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Derivative Liability

3 Months Ended

Mar. 31, 2025

DERIVATIVE LIABILITY

The convertible debt and warrants issued by the Company to Cavalry, Mercer, RRH and Quick Capital, as described in Note 8 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 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.

Between January 7, 2025 and March 28, 2025, the Company received conversion notices from Cavalry, Mercer, RRH and Quick Capital, pursuant to which $230,798 of principal, penalty and interest was converted into an aggregate of 54,807,989 shares of common stock at a weighted average conversion price of $0.004211 (conversion prices ranging from $0.0325 to $0.001105). as a result of these conversions, all of the outstanding convertible debt and warrants of the Company that contain price based anti-dilution protection had the conversion prices of such notes and the exercise price of such warrants adjusted to $0.001105 per share and certain warrants of the Company that contain “full-rachet” anti-dilution price protection had the number of shares exercisable for such warrants increased by the full ratchet provision and the conversion prices of such warrants adjusted to $0.001105 per share (the “Triggering Event”).

Convertible debt with an aggregate principal and interest balance outstanding on March 20, 2025 of $1,948,864 have such price-based anti-dilution protection. Based on the lowest conversion price in the period January 7, 2025 to March 28, 2025, as described above, the conversion price of these notes will reset to $0.001105. In addition, certain warrants exercisable for 12,918,370 shares of common stock at an exercise price of $0.084 per share, have a full ratchet provision which results in an increase in the number of shares of Common Stock exercisable for such warrants by 969,111,567 to a total number of shares of Common Stock exercisable for such warrants of 982,029,937. In addition to this, certain warrants exercisable for 457,897 shares of common stock have exercise price protection which will reduce the exercise price of these warrants to $0.001105 per share from $0.084 per share, resulting in a decrease in potential proceeds receivable from the exercise price of such warrants by $37,957.

The value of the derivative liability related to the anti-dilution price protected convertible debt and warrants was evaluated immediately prior to the Triggering Event and immediately after the Triggering Event, resulting in an additional derivative liability of $2,341,480 on the convertible debt and $1,618,545 on the warrants.

The net mark-to-market movement of the derivative liability for the three months ended March 31, 2025 was a net mark-to-market credit of $928,978, determined by using a Black-Scholes valuation model.

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

	Three months ended March 31, 2025			Year ended December 31, 2024

Conversion price	$	0.0022		$	0.0364 to 0.345
Risk free interest rate		3.89 to 4.33	%		3.58 to 5.50	%
Expected life of derivative liability		3 to 29 months			1 to 41 months
Expected volatility of underlying stock		189.8 to 219.4	%		24.3 to 262.09	%
Expected dividend rate		0.0	%		0.0	%

The movement in derivative liability is as follows:

	Three months ended March 31, 2025			Year ended December 31, 2024

Opening balance	$	1,138,204		$	1,434,196
Derivative financial liability arising from convertible debt and warrants		-			226,329
Derivative liability arising on anti-dilutive convertible debt and warrants		3,960,025			6,370,074
Fair value adjustment to derivative liability		(928,979	)		(6,892,395	)
Closing balance	$	4,169,250		$	1,138,204