NOTE 10: FAIR VALUE MEASUREMENTS

The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities, including financial liabilities measured and recorded at fair value on a recurring basis as of March 31, 2025: 

The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities measured and recorded at fair value on a recurring basis as of December 31, 2024: 

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The Company did not make any transfers into or out of Level 3 of the fair value hierarchy during the three months period ended March 31, 2025 and December 31, 2024.

The following table provides a reconciliation of our assets and liabilities measured at fair value using Level 3 inputs:

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Convertible Notes Payable

The Company’s carrying value and fair value for the convertible notes payable for which the Company elected the fair value option is as follows

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The change in fair value on convertible debt resulted in a loss of approximately $320,000 and $0 for the three months ended March 31, 2025 and 2024, respectively, which was recorded as a component of other income (expense) on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

2024 Convertible Notes and 2025 Convertible Notes: The 2024 Convertible Notes and 2025 Convertible Notes are re-measured to fair value each reporting period using the following relevant assumptions:

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SEPA Convertible Note: The fair value of the SEPA Convertible Note was determined utilizing a Monte Carlo simulation considering the following relevant assumptions:

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Forward Purchase Agreement

The change in fair value on the forward purchase agreement resulted in a loss of approximately $971,000 for the three months ended March 31, 2025, which was recorded as a component of other income on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss (see Note 9).

As at December 31, 2024, the FPA Amendment provide two settlement options whereby the Amended 2024 FPA can be settled either at maturity if shares of the Company’s common stock are trading above $2.00 per share (the “Maturity Settlement Scenario”) or at the Company’s request for a prepayment short-fall whereby the Company requests Meteora to sell shares (the “Prepayment Short-fall Scenario”). The fair value of the Amended 2024 FPA was re-measured to fair value at each subsequent reporting period utilizing a Monte Carlo simulation model that applies a probability of occurrence to the present value of each settlement scenario as follows:

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3(a)(10) Settlement Agreement

The change in fair value on the remaining obligation owed under the 3(a)(10) Settlement Agreement (see Note 4) resulted in a gain of approximately $606,000 for the three months ended March 31, 2025, which was recorded as a component of other income (expense) on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

The fair value of the 3(a)(10) Settlement Agreement was determined using a base case and a default scenario utilizing a Monte Carlo simulation to forecast the Company’s share price through the last share issuance date, considering the following relevant assumptions at the date of issuance and each subsequent reporting period:

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Contingent consideration obligation

During the three months ended March 31, 2025 there was no change in fair value of the contingent consideration obligation.

The fair value of the contingent consideration obligation was measured to fair value at inception and re-measured each reporting period utilizing a Monte Carlo simulation considering the following relevant assumptions:

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Derivative Liabilities

The change in fair value on derivative liabilities resulted in a loss of approximately $34,000 for the three months ended March 31, 2025, which was recorded as a component of other income on the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Debt conversion share adjustment obligations: The fair value of the derivative liabilities issued in connection with the September 2024 debt conversion agreements were determined using Monte Carlo simulations considering the following relevant assumptions at the date of issuance and each subsequent reporting period:

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SEPA Derivative Liability: The fair value of the SEPA Derivative Liability was determined using a Monte Carlo simulation considering the following relevant assumptions at the date of issuance and each subsequent reporting period:

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Shares to be issued at settlement of derivative liabilities

The shares of the Company’s common stock to be issued in settlement of the above derivative liabilities are dependent on the share price at a future date and, as such, cannot be exactly determined as of March 31, 2025. Accordingly, an estimate has been made using the option pricing model to determine the liability value.