NOTE 8 - DERIVATIVE LIABILITY |
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Jun. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| NOTE 8 - DERIVATIVE LIABILITY | NOTE 8 – DERIVATIVE LIABILITY
The Company evaluated the notes under the requirements of ASC 480 “Distinguishing Liabilities From Equity” (ASC 480) and concluded that the notes do not fall within the scope of ASC 480. The Company next evaluated the notes under the requirements of ASC 815 “Derivatives and Hedging Activities” and determined that the scope exception to ASC 815’s derivative accounting provisions does not apply. The Company then evaluated the embedded derivative criteria in ASC 815, and concluded that the conversion features meet all the embedded derivative criteria in ASC 815, and therefore, the conversion features meet the definition of an embedded derivative that should be separated from the notes and accounted for as a derivative liability.
The derivative liabilities were valued using a Black-Scholes option pricing model with the following average assumptions:
The expected life of the note was based on the remaining contractual term of the instruments. The Company uses the historical volatility of its Common Stock to estimate the future volatility for its Common Stock. The expected dividend yield was based on the fact that the Company has not paid dividends in the past and does not expect to pay dividends in the future. The risk-free interest rate was based on rates established by the Federal Reserve Bank.
Consolidated Statement of Operations – Change in fair value on derivative
During the year ended December 31, 2025, the following transactions were recorded in the account “change in fair value on derivative”: (i) the change in the fair value of these derivative liabilities for the year ended December 31, 2025 resulted in a gain of $273,009.
During the months ended June 30, 2026, the following transactions were recorded in the account “change in fair value on derivative”: (i) the change in the fair value of these derivative liabilities for the months ended June 30, 2026 resulted in a gain of $304,058.
The details of derivative liability transactions for the months ended June 30, 2026 and year ended December 31, 2025 are as follows:
The change in Level 3 financial instrument fair value is as follows:
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