NOTE 7. CONVERTIBLE PROMISSORY NOTES

Convertible Note Payable

On March 6, 2025, the Company issued a convertible promissory note with a principal amount of $75,000 to a third-party lender. The note bears interest at 10% per annum and matures on December 15, 2025. The note contains a conversion feature that allows the holder, after 180 days, to convert any unpaid principal and interest into shares of the Company’s common stock at a conversion price equal to 61% of the lowest trading price of the common stock during the ten (10) trading days prior to the conversion date. The conversion of this note is subject to certain criterions as mentioned in the Convertible Note Agreement, which include a beneficiary cap of 4.99% of shareholdings in the Company by the Note Holder.

Embedded Derivative Liability

In accordance with ASC 815-15-25, the Company evaluated the terms of the conversion feature and determined that it represents an embedded derivative that is not clearly and closely related to the host debt instrument. Specifically, the variability in the conversion price based on market prices causes the feature to meet the definition of a derivative under ASC 815-10-15-83. Accordingly, the conversion option was bifurcated from the host instrument and accounted for separately as a derivative liability at fair value.

Fair Value Measurement

The Company engaged an independent valuation specialist to determine the fair value of the embedded derivative as of the issuance date and subsequent reporting dates.

As of March 6, 2025, the fair value measurements were as follows:

The difference between the fair value of the convertible instrument and the cash proceeds received resulted in a loss on issuance of $47,179, which was recognized in the condensed consolidated statement of operations.

As of June 30, 2025, the Company recognized the following in its condensed consolidated statement of operations: