Derivative liabilities

12 Months Ended

Dec. 31, 2023

Derivative liabilities

Derivative liabilities

7. Derivative liabilities   

Embedded derivatives

The Company’s convertible promissory notes gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.

The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of December 31, 2023 and 2022 and the amounts that were reflected in income related to derivatives for the period ended:

	December 31, 2023
The financings giving rise to derivative financial instruments	Indexed Shares		Fair Values
Embedded derivatives		45,221,645	$	149,182
Total		45,221,645	$	149,182

	December 31, 2022
The financings giving rise to derivative financial instruments	Indexed Shares		Fair Values
Embedded derivatives		46,915,395	$	161,565
Total		46,915,395	$	161,565

The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the years ended December 31, 2023 and 2022:

	For the Years Ended
	December 31, 2023		December 31, 2022
Embedded derivatives	$	38,759	$	47,183
Loss on issuance of derivative		—		—
Total gain (loss)	$	38,759	$	47,183

Current accounting principles that are provided in ASC 815 require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. The Company has selected the Monte Carlo Simulation Model, which approximates the Monte Carlo Simulations, valuation technique to fair value the embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Binomial Lattice Model technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators. For instruments in which the time to expiration has expired, the Company has utilized the intrinsic value as the fair value. The intrinsic value is the difference between the quoted market price on the valuation date and the applicable conversion price.

Significant inputs and results arising from the Monte Carlo Simulation process are as follows for the embedded derivatives that have been bifurcated from the convertible notes and classified in liabilities:

	Inception Date			December 31, 2022			December 31, 2023
Quoted market price on valuation date	$	0.034		$	0.010		$	0.012
Effective contractual conversion rates	$	0.026		$	0.007		$	0.009
Contractual term to maturity	0.5 Years			0.25 Years			0.25 Years
Market volatility:
Volatility	200.36%-332.78		%	200.36%-332.78		%	200.36%-332.78		%
Risk-adjusted interest rate		10	%		10	%		10	%

The following table reflects the issuances of embedded derivatives and changes in fair value inputs and assumptions related to the embedded derivatives as of December 31, 2023 and 2022.

	Year Ended			Year Ended
	December 31, 2023			December 31, 2022
Balances at beginning of period	$	161,565		$	208,748
Issuances:
Embedded derivatives		26,376			-
Conversions/extinguishments
Changes in fair value inputs and assumptions reflected in income		(38,759	)		(47,183	)
Balances at end of period	$	149,182		$	161,565