| Fair Value of Financial Instruments |
6. Fair
Value of Financial Instruments There were no level 1 or
2 assets or liabilities at December 31, 2025 or 2024. Level 3 assets and
liabilities measured and recorded at fair value on a recurring basis at
December 31, 2025 and 2024 were as follows:
| | | | | | | | | |
| |
|
December
31,
2025
|
|
|
December
31,
2024
|
|
|
Derivative Liability – Contingent Interest April Note
|
|
$
|
1,680,000 |
|
|
$
|
47,000 |
|
|
Derivative Liability – Contingent Interest September Note
|
|
$
|
924,000 |
|
|
$
|
94,000 |
|
|
Derivative Liability – Contingent Interest December Note
|
|
$
|
1,358,000 |
|
|
$
|
275,000 |
|
The April 2021 Note
derivative liability – contingent interest was valued using a Monte Carlo
Geometric Brownian Stock Path Model. The key assumptions used in the model at
December 31, 2025 and 2024 are as follows: | | | | | | | | | | | | | December 31, 2025 | | | December 31,
2024 | | | Stock Price | | $ | 4.16 | | | $ | 1.29 | | | Conversion Price of conversion feature | | $ | 5.00 | | | $ | 5.00 | | | Term | | 1.5 years | | | 0.29 years | | | Risk Free Interest Rate | | | 3.48 | % | | | 4.37 | % | | Credit Adjusted Discount Rate | | | 12.03 | % | | | 12.43 | % | | Volatility | | | 113 | % | | | 152 | % | | Dividend Rate | | | 0 | % | | | 0 | % |
The roll forward of the
April 2021 Note derivative liability – contingent interest is as follows:
| | | | | |
|
Balance – December 31, 2023
|
|
$
|
431,000 |
|
|
Fair Value Adjustment
|
|
|
(384,000 |
)
|
|
Balance – December 31, 2024
|
|
|
47,000 |
|
|
Fair Value Adjustment
|
|
|
1,633,000 |
|
|
Balance – December 31,
2025
|
|
$
|
1,680,000 |
|
The September 2021 Note
derivative liability – contingent interest was valued using a Monte Carlo
Geometric Brownian Stock Path Model. The key assumptions used in the model at
inception, and at December 31, 2025 and 2024 are as follows: | | | | | | | | | | | | | December 31,
2025 | | | December 31,
2024 | | | Stock Price | | $ | 4.16 | | | $ | 1.29 | | | Conversion Price of conversion feature | | $ | 8.64 | | | $ | 8.64 | | | Term | | 1.5 years | | | 0.72 years | | | Risk Free Interest Rate | | | 3.48 | % | | | 4.16 | % | | Credit Adjusted Discount Rate | | | 12.03 | % | | | 12.43 | % | | Volatility | | | 113 | % | | | 111 | % | | Dividend Rate | | | 0 | % | | | 0 | % |
The roll forward of the
September 2021 Note derivative liability – contingent interest is as follows:
| | | | | |
|
Balance – December 31, 2023
|
|
$
|
169,000 |
|
|
Fair Value Adjustment
|
|
|
(75,000 |
)
|
|
Balance – December 31, 2024
|
|
|
94,000 |
|
|
Fair Value Adjustment
|
|
|
830,000 |
|
|
Balance – December 31,
2025
|
|
$
|
924,000 |
|
The December 2021 Note
derivative liability – contingent interest was valued using a Monte Carlo
Geometric Brownian Stock Path Model. The key assumptions used in the model at
inception, and at December 31, 2025 and 2024 are as follows: | | | | | | | | | | | | | December 31, 2025 | | | December 31,
2024 | | | Stock Price | | $ | 4.16 | | | $ | 1.29 | | | Conversion Price of conversion feature | | $ | 5.43 | | | $ | 5.43 | | | Term | | 1.5 years | | | 0.97 years | | | Risk Free Interest Rate | | | 3.48 | % | | | 4.16 | % | | Credit Adjusted Discount Rate | | | 12.03 | % | | | 12.43 | % | | Volatility | | | 113 | % | | | 102 | % | | Dividend Rate | | | 0 | % | | | 0 | % |
The roll forward of the
December 2021 Note derivative liability – contingent interest is as follows:
| | | | | |
|
Balance – December 31, 2023
|
|
$
|
404,000 |
|
|
Fair Value Adjustment
|
|
|
(129,000 |
)
|
|
Balance – December 31, 2024
|
|
|
275,000 |
|
|
Fair Value Adjustment
|
|
|
1,083,000 |
|
|
Balance – December 31,
2025
|
|
$
|
1,358,000 |
|
|