5. CONVERTIBLE PROMISSORY NOTES

2013 Note

On October 1, 2013, the Company issued an unsecured convertible promissory note (the “2013 Note”) in the amount of $12,000 to a former Board member (the “Holder”) in exchange for retention as a director during the fiscal year ending September 30, 2014. The Note can be converted into shares of common stock by the Holder for $4.50 per share. The Note matured on October 1, 2015, and bore a one-time interest charge of $1,200 which was applied to the principal on October 1, 2014. As of September 30, 2024, the outstanding principal balance was $12,000 and accrued interest was $1,200. This loan is in default.

2014 Note

On November 20, 2014, the Company issued a 10% unsecured convertible promissory note (the “2014 Note”) for the principal sum of up to $400,000 plus accrued interest on any advanced principal funds. The 2014 Note matured eighteen months from each advance. The 2014 Note may be converted by the lender into shares of common stock of the Company at the lesser of $12.50 per share or (b) fifty percent (50%) of the lowest traded prices following issuance of the 2014 Note or (c) the lowest effective price per share granted to any person or entity. On November 20, 2014, the lender advanced $50,000 to the Company under the 2014 Note at inception. On various dates from February 18, 2015, through September 30, 2016, the lender advanced an additional $350,000 under the 2014 Note. On September 3, 2024, the Company and lender agreed to extend the maturity date for the outstanding balance to June 30, 2025. As of September 30, 2024, the outstanding principal balance was $50,880 and accrued interest was $41,805.

2017 Note

On May 10, 2017, the Company issued a 10% unsecured convertible promissory note (the “2017 Note”) for the principal sum of up to $150,000 plus accrued interest on any advanced principal funds. The Company received a tranche in the amount of $25,000 upon execution of the 2017 Note. On various dates, the Company received additional tranches in the aggregate sum of $90,000. On September 3, 2024, the Company and lender agreed to extend the maturity date for the outstanding balance to June 30, 2025. The 2017 Note may be converted by the lender into shares of common stock of the Company at the lesser of $10 per share or (b) fifty percent (50%) of the lowest traded price of common stock recorded on any trade day after the effective date, or (c) the lowest effective price per share granted to any person or entity. As of September 30, 2024, the outstanding principal balance was $115,000 and accrued interest was $81,119.

August 2021 Note

On August 20, 2021, the Company issued a 10% secured promissory note (the “August 2021 Note”) for the principal sum of $500,000 plus accrued interest. The August 2021 Note was to mature on February 20, 2022, unless extended for up to an additional six months. The August 2021 Note could be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of 90% (representing a 10% discount) multiplied by the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period. The Company issued 1,000,000 warrants at a price of $1.50 in connection with the note and issued 400,000 shares as a commitment fee. In February 2022, the Company extended the term of the August 2021 Note for an additional six months. The Company repaid the August 2021 Note on May 9, 2022, in connection with the issuance of the May 2022 Note described below. As of September 30, 2024, the balance on the August 2021 Note was $0.

In connection with the February 2023 Letter Agreement (described below) the warrants issued in connection with this note were repriced to $0.20 per share. The warrants contained a ratchet price adjustment provision and the difference in fair value upon the reduction of exercise price was treated as a deemed dividend for the down round adjustment provision.

February 2022 Note

On February 15, 2022, the Company issued a 10% secured promissory note (the “February 2022 Note”) for the principal sum of $250,000 plus accrued interest. The February 2022 Note was to mature on August 15, 2022, unless extended for up to an additional six months. The February 2022 Note may be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period before the conversion. In July 2022, the Company extended the term of the February 2022 note for another six months until February 15, 2023. In connection with the note, the Company issued 500,000 warrants with an exercise price of $1.50. The February 2022 Note had an original issuance discount amounting to $25,000, debt issuance cost amounting to $12,000 and the Company issued 300,000 shares as a commitment fee valued at $111,000 based on the share price on the date of the agreement. The initial recognition of derivative and warrant liability was recorded as debt discount and amortized over the term of the loan. The debt discount is fully amortized and the balance in debt discount as on September 30, 2024, was $0. As of September 30, 2024, the principal balance outstanding was $250,000 and accrued interest was $70,374.

On February 9, 2023, the Company entered into a letter agreement in connection with the February 2022 Note, whereby the lender extended the due date of the loan to May 9, 2023, and deferred all interest payments for the period from January 1, 2023, until May 9, 2023. Pursuant to the letter agreement the exercise price of the warrants issued with the February 2022 Note was reduced to $0.20 per share. The warrants contained a ratchet price adjustment provision and the difference in fair value upon the reduction of exercise price was treated as a deemed dividend for the down round adjustment provision.

The Holder has agreed to a number of extensions on the loan and on August 18, 2025, agreed to an extension until November 1, 2025.

May 2022 Note

On May 5, 2022, the Company issued a 12% secured promissory note (the “May 2022 Note”) for the principal sum of $1,000,000 plus accrued interest. The May 2022 Note was to mature on November 5, 2022, unless extended for up to an additional six months. If extended, the interest rate increased to 15% for the remaining six months. The May 2022 Note may be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period before conversion. The Company used some of the proceeds from the May 2022 Note to pay off the August 2021 Note. In November 2022, the Company extended the May 2022 Note for another six months until May 5, 2023. In connection with the loan the Company issued 1,000,000 warrants at an exercise price of $0.01. The May 2022 Note had an original issuance discount amounting to $100,000, debt issuance costs of $25,500 and the Company issued 875,000 shares as a commitment fee valued at $259,875 based on the share price on the date of the agreement. The initial recognition of derivative liability of $412,065 and warrant liability amounting to $282,051 was recorded as debt discount and amortized over the term of the loan. The balance in debt discount as on September 30, 2024, was $0. As of September 30, 2024, the principal balance outstanding was $1,000,000 and accrued interest was $306,285.

The Holder has agreed to a number of extensions on the loan and on August 18, 2025, agreed to an extension until November 1, 2025.

August 2022 Note

On August 8, 2022, the Company issued a 12% unsecured promissory note (the “August 2022 Note”) for the principal sum of $100,000 plus accrued interest. The August 2022 Note matured on August 8, 2023. The holder has the right, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a conversion price of $0.15. The initial recognition of derivative liability of $77,259 was recorded as debt discount and amortized over the term of the loan. The balance in debt discount as on September 30, 2024, was $0. As of September 30, 2024, the balance outstanding was $100,000 and accrued interest was $24,928.

On August 3, 2023, the Company and the holder signed an agreement extending the loan until November 8, 2023, with an interest rate of 14% commencing on August 9, 2023. On January 31, 2024, the Holder agreed to a further extension until February 29, 2024, in return for an additional fee of $5,000. On May 9, 2024, the Holder agreed to a third extension until August 10, 2024, in exchange for an interest rate change to 20% retroactive to August 9, 2022. On August 16, 2024, the Holder agreed to a repayment plan requiring payment in full for unpaid principal and interest by February 27, 2025. On August 28, 2025, the Company and holder agreed to a payment plan of $10,000 within five days of signing with the $100,000 note due by November 1, 2025.

September 2022 Note

On September 22, 2022, the Company issued an 8% secured promissory note (the “September 2022 Note”) for the principal sum of $79,250 plus accrued interest. The September 2022 Note was to mature on September 22, 2023. In case of default in repayment of the outstanding amount on the due date, the balance would have borne interest of 22% per annum. The holder had the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the Common Stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company had the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty was subject to agreement between the parties. The initial recognition of derivative liability amounting to $75,000 was recorded as debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded as debt discount and amortized over the term of the loan. The Company repaid the loan in full including interest of $3,127 and prepayment penalty of $20,594 on March 12, 2023. As of September 30, 2024, the balance outstanding was $0.

November 2022 Note

On November 1, 2022, the Company issued an 8% secured promissory note (the “November 2022 Note”) for the principal sum of $55,000 plus accrued interest. The November 2022 Note was to mature on November 1, 2023. In case of default in repayment of the outstanding amount on the due date, the balance would have borne interest of 22% per annum. The holder had the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the Common Stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company had the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty was subject to agreement between the parties. The initial recognition of derivative liability amounting to $50,750 was recorded as debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded as debt discount and amortized over the term of the loan. The Company repaid the loan in full including interest of $2,109 and prepayment penalty of $14,277 on April 24, 2023. As of September 30, 2024, the balance outstanding was $0.

December 2022 Note

On December 7, 2022, the Company issued an 8% secured promissory note (the “December 2022 Note”) for the principal sum of $55,000 plus accrued interest. The December 2022 Note was to mature on December 7, 2023. In case of default in repayment of the outstanding amount on the due date, the balance would have borne interest of 22% per annum. The holder had the right, after six months, until the date of payment in full of all amounts outstanding, to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the Common Stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company had the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty was subject to agreement between the parties. The initial recognition of derivative liability amounting to $50,750 was recorded as debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded as debt discount and amortized over the term of the loan. On June 13, 2023, the lender converted $12,000 of the amount due into 141,677 shares of the Company and on June 20, 2023, the Company repaid the balance of the loan together with $2,260 in interest and $11,315 in prepayment penalty. As of September 30, 2024, the balance outstanding was $0.

February 2023 Letter Agreement

On February 9, 2023, the Company entered into a letter agreement, whereby the Company borrowed an additional loan amounting to $265,000, which was added to the May 2022 Note. The $265,000 loan has an original issuance discount of 10% of the principal and bears interest at 10% a year. This loan was due on May 9, 2023. Our chief executive officer, Dwain K. Irvin, guaranteed repayment of the loan. Pursuant to this agreement, the Company paid a commitment fee of 500,000 unregistered shares of the Company’s common stock which were valued at $82,500 based on the share price on the date of the agreement. The initial recognition of derivative liability amounting to $110,576 was recorded as debt discount and amortized over the term of the loan. The original issuance discount of $26,500 was recorded as debt discount and amortized over the term of the loan. As of September 30, 2024, the unamortized debt discount balance was $0, the principal balance outstanding was $265,000 and accrued interest was $69,356.

Also, as part of this agreement the lender extended the term of February 2022 note to May 9, 2023, and deferred payment of all interest due on both the February 2022 note and May 2022 note until May 9, 2023. In addition, the Company issued 1,000,000 warrants to purchase common stock at a price of $0.20 per share and repriced the warrants issued in connection with the August 2021 Note and February 2022 Note to $0.20 per share. Since the consideration was for all the modifications and not just the additional loan, the expense was recorded immediately.

On June 8, 2023, the Company entered into a letter agreement which extended the due date of the February 22 note until June 30, 2023. On August 8, 2023, the Company entered into a further letter agreement extending the due date of the loan until August 31, 2023. On January 29, 2024, the Holder agreed to a further extension until February 29, 2024, on May 13, 2024, the Holder agreed to a further extension until May 31, 2024, and on August 18, 2025, the Holder agreed to an extension until November 1, 2025.

April 11, 2023, Note

On April 11, 2023, the Company issued a convertible promissory note for the principal sum of $79,250 plus accrued interest (the “April 11, 2023 Note”). The loan bears interest at 8% a year. The note matures on April 11, 2024. In case of default in repayment of the outstanding amount on the due date, the balance will bear interest of 22% per annum. The holder has the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the common stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company has the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty is subject to agreement between the parties. The initial recognition of the derivative liability of $75,000 was recorded in debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded as debt discount and amortized over the term of the loan. As of September 30, 2023, the remaining debt discount and debt issuance cost balance was expensed since the loan was in default because of a delay in filing the Company’s report on Form 10-K for the period ending September 30, 2023. During the year ended September 30, 2024, on various dates, the $79,250 principal of the loan and accrued interest was converted to 6,953,792 common shares within the terms of the note with no gain or loss. As of September 30, 2024, the principal balance outstanding was $0 and accrued interest was $0. In connection with the repayment of the convertible note, the Company extinguished the related derivative liability valued at $76,871.

April 24, 2023, Note

On April 24, 2023, the Company issued a convertible promissory note in the original principal amount of $54,250 plus accrued interest (the “April 24, 2023 Note”). The loan bears interest at 8% a year. The note matures on April 24, 2024. In case of default in repayment of the outstanding amount on the due date the balance will bear interest of 22% per annum. The holder has the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the common stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company has the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty is subject to agreement between the parties. The initial recognition of derivative liability amounting to $50,000 was recorded as debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded as debt discount and amortized over the term of the loan. As of September 30, 2023, the remaining balance in debt discount and debt issuance costs was expensed since the loan was in default because of a delay in filing the Company’s report on Form 10-K for the period ending September 30, 2023. During the year ended September 30, 2024, on various dates, $24,540 principal of the loan and $4,125 of accrued interest was repaid, and $29,710 principal of the loan was converted to 4,481,509 common shares within the terms of the note with no gain or loss. As of September 30, 2024, the principal balance outstanding was $0 and accrued interest was $0. In connection with the repayment of the convertible note, the Company extinguished the related derivative liability valued at $40,849.

June 19, 2023, Letter Agreement

On June 19, 2023, the Company entered into a letter agreement whereby it borrowed a further $75,000 which was added to the May 2022 Note. This loan bears interest at 15% a year and originally matured on July 16, 2023. Our chief executive officer, Dwain K. Irvin, guaranteed repayment of the $75,000 loan. In connection with this loan the Company issued 750,000 warrants at an exercise price of $0.0001 per share. The initial recognition of the derivative liability was $75,000 which is amortized over the life of the loan. As of September 30, 2024, the principal balance outstanding was $75,000 and accrued interest was $17,276.

On August 8, 2023, the Company entered into a further letter agreement extending the due date of the loan until August 31, 2023. On January 31, 2024, the Holder agreed to a further extension until February 29, 2024, on May 13, 2024, the Holder agreed to a further extension until May 31, 2024, and on August 18, 2025, the Holder agreed to an extension until November 1, 2025.

June 20, 2023, Note

On June 20, 2023, The Company issued a convertible promissory note in the original principal amount of $55,000 plus accrued interest (the “June 20, 2023 Note”). The loan bears interest at 8% a year and matures on June 20, 2024. In case of default in repayment of the outstanding amount on the due date, the balance will bear interest of 22% per annum. The holder has the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the common stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company has the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty is subject to agreement between the parties. The initial recognition of the derivative liability of $17,937 was recorded in debt discount and amortized over the term of the loan. The debt issuance cost of $4,250 was recorded in debt discount and amortized of the term of the loan. As of September 30, 2023, the remaining balance in debt discount and debt issuance cost was expensed since the loan was in default because of a delay in filing the Company’s report on Form 10-K for the period ending September 30, 2023.

During the year ended September 30, 2024, on various dates, $33,620 principal of the loan and $6,131 of accrued interest was repaid, and $21,380 principal of the loan was converted to 5,405,711 common shares within the terms of the note with no gain or loss. As of September 30, 2024, the principal balance outstanding was $0 and accrued interest was $0. In connection with the repayment of the convertible note, the Company extinguished the related derivative liability valued at $43,074.

August 16, 2023, Note

On August 16, 2023, the Company issued a convertible promissory note in the original principal amount of $55,000 plus accrued interest (the “August 16, 2023, Note”). The note bears interest at 8% a year and matured on August 16, 2024. In case of default in repayment of the outstanding amount on the due date, the balance will bear interest of 22% per annum. The holder has the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the common stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company has the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty is subject to agreement between the parties. The initial recognition of the derivative liability of $52,800 was recorded in debt discount and amortized over the term of the loan. The debt issuance cost of $2,200 was recorded in debt discount and amortized of the term of the loan. As of September 30, 2023, the remaining balance in debt discount and debt issuance cost was expensed since the loan was in default as a result of a delay in filing the Company’s report on Form 10-K for the period ending September 30, 2023.

During the year ended September 30, 2024, on various dates, $21,795 principal of the loan was converted to 5,400,000 common shares within the terms of the note with no gain or loss. As of September 30, 2024, the principal balance outstanding was $33,205 and accrued interest was $3,530. The loan is in default and the Company and the Holder are discussing a settlement. The Company has recorded $509,842 as an accrual for its best estimate of the settlement. In connection with the conversion of the convertible note, the Company extinguished the related derivative liability valued at $27,532.

August 17, 2023, Note

On August 17, 2023, the Company issued a convertible promissory note in the original principal amount of $55,000 plus accrued interest (the “August 17, 2023 Note”). The note bears interest at 8% a year and was to mature on August 17, 2024. In case of default in repayment of the outstanding amount on the due date, the balance will bear interest of 22% per annum. The holder has the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to 65% multiplied by the market price. Market price means the average of the three lowest trading prices for the common stock during the fifteen-trading day period ending on the latest complete trading day prior to the conversion date. The Company has the right to prepay the loan with a prepayment penalty of between 15% and 25% of the total amount owed in the first six months. Thereafter, any prepayment penalty is subject to agreement between the parties. The initial recognition of the derivative liability of $50,000 was recorded in debt discount and amortized over the term of the loan. The debt issuance cost of $5,000 was recorded in debt discount and amortized of the term of the loan. As of September 30, 2023, the remaining balance in debt discount and debt issuance cost was expensed since the loan was in default as a result of a delay in filing the Company’s report on Form 10-K for the period ending September 30, 2023.

During the year ended September 30, 2024, on various dates, $55,000 principal of the loan and $5,249 of accrued interest was repaid. As of September 30, 2024, the principal balance outstanding was $0 and accrued interest was $0. In connection with the repayment of the convertible note, the Company extinguished the related derivative liability valued at $44,660.

December 29, 2023 Letter Agreement

On December 29, 2023, the Company entered into a letter agreement with the holder of the February 2022 Note. Under this agreement the holder agreed to loan the Company an additional $29,444 to be added to the principal of the February 2022 Note. An initial amount of $10,000 was loaned on December 29, 2023, with the remaining amount of $19,444 loaned to the Company on February 8, 2024. The loan has an original interest discount of 10% and bears interest at 10% per annum. On May 13, 2024, the Holder agreed to a further extension until May 31, 2024. As part of this agreement, the Company agreed to extend the life on each of the warrants previously issued to the holder by two years. On October 16, 2024, the Holder agreed to an extension until November 1, 2025. As of September 30, 2024, the principal balance outstanding was $29,444 and accrued interest was $4,028.

February 27, 2024 Note

On February 27, 2024, the Company issued a convertible promissory note in the principal amount up to $100,000 plus accrued interest (the “February 27, 2024 Note”). The note has an original interest discount of 20%, bears interest at 12% per calendar year and was to mature on August 27, 2024. The terms of the note included payment in three tranches on February 27, 2024, March 15, 2024, and April 15, 2024. In case of default in repayment of the outstanding amount on the due date, the balance will bear interest of 18% per annum. The holder has the right, after six months, until the date of payment in full of all amounts outstanding to convert unpaid principal and interest and any other amounts into fully paid shares of common stock of the Company at a variable conversion price equal to the lowest trading price for the common stock during the twenty-trading day period ending on the latest complete trading day prior to the conversion date. The initial recognition of the derivative liability of $47,293 was recorded in debt discount and will be amortized over the term of the loan. The debt issuance cost of $5,000 was recorded in debt issuance discount and will be amortized over the term of the loan. The balance in debt discount as of September 30, 2024, was $0. As of September 30, 2024, the principal balance outstanding was $100,000 and accrued interest was $7,783. On August 18, 2025 the Holder agreed to an extension until November 1, 2025.

April 29, 2024 Note

On April 29, 2024, the Company issued a convertible promissory note in the principal amount of $25,600 plus accrued interest (the “April 29, 2024 Note”). The note has an original interest discount of 10%, bears interest at 12% per calendar year and matured on October 26, 2024. The April 29, 2024 Note could be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period before conversion. The Company issued 2,500,000 shares as a commitment fee. The April 29, 2024 Note had an original issuance discount amounting to $2,560 and debt issuance cost amounting to $5,000, which were recorded as debt discount and will be amortized over the term of the loan. The commitment fee was valued at $13,750 based on the share price on the date of the agreement, of which $3,096 was expensed immediately, and the value of the derivative was $9,532, of which $2,146 was expensed immediately, and the balance was recorded as debt discount and will be amortized over the term of the loan. The balance in debt discount as on September 30, 2024 was $3,697. As of September 30, 2024, the principal balance outstanding was $25,600 and accrued interest was $1,289. On August 18, 2025 the Holder agreed to an extension until November 1, 2025.

May 13, 2024 Note

On May 13, 2024, the Company issued a 12% secured promissory note (the “May 13, 2024 Note”) for the principal sum of $117,000 plus accrued interest. The May 13, 2024 Note matures on November 13, 2024. The May 13, 2024 Note may be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period before conversion. In connection with the loan the Company issued 10,000,000 prefunded warrants, of which 3,000,000 may be repurchased by the Company for $1 if all amounts due to the Holder are paid within 90 days. The net proceeds from this loan were used to pay off the June 20, 2023 Note and the August 17, 2023 Note. The May 13, 2024 Note had an original issuance discount amounting to $11,700 and debt issuance costs of $5,300. The initial recognition of derivative liability of $85,588, of which $28,625 was expensed immediately, and warrant liability amounting to $64,665, of which $21,628 was expensed immediately, was recorded as debt discount and the remaining balance will be amortized over the term of the loan. The balance in debt discount as on September 30, 2024 was $27,978. As of September 30, 2024, the principal balance outstanding was $117,000 and accrued interest was $5,382.

August 20, 2024 Note

On August 20, 2024, the Company issued a 12% secured promissory note (the “August 20, 2024 Note”) for the principal sum of $45,000 plus accrued interest. The August 20, 2024 Note matures on February 20, 2025. The August 20, 2024 Note may be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period before conversion. The August 20, 2024 Note had an original issuance discount amounting to $4,500, debt issuance costs of $5,000 and the initial recognition of derivative liability of $29,019 and was recorded as debt discount with the balance to be amortized over the term of the loan. The balance in debt discount as on September 30, 2024 was $29,936. As of September 30, 2024, the principal balance outstanding was $45,000 and accrued interest was $615.

September 18, 2024 Note

On September 13, 2024, the Company issued a 12% secured promissory note (the “September 18, 2024 Note”) for the principal sum of $65,000 plus accrued interest. The September 18, 2024 Note matures on March 18, 2025. The September 18, 2024 Note may be converted, only following an event of default, by the lender into shares of common stock of the Company at the lesser of the lowest trading price during the previous twenty (20) trading day period ending on the issuance date, or during the previous twenty (20) trading day period before conversion. In connection with the loan the Company issued 2,000,000 prefunded warrants. The September 18, 2024 Note had an original issuance discount amounting to $6,500 and debt issuance costs of $8,500. The initial recognition of derivative liability of $89,993, of which $50,374 was expensed immediately, and warrant liability amounting to $19,995, of which $9,574 was expensed immediately, was recorded as debt discount and the remaining balance will be amortized over the term of the loan. The balance in debt discount as on September 30, 2024 was $60,691. As of September 30, 2024, the principal balance outstanding was $65,000 and accrued interest was $282.

Evaluation of Financing Transactions

We evaluated the financing transactions in accordance with ASC Topic 815, Derivatives and Hedging, and determined that the conversion feature of the convertible promissory notes was not afforded the exemption for conventional convertible instruments due to their variable conversion rates. The notes have no explicit limit on the number of shares issuable so they did not meet the conditions set forth in current accounting standards for equity classification. The Company elected to recognize the notes under paragraph 815-15-25-4, whereby, there would be a separation into a host contract and derivative instrument. The Company elected to initially and subsequently measure the notes in their entirety at fair value, with changes in fair value recognized in earnings. The Company recorded a derivative liability representing the imputed interest associated with the embedded derivative. The derivative liability is adjusted periodically according to the stock price fluctuations based upon the Binomial lattice model calculation.

The convertible notes issued and described in this Note do not have fixed settlement provisions because their conversion prices are not fixed. The conversion feature has been characterized as a derivative liability to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

We record the full value of the derivative as a liability at issuance with an offset to valuation discount, which will be amortized over the life of the notes.

For purpose of determining the fair market value of the derivative liability for the embedded conversion, the Company used Binomial lattice valuation model. The significant assumptions used in the Binomial lattice valuation of the derivatives are as follows: