Derivative Liabilities

6 Months Ended

Jun. 30, 2024

NOTE 8 – DERIVATIVE LIABILITIES

Commencing with the second quarter of 2022, the Company changed its accounting treatment for securities that contain predominantly, fixed rate conversion features by recording the derivative feature as a put premium on stock settled debt.

The embedded conversion options of certain of the Company’s convertible debentures summarized in Note 6 contain variable conversion features that qualify for embedded derivative classification under ASC 815-15 Embedded Derivatives. The fair value of these liabilities is re-measured at the end of every reporting period and the change in fair value is reported in the statement of operations as a gain or loss on derivative financial instruments.

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities:

	Total
Balance as of December 31, 2021	$	110,992
Change Due to Issuances		2,718,645
Transfer to put premium		(112,537	)
Change in fair value		(544,850	)
Balance as of December 31, 2022		2,172,250
Change Due to Issuances		(4,035,300	)
Transfer to put premium		651,156
Change in fair value		1,645,712
Balance as of December 31, 2023		433,818
Change in fair value		144,545
Balance as of June 30, 2024	$	578,363

The Company uses Level 3 inputs for its valuation methodology for its conversion option liabilities as their fair values were determined by using Black-Scholes options pricing model. The option-pricing model requires a number of assumptions, of which the most significant are share price, expected volatility and the expected option term (the time from the issuance date until the maturity date). The Company has historically not paid dividends and has no foreseeable plans to issue dividends. The risk-free interest rate is based on the yield from governmental zero-coupon bonds with an equivalent term. As, required, these are classified based on the lowest level of input that is significant to the fair value measurement.

The following table shows the assumptions used in the calculations of its derivatives:

	June 30, 2024	December 31, 2023
Stock price	$0.0001 - $0.1500	$0.0001 - $0.1500
Exercise price	$0.00003 - $0.2572	$0.00003 - $0.2572
Contractual term (in years)	7.00 – 0.025	7.00 – 0.025
Volatility (annual)	174% - 2068%	174% - 2068%
Risk-free rate	4.41% - 5.57%	4.41% - 5.57%

bowmo, Inc. 10-Q