Annual report [Section 13 and 15(d), not S-K Item 405]

DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

v3.26.3
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
 12 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

NOTE 12 - DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

 

Derivative Financial Instruments:

 

The Company applies the provisions of ASC 815-40, Contracts in Entity’s Own Equity, under which convertible instruments and warrants, which contain terms that protect holders from declines in the stock price (reset provisions), may not be exempt from derivative accounting treatment. As a result, warrants and embedded conversion options in convertible debt are recorded as a liability and are revalued at fair value at each reporting date. If the fair value of the warrants exceeds the face value of the related debt, the excess is recorded as change in fair value in operations on the issuance date. The Company had $0 and $291,650 (9 notes) of convertible debt, which were treated as derivative instruments outstanding at June 30, 2026 and 2025, respectively.

 

 

The Company calculates the estimated fair values of the liabilities for derivative instruments using the Binomial Trees Method. The closing price of the Company’s common stock at June 30, 2026 was $1.50 per share. The volatility, expected remaining term, and risk-free interest rates used to estimate the fair value of derivative liabilities at June 30, 2026 and 2025 are indicated in the table that follows. The expected term is equal to the remaining term of the warrants or convertible instruments and the risk-free rate is based upon rates for treasury securities with the same term.

 

Convertible Debt

 

   

Initial Valuations
(on new derivative
instruments entered

into during the year ended June 30, 2026)

    

Initial Valuations
(on new derivative
instruments entered

into during the year ended June 30, 2025)

  
Volatility     -       344-414 %
Expected remaining term     -       0.66-1.00  
Risk-free interest rate     -       4.21-4.29 %
Expected dividend yield     None       None  

 

    June 30, 2026     June 30, 2025  
Volatility     -       413.55 %
Expected remaining term     -       0.01 - 0.95  
Risk-free interest rate     -       4.21 – 4.45 %
Expected dividend yield     None       None  
                 

 

The Company measures and reports at fair value the liability for derivative instruments. The fair value liabilities for price adjustable warrants and embedded conversion options have been recorded as determined utilizing the Binomial Trees model. The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis As of June 30, 2026 and 2025:

 

    Balance at
June 30, 2026		    

Quoted Prices

in Active

Markets for

Identical
Assets

    

Significant

Other

Observable
Inputs

    

Significant

Unobservable Inputs

  
              (Level 1)       (Level 2)       (Level 3)  
Warrant liability   $ —     $ —     $ —     $ —  
Embedded conversion option liabilities     —       —       —       —  
Total   $ —     $ —     $ —     $ —  

 

    Balance at
June 30, 2025		    

Quoted Prices

in Active

Markets for

Identical
Assets

    

Significant

Other

Observable
Inputs

    

Significant

Unobservable Inputs

  
          (Level 1)     (Level 2)     (Level 3)  
Embedded conversion option liabilities   $ 403,892     $ —     $ —     $ 403,892  
Total   $ 403,892     $ —     $ —     $ 403,892  

 

 

The following is a roll forward for the years ended June 30, 2026 and 2025 of the fair value liability of price adjustable derivative instruments:

 

    Fair Value of  
    Liability for  
    Derivative  
    Instruments  
Balance at June 30, 2024   $ 133,886  
Initial fair value of embedded conversion option derivative liability recorded as debt discount     222,500  
Initial fair value of embedded conversion option derivative liability recorded as derivative expense     333,596  
Gain on debt extinguishment     (73,640 )
Change in fair value included in statements of operations     (212,450 )
Balance at June 30, 2025     403,892  
Gain on debt extinguishment     (390,183 )
Change in fair value included in statements of operations     (13,709 )
Balance at June 30, 2026   $ -  

 

The following table sets forth a summary of the changes in the fair value of the Level 3 warrant liability for the year ended June 30, 2026:

 

    Warrant
Liability		  
Fair value as of June 30, 2025   $ -  
Initial fair value of warrant liability upon issuance     882,345  
Reclassification into equity upon conversions     (8,925 )
Reclassification into equity upon amendment of Series C designation     (973,115 )
Change in fair value of warrant liability     99,695  
Fair value as of June 30, 2026   $ —