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NOTE 13 – WARRANTS | 9 Months Ended
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Sep. 30, 2024
Accounting Policies [Abstract] |
NOTE 13 – WARRANTS | NOTE 13 – WARRANTS On February 12, 2024, we issued a Common Stock Purchase Option (the “Option”) to ADI Funding LLC (“ADI Funding”) for $100,000 that expires on December 31, 2024, for the right to acquire up to 10,000,000 shares of common stock. The exercise price per share of the common stock under the Option shall be (i) 70% of the VWAP of the common stock during the then 10 Trading Days immediately preceding, but not including the date of exercise if the VWAP is below $2.00 or (ii) seventy five percent (75%) of the VWAP of the common stock during the then 10 Trading Days immediately preceding, but not including the date of exercise if the VWAP is equal or above $2.00. ADI Funding has the right and the obligation to exercise, on a “cash basis”, not less than (i) 2,000,000 of the shares of common stock underlying the option not later than the later of March 31, 2024 or the date on which there is an effective registration statement permitting the resale of the shares by ADI Funding. From and after the occurrence of the above-referenced exercise, each additional exercise of the Option shall be in an amount not less than 1,000,000 shares, which shall occur every thirty (30) days and shall be exercised only on a cash basis. ADI Funding’s obligation to exercise each specified portion of the Option is subject to the exercise price being not less than $0.11 If the Company issues securities less than the exercise price of the option, ADI Funding has a right to also use that lesser price in the exercise of its Option. The Option also contains rights to any Company distributions and consideration in fundamental transactions. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. The Company determined that the warrants had net cash settlement and categorized the warrants as a liability in the accompanying consolidated financial statements. A summary of activity regarding warrants issued as follows:
|  | Warrants Outstanding |  |
|  |  |  | Weighted Average |  | Weighted Average Remaining
|  | Shares |  | Exercise Price |  | Contractual life (in years)
Outstanding, December 31, 2023 |  |  |  | — |  |  | $ | — |  |  |  | —
Granted |  |  |  | 10,000,000 |  |  |  | 0.88 |  |  |  | 0.88
Exercised |  |  |  | (5,227,273 | ) |  |  | 0.11 |  |  |  | —
Forfeited/canceled |  |  |  | — |  |  |  | — |  |  |  | —
Outstanding, September 30, 2024 |  |  |  | 4,772,727 |  |  | $ | 0.11 |  |  |  | 0.25
The intrinsic value of the warrants as of September 30, 2024 is approximately $253,000. All of the outstanding warrants are exercisable as of September 30, 2024; however, each exercise is subject to a beneficial ownership limitation of 4.99% of the Company’s outstanding common stock, which, upon notice, may be increased to 9.99%. Fair Value Assumptions Used in Accounting for Derivative Liabilities ASC 815 requires we assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of September 30, 2024. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. As of September 30, 2024, the estimated fair values of the liabilities measured on a recurring basis are as follows:
Expected term |  |  | 0.25 - 0.65 years
Expected average volatility |  |  | 78% - 118%
Expected dividend yield |  |  | —
Risk-free interest rate |  |  | 4.73% - 5.44%
The following table summarizes the changes in the derivative liabilities during the nine months ended September 30, 2024:
Fair Value Measurements Using Significant Observable Inputs (Level 3)
Balance - December 31, 2023 |  |  | — |
Addition of new derivatives recognized as cash received |  |  | 100,000 |
Exercise on issuance of common stock |  |  | (885,843 | )
Change in fair value of the warrant |  |  | 1,063,789 |
Balance - September 30, 2024 |  | $ | 277,946 |

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- Definition Disclosure of accounting policy for derivatives entered into for trading purposes and those entered into for purposes other than trading including where and when derivative financial instruments and derivative commodity instruments and their related gains or losses are reported in the entity's statements of financial position, cash flows, and results of operations. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-1 + Details
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