified as Level 3 within the fair value hierarchy and are measured at fair value using the Black-Scholes option pricing model. The fair values of the derivative liabilities are remeasured at each reporting date, with changes in fair value recognized in earnings.

As of June 30, 2025, the derivative liabilities recorded in connection with the GTG Financial acquisition and the MMC transaction were approximately $253,134 and $4,492,500, respectively, resulting in a combined fair value of $4,745,634. A total increase in fair value of $215,204 from the prior quarter was recognized in the condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2025, the Company estimated the fair value of the derivative liability using the Black-Scholes option pricing model with the following key assumptions: