v3.26.1
Fair Value
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value

Note 4 - Fair Value

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of all Level 3 liabilities measured at fair value on a recurring basis using unobservable inputs during the three months ended March 31, 2025 and 2024:

 

   Warrant   Accrued   Derivative     
   Liabilities   Compensation   Liabilities   Total 
                 
Balance - January 1, 2025  $216,085   $37,348   $581,503   $834,936 
                     
Issuance of warrants and conversion option   7,760    -    141,397    144,723 
Change in fair value   (2,935)   (34)   (27,675)   (28,889)
                     
Balance - March 31, 2025  $220,910   $37,314   $695,225   $950,770 

 

   Warrant   Accrued   Derivative     
   Liabilities   Compensation   Liabilities   Total 
                 
Balance - January 1, 2024  $356,510   $97,102   $33,000   $486,612 
                     
Accrual of warrant obligation   6,666    -    -    6,666 
Issuance of warrants and conversion option   11,377    -    5,100    16,477 
Common stock issued in satisfaction of accrued compensation   -    (45,000)   -    (45,000)
Change in fair value   (85,693)   (766)   (5,800)   (92,259)
                     
Balance - March 31, 2024  $288,860   $51,336   $32,300   $372,496 

 

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The Company’s Level 3 liabilities shown in the above table consist of warrants with “down-round protection”, as the Company is unable to determine if it will have sufficient authorized common stock to settle such arrangements, warrants deemed to be derivative liabilities according to the Company’s sequencing policy in accordance with ASC 815-40-35-12, the embedded conversion options within its convertible notes payable, the fair value of the Company’s obligation to issue penalty warrants (which is classified within warrant liabilities and warrant liabilities – related party on the condensed consolidated balance sheets), and an accrued obligation to issue common stock (which is a component of accrued compensation).

 

In applying the Black-Scholes option pricing model utilized in the valuation of Level 3 liabilities, the Company used the following approximate assumptions:

 

   For the Three Months Ended 
   March 31, 
   2025   2024 
         
Risk-free interest rate   3.89% - 4.35%   3.84% - 4.35%
Expected term (years)   2.62 - 10.00    3.58 - 5.00 
Expected volatility   70%   65%
Expected dividends   0.00%   0.00%

 

The expected term used is the contractual life of the instrument being valued. Since the Company’s stock has not been publicly traded for a sufficiently long period of time or with significant volume, the Company is utilizing an expected volatility based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

 

As of March 31, 2025 and December 31, 2024, the Company had an obligation to issue 183,095 shares of common stock to service providers that had a fair value of $34,788, which was a component of accrued compensation in the condensed consolidated balance sheets. The fair value of the common stock underlying this obligation has a per share value of $0.19 as of March 31, 2025 and December 31, 2024. Furthermore, as of March 31, 2025 and December 31, 2024, the Company has an obligation to issue warrants to purchase 42,930 shares of the Company’s common stock to service providers that had a fair value of $2,526 and $2,560, respectively, which was a component of accrued compensation in the condensed consolidated balance sheets.

 

See Note 5, Notes Payable and Note 6, Stockholders’ Deficiency for additional details associated with the issuances of common stock, warrants and embedded conversion options.