DERIVATIVE LIABILITY |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE LIABILITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVE LIABILITY | NOTE 3: DERIVATIVE LIABILITIES
Derivative liability – convertible notes
During the three months ended March 31, 2026, five separate notes went into default. These defaults triggered variable conversion features and penalty provisions that met the criteria for liability classification under ASC 815. Consequently, the Company recorded an initial discount on convertible notes of $263,586 representing the fair value of these instruments on the measurement (default) date.
The Company has certain convertible notes with variable price conversion terms. Upon the issuance of these convertible notes and as a consequence of their conversion features, the convertible notes give rise to embedded derivative liabilities. The Company’s derivative liabilities related to its convertible notes payable have been measured at fair value at March 31, 2026 and June 30, 2025 using the Cox, Ross & Rubinstein Binomial Tree valuation model.
The revaluation of the warrants and convertible debt at each reporting period, as well as the charges associated with issuing additional convertible notes, and warrants with price protection features, resulted in the recognition of a gain of $80,293 and $23,155 for the nine months ended March 31, 2026 and 2025, respectively in the Company’s consolidated statements of operations, under the caption “Gain on change of fair value of derivative liability”. The fair value of the warrants at March 31, 2026 and June 30, 2025 was $0 and $0, respectively. The fair value of the derivative liability related to the convertible debt at March 31, 2026 and June 30, 2025 is $191,098 and $7,805, respectively, which is reported on the consolidated balance sheet under the caption “Derivative liability”.
The Company has determined its derivative liability to be a Level 3 fair value measurement. The significant assumptions used in the Cox, Ross & Rubinstein Binomial Tree valuation of the derivative are as follows:
Changes in the derivative liabilities during the nine months ended March 31, 2026 is follows:
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