The convertible debt and warrants issued by the Company to Cavalry, Mercer, Quick Capital and certain of the 2025 Convertible Note holders, as described in Note 10 have variable priced conversion rights with no fixed floor price and will re-price dependent on the share price performance over varying periods of time and certain convertible notes and warrants have fundamental transaction clauses which might result in cash settlement, due to these factors, all convertible debt and any warrants attached thereto are valued and give rise to a derivative financial liability, which was initially valued at inception of the convertible debt using a Black-Scholes valuation model.

The expiration of the forbearance agreement with Cavalry and Mercer, disclosed in note 10 above resulted in a revaluation of the conversion feature of certain Cavalry and Mercer variable priced convertible notes on May 1, 2026, using a Black Scholes valuation model. This resulted in an additional derivative liability of $20,196,476 on May 1, 2026.

The net mark-to-market movement of the derivative liability for the three months ended June 30, 2026 was a net mark-to-market credit of $8,189,992 and for the six months ended June 30, 2026 was $9,208,075, determined by using a Black-Scholes valuation model.

The following assumptions were used in the Black-Scholes valuation model:

The movement in derivative liability is as follows:

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these liabilities is sensitive to changes in the conversion price and changes in the stock price. Changes in the Company’s expected stock price volatility and movements in interest rates are less sensitive. A 10% change in volatilities and interest rate factors would not result in a material change in our Level 3 fair value.