v3.25.1
FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2025
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS

NOTE 16. FAIR VALUE MEASUREMENTS

The Company accounts for certain liabilities at fair value and classifies these liabilities with the fair value hierarchy. Our asset retirement obligation liabilities are measured at fair value on a non-recurring basis.

Assets, liabilities, and expenses subject to fair value measurements are as follows:

March 31, 2025

    

Level 1

    

Level 2

    

Level 3

    

Total

Asset:

Equity facility derivative asset

$

$

$

1,596

$

1,596

Liability:

ARO liabilities

$

$

$

2,252,996

$

2,252,996

Embedded derivative liability

$

$

$

381,216

$

381,216

December 31, 2024

Level 1

    

Level 2

    

Level 3

    

Total

Asset:

Equity facility derivative asset

$

$

$

16,999

$

16,999

Liabilities:

ARO liabilities

$

$

$

2,198,064

$

2,198,064

Embedded derivative liability

$

$

$

309,181

$

309,181

The carrying value of cash and cash equivalents, trade receivables, prepaid and other current assets, due from related parties, accounts payable, accrued liabilities, due to related party, and other current liabilities, as reflected in the consolidated balance sheets, approximate fair value, due to the short-term maturity of these instruments. The carrying value of notes payable approximates their fair value due to immaterial changes in market interest rates.

The equity facility derivative asset and the embedded derivative liability were valued using a Monte Carlo model.

The following table provides quantitative information regarding Level 3 fair value measurements for the embedded derivative liability and equity facility asset at initial measurement at December 6, 2024 and at March 31, 2025.

    

Equity Facility

 

Embedded

 

Embedded

Equity Facility

Embedded

Derivative Asset

Derivative Liability

Derivative Liability

Derivative Asset

Derivative Liability

    

March 31, 2025

    

March 31, 2025

    

January 15, 2025 (Initial Measurement)

    

December 6, 2024 (Initial Measurement)

    

December 6, 2024 (Initial Measurement)

Conversion price

$

$

10.00

$

10.00

$

$

10.00

Share price

$

1.14

$

1.14

$

3.00

$

9.88

$

9.88

Volatility

 

36.0

%

 

32.0

%

32.0

%

29.0

%

28.0

%

Probability of default

 

 

38.72

%

41.0

%

41.0

%

Risk-free rate

 

4.23

%

 

3.95

%

4.12

%

4.23

%

4.08

%

Dividend yield

 

 

The following table presents the changes in the fair value of Level 3 embedded derivative liabilities and equity facility derivative asset:

    

Embedded

    

Equity

Derivative

Facility

Liabilities

Derivative Asset

Fair value as of January 1, 2025

$

309,181

$

16,999

Initial fair value as of January 15, 2025

263,012

Change in valuation inputs or other assumptions

(190,977)

(15,403)

Fair value as of March 31, 2025

$

381,216

$

1,596