v3.26.1
Derivative Liabilities
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Liabilities

NOTE 8 – Derivative Liabilities

 

The fair values of the conversion option of outstanding convertible notes payable and common stock warrants were determined to be derivative liabilities under ASC 815 due to the default on convertible notes payable disclosed above, which resulted in a variable conversion price on the outstanding convertible note payable. The fair value of the derivative liabilities was estimated using a binomial model with the following assumptions:

           
    As of June 30, 2026  
    Conversion Option     Warrants  
             
Volatility     307.67%       307.67%  
Dividend Yield     0%       0%  
Risk-free rate     3.98%       3.98%  
Expected term     1 year       1 year  
Stock price   $ 0.0038     $ 0.0038  
Exercise price   $ 0.00077-0.01     $ 0.01-0.5  
Derivative liability fair value   $ 3,160,849     $ 664,066  
Number of shares issued upon conversion, exercise, or satisfaction of required conditions as of June 30, 2026     901,421,462       216,800,000  

 

             
   As of December 31, 2025
   Conversion Option  Warrants
       
Volatility   762.08%    762.08% 
Dividend Yield   0%    0% 
Risk-free rate   3.48%    3.48% 
Expected term   1 year    1 year 
Stock price  $0.041   $0.041 
Exercise price  $0.01   $0.01-0.5 
Derivative liability fair value  $3,100,316   $12,324,245 
Number of shares issued upon conversion, exercise, or satisfaction of required conditions as of December 31, 2025   75,670,000    300,800,000 

 

All fair value measurements related to the derivative liabilities are considered significant unobservable inputs (Level 3) under the fair value hierarchy of ASC 820.

 

The table below presents the change in the fair value of the derivative liability during the six months ended June 30, 2026:

     
Fair value as of December 31, 2025   $ 15,424,561  
Establishment of derivative liability upon issuance of notes and date they became convertible     1,230,805  
Extinguishment due to conversion     (1,246,049 )
Extinguishment due to repayment     (68,412 )
Extinguishment due to exercise of warrants     (2,565,487 )
Change in fair value of derivatives     (8,950,503 )
Fair value as of June 30, 2026   $ 3,824,915  

 

The total impact of derivative liabilities recognized in the Company’s consolidated statements of operations includes the change in fair value of derivatives and the fair value of the derivative settled upon repayment, with the Company recognizing a net loss of $705,807 for the three months ended June 30, 2026, and a total gain of $9,018,915 during the six months ended June 30, 2026. In addition, as a result of the default, all other potentially dilutive instruments must also be recorded at fair value pursuant to ASC 815.