Note 6 - Fair Value Measurements

The Company measures certain assets and liabilities at fair value. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability (i.e., an ‘exit price’) in the principal or most advantageous market in an orderly transaction between market participants at the measurement date.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 – Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2 – Valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Valuations based on inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The Company’s digital assets measured at fair value, which include assets held in treasury, deployed in DeFi protocols, and staked in validator operations, are accounted for in accordance with ASC 350-60 and are valued using quoted prices in active markets for the underlying tokens, primarily on major digital-asset exchanges. These quoted prices represent Level 1 inputs within the fair-value hierarchy.

The Company also holds certain digital assets, including liquidity pool positions and NFTs that are accounted for as indefinite-lived intangible assets under ASC 350 and are measured at cost less impairment. These assets are not measured at fair value on a recurring basis and, therefore, are not included in the recurring fair value hierarchy disclosures presented in this note. To the extent impairment is recognized, the related fair value measurement is disclosed as a nonrecurring fair value measurement. See Note 5 – Digital Assets (Liquidity Pool Positions and Other Intangible Digital Assets) for additional information.

Encumbrances resulting from staking lock-ups or DeFi collateralization do not affect classification within the fair-value hierarchy because such restrictions are entity-specific and do not impact the market prices of the respective tokens available to other market participants. Accordingly, all digital assets measured at fair value on a recurring basis are classified as Level 1.

Financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities, accrued compensation, accrued interest, loans payable – DeFi protocol, and convertible notes payable.

The carrying amounts of cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities, accrued compensation, and accrued interest approximate fair value due to the short-term nature of these instruments.

The carrying amount of loans payable – DeFi protocol approximates fair value because the borrowings are denominated primarily in USD-pegged stablecoins, bear variable rates determined by the applicable DeFi protocol, have no fixed maturity, and may be repaid or liquidated in accordance with protocol terms; the related fair value measurement would be categorized within Level 2 of the fair value hierarchy.

The Company’s convertible notes payable are carried at amortized cost, net of unamortized debt discount and issuance costs. Management believes the estimated fair value of the convertible notes approximated carrying value as of March 31, 2026 and December 31, 2025; the related fair value measurement would be categorized within Level 3 of the fair value hierarchy due to the absence of an active market for the notes and the use of significant unobservable inputs, including the Company’s estimated credit risk, liquidity considerations, and assumptions regarding conversion and settlement.

The following tables present the Company’s assets and liabilities that are measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets as of March 31, 2026 and December 31, 2025. Private equity investments accounted for under the ASC 321 measurement alternative are not measured at fair value on a recurring basis and are presented separately below.

 Schedule of Fair Value of Assets and Liabilities Valued on Recurring Basis

The Company did not make any transfers between the levels of the fair value hierarchy during the three months ended March 31, 2026.

Level 3 Liabilities

Level 3 financial liabilities previously consisted of warrant liabilities for which there was no active market and fair value was determined using valuation models incorporating unobservable inputs.

The warrant liabilities originated from warrants issued in a prior financing transaction and were previously classified as derivative liabilities. These warrants were classified as derivative liabilities because certain terms could have required net-cash settlement under circumstances outside the Company’s control. Prior to their expiration, the warrant liabilities were measured at fair value using an option pricing model that incorporated inputs such as the Company’s stock price, expected volatility, risk-free interest rate, and expected term.

All outstanding liability-classified warrants expired during the three months ended March 31, 2026. As a result, there were no warrant liabilities outstanding as of March 31, 2026, and the Company will no longer remeasure warrant liabilities in future periods. As of December 31, 2025, the estimated fair value of these warrant liabilities was approximately $0.

Private Equity Investments Accounted for Under ASC 321 Measurement Alternative

The Company holds private equity investments without readily determinable fair values. The Company has elected to account for these investments using the measurement alternative under ASC 321, Investments—Equity Securities, under which such investments are measured at cost, less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

As of March 31, 2026 and December 31, 2025, the carrying amount of the Company’s private equity investments accounted for under the measurement alternative was $600,000 and $600,000, respectively. No impairments, upward adjustments, or downward adjustments were recognized during the three months ended March 31, 2026.

The following table summarizes changes in the carrying amount of private equity investments accounted for under the ASC 321 measurement alternative for the three months ended March 31, 2026 and the year ended December 31, 2025:

Schedule of Changes in Fair Value and Other Adjustments of Warrants 

Nonrecurring Fair Value Measurements of Intangible Digital Assets

The Company holds certain digital assets, including liquidity pool positions and NFTs, that are accounted for as indefinite-lived intangible assets under ASC 350 and measured at cost less impairment. These assets are not measured at fair value on a recurring basis and, therefore, are excluded from the recurring fair value hierarchy tables presented below. When the Company recognizes an impairment loss, the fair value measurement used to measure the impairment represents a nonrecurring fair value measurement under ASC 820. See Note 5 – Digital Assets (Liquidity Pool Positions and Other Intangible Digital Assets) for additional information.

During the three months ended March 31, 2026, the Company recognized impairment losses of approximately $210,000 related to intangible digital assets, including approximately $194,000 impairment of liquidity pool positions and approximately $16,000 impairment of NFTS, because the carrying amounts of certain assets exceeded their estimated fair values. After recognizing impairment, the carrying amounts of liquidity pool positions and NFTs as of March 31, 2026 were approximately $11,358,000 and $26,000, respectively. To the extent the related assets were written down to fair value during the period, these amounts represent the assets’ fair values as of the March 31, 2026 nonrecurring measurement date. The impairment losses are included in impairment loss on intangible digital assets in the statements of operations.

The fair value of liquidity pool positions was estimated using a market approach based on the observable value of the underlying digital assets withdrawable from the applicable liquidity pools as of the measurement date, including observable on-chain pool composition, pool liquidity and quoted market prices for the underlying digital assets. Because the measurement was based principally on observable inputs and no significant unobservable adjustments were applied, the related nonrecurring fair value measurement was categorized within Level 2 of the fair value hierarchy.

The fair value of NFTs was estimated using a market approach based on available NFT marketplace information, including recent transactions, floor prices or other marketplace indications for comparable NFTs, as adjusted for asset-specific characteristics and limited market activity. The related nonrecurring fair value measurement was categorized within Level 3 of the fair value hierarchy because there are no quoted prices in active markets for identical NFTs and the measurement involves management judgment. For the Level 3 NFT measurement, significant unobservable inputs consisted primarily of management’s judgment in selecting comparable NFT marketplace data and evaluating asset-specific characteristics and market activity. The Company did not develop material quantitative unobservable adjustments in measuring fair value.