Derivatives Liabilities Disclosure

9 Months Ended

Sep. 30, 2025

NOTE 7 - DERIVATIVE LIABILITY

The Company’s derivative liabilities consist of convertible notes with variable conversion price provisions. These instruments are classified as derivative liabilities under ASC 815 due to their potential for a variable number of shares upon settlement. The fair value of these derivative liabilities is estimated at initial recognition and remeasured at each reporting date using the Black-Scholes pricing model. Changes in fair value are recorded as derivative income or expense in the statement of operations. The significant assumptions used in estimating the fair value include the exercise price, volatility of the stock underlying the instrument, risk-free interest rate, estimated fair value of the stock underlying the instrument and the estimated life of the instrument.

A summary of the activity of the derivative liability for the notes above is as follows:

		September 30, 2025		December 31, 2024
Balance at Beginning of period	$	-	$	2,224,622
Increase in derivative due to new issuances		-		1,611,600
Derivative income due to mark to market adjustment		-		(713,237)
Balance at end of period	$	-	$	3,122,985

GROOVY COMPANY, INC. 10-Q