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Derivative Liability

9 Months Ended

Sep. 30, 2025

9	DERIVATIVE LIABILITY

The convertible debt and warrants issued by the Company to Cavalry, Mercer, 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 August 12, 2025, the Company received conversion notices from Cavalry, Mercer, RRH, certain RRH Assignees, Quick Capital and Seven Knots, pursuant to which $468,511 of principal, penalty and interest was converted into an aggregate of 351,130,485 shares of common stock at a weighted average conversion price of $0.001334 (conversion prices ranging from $0.0325 to $0.0005). 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 $0.0005 to $0.000585 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 $0.0005 per share (the “Triggering Event”).

Convertible debt with an aggregate principal and interest balance outstanding on June 2, 2025 of $1,988,523 have such price-based anti-dilution protection. Based on the lowest conversion price in the period January 7, 2025 to September 30, 2025, as described above, the conversion price of these notes was reset to $0.0005. In addition, certain warrants exercisable for 982,029,937 shares of common stock at an exercise price of $0.001105 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 1,188,256,223 to a total number of shares of Common Stock exercisable for such warrants of 2,170,286,160. In addition to this, certain warrants exercisable for 50,457,897 shares of common stock have exercise price protection which reduced the exercise price of these warrants to between $0.0005 and $0.000585 per share from exercise prices ranging from $0.005 to $0.084 per share, resulting in a decrease in potential proceeds receivable from the exercise price of such warrants by $223,558.

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 $16,925,719 on the convertible debt and $8,250,569 on the warrants.

On August 13, 2025, the Company entered into an agreement to modify the conversion price of certain notes issued to Mercer, Cavalry and affiliated entities from conversion prices ranging from $0.0005 to $0.084 per share, to a conversion price of $0.01 per share of common stock. A total of $2,009,024 of the convertible debt is subject to derivative liability, resulting in a gain on repricing of convertible debt of $11,955,877. In addition convertible debt with a fixed conversion price and not subject to derivative liability was repriced resulting in a deemed dividend expense of $33.378 and certain warrants were repriced resulting in a deemed dividend expense of $704, resulting in a total deemed dividend expense of $34,082.

The net mark-to-market movement of the derivative liability for the three months ended September 30, 2025 was a net mark-to-market debit of $33,292,940 and for the nine months ended September 30, 2025 was $30,657,632, determined by using a Black-Scholes valuation model.

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

	Nine months ended September 30, 2025			Year ended December 31, 2024

Conversion price	$	0.0005 to 0.01		$	0.0364 to 0.345
Risk free interest rate		3.72 to 4.44	%		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 443.26	%		24.3 to 262.09	%
Expected dividend rate		0.0	%		0.0	%

The movement in derivative liability is as follows:

	Nine months ended September 30, 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 repricing of convertible debt and warrants		13,220,310		6,370,074
Fair value adjustment to derivative liability		30,657,732		(6,892,395	)
Closing balance	$	45,016,246	$	1,138,204

Common Stock

The Company has total authorized Common Stock of 1,500,000,000 shares with a par value of $0.0001 each. The Company had 454,236,931 and 19,081,446 shares of Common Stock issued and outstanding as of September 30, 2025 and December 31, 2024, respectively.