NOTE 8 - DERIVATIVE LIABILITY

9 Months Ended

Sep. 30, 2025

Notes

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:

	September 30, 2025	Upon Issuance 2025	December 31, 2024	Upon Issuance 2024
Stock Price	$1.697	$0.00	$2.5099	$0.00
Exercise Price	$0.896-1.5273	$0.00	$1.406-6.00	$0.00
Expected Life	0	0	0	0.00
Volatility	171%	0%	235%	0%
Dividend Yield	0%	0%	0%	0%
Risk-Free Interest Rate	4.13%	0%	4.29%	0%
Convertible Notes	183,956	0	530,860	0.00
Total Fair Value	$557,997	$0.00	$625,420	$0.00

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, 2024, 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, 2024 resulted in a loss of $471,270.

During the nine months ended September 30, 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 nine months ended September 30, 2025 resulted in a gain of $67,423.

The details of derivative liability transactions for the months ended September 30, 2025 and year ended December 31, 2024 are as follows:

The change in Level 3 financial instrument fair value is as follows:

Balance, December 31, 2023	$154,150
Issued during the year ended December 31, 2024	-
Derivative liabilities debt premium	-
Change in fair value recognized in operations	471,270
Converted during the year ended December 31, 2024	-
Balance, December 31, 2024	$625,420
Issued during the nine months ended September 30, 2025	-
Derivative liabilities debt discount	-
Change in fair value recognized in operations	20,679
Converted during the nine months ended September 30, 2025	(88,102)
Balance, September 30, 2025	$557,997