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Derivative Liability | 6 Months Ended
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Jun. 30, 2024
Derivative Liability [Abstract] |
DERIVATIVE LIABILITY | NOTE 7 – DERIVATIVE LIABILITY As stated in Note 6, May 2023 Convertible Note, July 2023 Convertible Note, October 2023 Convertible Note, and March 2024 Convertible Note, the Company determined that these convertible notes payable contained an embedded derivative feature in the form of a conversion provision which was adjustable based on future prices of the Company’s common stock. In accordance with ASC 815-10-25, each derivative feature was initially recorded at its fair value using the Black-Scholes option valuation method and then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. However, on May 23, 2023, July 6, 2023, October 9, 2023, March 7, 2024, and March 31, 2024, management determined the probability of failing to make an amortization payment when due was remote and as such the estimated fair value of the embedded conversion feature was zero. As of June 5, 2024, these convertible notes were repaid in full. As stated in Note 6, June 2024 Convertible Note, the Company determined that the convertible note payable contains an embedded derivative feature in the form of a conversion provision which is adjustable based on future prices of the Company’s common stock. In accordance with ASC 815-10-25, each derivative feature is initially recorded at its fair value using the Black-Scholes option valuation method and then re-value at each reporting date, with changes in the fair value reported in the statements of operations. However, on June 5, 2024 and June 30, 2024, management determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the embedded conversion feature has been estimated to be zero. On May 23, 2023, the Company issued 240,500 warrants to Mast Hill and a third party as a finder’s fee (see Note 6). Upon evaluation, the warrants meet the definition of a derivative liability under FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Through life of the May 2023 Convertible Note, management determined the probability of failing to make an amortization payment when due was remote and as such the estimated fair value of the 105,500 warrants with an exercise price of $3.20, which warrant was cancelled and extinguished against payment of the May 2023 Convertible Note, was zero. Accordingly, the fair value of the 135,000 warrants with an exercise price of $4.50 exercisable until the five-year anniversary of May 23, 2023 was classified as a derivative liability on May 23, 2023. On June 30, 2024, the estimated fair value of the 135,000 warrants with an exercise price of $4.50 exercisable until the five-year anniversary of May 23, 2023 as derivative liability was $10,409. The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $0.47, volatility of 80.89%, risk-free rate of 4.52%, annual dividend yield of 0% and expected life of 3.9 years. On July 6, 2023, the Company issued 80,163 warrants to Firstfire and a third party as a finder’s fee (see Note 6). Upon evaluation, the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Through life of the July 2023 Convertible Note, management determined the probability of failing to make an amortization payment when due was remote and as such the estimated fair value of the 35,165 warrants with an exercise price of $3.20, which warrant was cancelled and extinguished against payment of the July 2023 Convertible Note, was zero. Accordingly, the fair value of the 44,998 warrants with an exercise price of $4.50 exercisable until the five-year anniversary of July 6, 2023 was classified as a derivative liability on July 6, 2023. On June 30, 2024, the estimated fair value of the 44,998 warrants with an exercise price of $4.50 exercisable until the five-year anniversary of July 6, 2023 as derivative liability was $3,482. The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $0.47, volatility of 79.79%, risk-free rate of 4.33%, annual dividend yield of 0% and expected life of 4.0 years. On October 9, 2023, the Company issued 200,900 warrants to Mast Hill and Firstfire and a third party as a finder’s fee (see Note 6). Upon evaluation, the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Through life of the October 2023 Convertible Note, management determined the probability of failing to make an amortization payment when due was remote and as such the estimated fair value of the 87,500 warrants with an exercise price of $1.80, which warrant was cancelled and extinguished against payment of the October 2023 Convertible Note, was zero. Accordingly, the fair value of the 113,400 warrants with an exercise price of $2.50 exercisable until the five-year anniversary of October 9, 2023 was classified as a derivative liability on October 9, 2023. On June 30, 2024, the estimated fair value of the 113,400 warrants with an exercise price of $2.50 exercisable until the five-year anniversary of October 9, 2023 as derivative liability was $16,700. The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $0.47, volatility of 83.41%, risk-free rate of 4.33%, annual dividend yield of 0% and expected life of 4.3 years. On March 7, 2024, the Company issued 262,904 warrants to Mast Hill and a third party as a finder’s fee (see Note 6). Upon evaluation, the warrants meet the definition of a derivative liability under FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Through life of the March 2024 Convertible Note, management determined the probability of failing to make an amortization payment when due was remote and as such the estimated fair value of the 121,154 warrants with an exercise price of $1.30, which warrant was cancelled and extinguished against payment of the March 2024 Convertible Note, was zero. Accordingly, the fair value of the 141,750 warrants with an exercise price of $2.00 exercisable until the five-year anniversary of March 7, 2024 was classified as a derivative liability on March 7, 2024. On June 30, 2024, the estimated fair value of the 141,750 warrants with an exercise price of $2.00 exercisable until the five-year anniversary of March 7, 2024 as derivative liability was $27,699. The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $0.47, volatility of 86.34%, risk-free rate of 4.33%, annual dividend yield of 0% and expected life of 4.7 years. On June 5, 2024, the Company issued 2,280,000 warrants to Mast Hill and a third party as a finder’s fee (see Note 6). Upon evaluation, the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Management determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the 1,200,000 warrants with an exercise price of $0.50 exercisable until the five-year anniversary of June 5, 2024, which warrant shall be cancelled and extinguished against payment of the June 2024 Convertible Note, has been estimated to be zero. Accordingly, the fair value of the 1,080,000 warrants with an exercise price of $0.65 exercisable until the five-year anniversary of June 5, 2024 was classified as a derivative liability on June 5, 2024. On June 30, 2024, the estimated fair value of the 1,080,000 warrants with an exercise price of $0.65 exercisable until the five-year anniversary of June 5, 2024 as derivative liability was $323,130. The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $0.47, volatility of 85.15%, risk-free rate of 4.33%, annual dividend yield of 0% and expected life of 4.9 years. Increases or decreases in fair value of the derivative liability are included as a component of total other (expenses) income in the accompanying condensed consolidated statements of operations and comprehensive loss. The changes to the derivative liability resulted in a decrease of $180,337 and $41,721 in the derivative liability and the corresponding increase in other income as a gain for the three months ended June 30, 2024 and 2023, respectively. The changes to the derivative liability resulted in a decrease of $211,549 and $41,721 in the derivative liability and the corresponding increase in other income as a gain for the six months ended June 30, 2024 and 2023, respectively.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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