Note 17 - Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value hierarchy ranks the inputs used in measuring fair value as follows:

The Company uses fair value measurements to record adjustments to certain financial assets and liabilities on a recurring basis. The Company may be required to record certain assets at fair value on a nonrecurring basis in specific circumstances, such as evidence of impairment. Methodologies used to determine fair value might be highly subjective and judgmental in nature; therefore, valuations may not be precise. If the Company determines that a valuation technique change is necessary, the change is assumed to have occurred at the end of the respective reporting period.

Assets and Liabilities Reported at Fair Value on a Recurring Basis

Public Warrants:

Public warrants are recorded at fair value on a recurring basis. The Company obtains exchange traded price, of Level 1 inputs, based on observable data to value these warrants.

Private Placement Warrants:

Private Placement Warrants are recorded at fair value on a recurring basis based upon an internal Company assessed value of these derivatives with Level 3 inputs, which are derived from the Black-Scholes model.

PIPE Warrants:

PIPE Warrants are recorded at fair value on a recurring basis based upon an internal Company assessed value of these derivatives with Level 3 inputs, which are derived from the Black-Scholes model.

Abaca Warrants:

Abaca Warrants are recorded at fair value on a recurring basis. The Company assessed the value of these derivatives with Level 3 inputs. Level 3 inputs, based on unobservable data derived from the Black-Scholes model.

Third anniversary payment consideration:

The third anniversary payment consideration was classified as a derivative liability under ASC 815, Derivatives and Hedging, and was recorded at fair value on a recurring basis using Level 3 inputs. On October 3, 2025, the third anniversary payment of $1.5 million, which was due in October 2025, was settled in full through the issuance of 37,517 shares of Common Stock at a floor value of $40.00 per share at the Company’s election. As a result of this settlement, the liability was fully extinguished during the year ended December 31, 2025.

Forward purchase option derivatives:

Forward purchase option derivatives are recorded at fair value on a recurring basis. On September 30, 2025, all three FPA holders entered into Exchange and Cancellation Agreements with the Company, pursuant to which they irrevocably cancelled, waived, and terminated all of their rights under the FPA in exchange for shares of Series B Convertible Preferred Stock and Series B Warrants to purchase Class A Common Stock. This transaction extinguished the FPA derivative liability in its entirety and was accounted for as a debt extinguishment under ASC 405-20, resulting in a gain on extinguishment of $3.3 million recognized in Other Income (Expense) for the year ended December 31, 2025.

The following tables summarize financial assets and liabilities recorded at fair value on a recurring basis, by the level of valuation inputs in the fair value hierarchy on December 31, 2025 and December 31, 2024:

 Schedule of Financial Assets and Liabilities Recorded at Fair Value

Assets Measured at Fair Value on a Nonrecurring Basis

Assets that are measured at fair value on a nonrecurring basis primarily comprises of property, plant and equipment, right-to-use assets, finite lived intangible assets and goodwill. The Company does not record these at fair value on a recurring basis, however, the carrying value of the assets may be reduced to fair value when the Company determines that impairment has occurred.

As of December 31, 2024, the Company had no assets or liabilities measured at fair value on a non-recurring basis. During the year ended December 31, 2025, the Company recognized the ASC 460 stand-ready guarantee liability under the Second Amended CAA at fair value on a non-recurring basis upon initial recognition on October 1, 2025. This liability was measured at inception only and is not remeasured at fair value in subsequent reporting periods. The carrying amount as of December 31, 2025 was $2.1 million, reflecting the systematic release of the liability as the Company is progressively released from risk on the underlying loan portfolio. The fair value measurement for stand-ready guarantee liability was prepared internally by management using an insurance-pricing methodology, reflecting the premium that a knowledgeable, willing third-party surety or specialty insurer would charge to assume the indemnification obligation in an arm’s-length transaction, consistent with the market participant framework of ASC 820-10-35-9.

The following table summarizes this non-recurring fair value measurement as of the initial recognition date:

 Schedule of Non-Recurring Fair Value Measurement

Level 3 Measurement - Significant Unobservable Inputs

The ASC 460 Guarantee liability was classified as Level 3 because its fair value was determined using significant unobservable inputs for which there is no active market. The following table summarizes the valuation methodology and significant unobservable inputs used in the Level 3 measurement:

 Schedule of Valuation Methodology and Significant Unobservable Inputs

Fair Value of Financial Instruments

The following tables present the carrying amounts and fair values of financial instruments on a non-recurring basis, by the level of valuation inputs in the fair value hierarchy, as of December 31, 2025 and December 31, 2024:

Schedule of Carrying Amounts and Fair Values of Financial Instruments

The change in the liability measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value are presented in the following table:

 Schedule of Fair Value Assets Measured on Recurring Basis

As of December 31, 2025 and on December 31, 2024, the fair market of the private placement warrants, Abaca warrants and PIPE warrants, were based on Black-Scholes Merton option pricing model. The valuation was performed by the Company as of December 31, 2025, and by a third-party prior for prior periods.

During the year ended December 31, 2025 and December 31, 2024, there were no changes in the classification of financial instruments within Level 2 and Level 3 of the fair value hierarchy.

The following table provides quantitative information regarding Level 3 fair value measurements inputs as it relates to the private placement warrants, public warrants, third anniversary payment consideration and Abaca warrants as of their measurement dates:

 Schedule of Level 3 Fair Value Measurements Inputs

On October 3, 2025, the Company issued 37,517 shares of Common Stock to the Abaca shareholders as part of the third anniversary consideration payment under the acquisition agreement (see Note 3), valued at $0.3 million.