v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 13 — FAIR VALUE MEASUREMENTS

 

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

 

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

Level 1—quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

 

Level 3—unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

 

The following table presents information about the Company’s liabilities that are measured at fair value as of March 31, 2026 and December 31, 2025 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

      March 31,   December 31, 
Description:  Level  2026   2025 
Derivative Liabilities:           
Forward purchase agreement  3  $1,214,100   $1,388,700 
Warrants – Series A  3  $2,997,150   $3,383,900 

 

Forward purchase agreement

 

The Company used a Monte Carlo analysis to determine the fair value of the FPA, assuming 191,007 FPA Shares.

 

The fair value measurement of the FPA at March 31, 2026 and December 31, 2025 was calculated using the following range of weighted average assumptions: 

 

   March 31,   December 31, 
   2026   2025 
Risk-free interest rate  $3.69%   3.48%
Stock price  $6.31   $7.09 
Expected life   0.8 years    1.1 years 
Expected volatility of underlying stock   167.5%   175.0%
Dividends   0%   0%

 

The model measured the total present value of the Company’s proceeds at approximately $4,182 and the total present value of the Company’s liability at approximately $1,218,251, resulting in a net liability of approximately $1,214,100 as of March 31, 2026. This resulted in a non-cash gain from the change in fair value of derivatives of approximately $174,600 for the three months ended March 31, 2026.

 

Warrants – Series A and B

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the Series A Warrants at March 31, 2026, which included the following assumptions:

 

   Series A Warrants 
Expected term   3.7 years 
Stock price  $6.31 
Risk free rate   3.8%
Expected volatility   170.0%
Expected dividend rate  $0.00 
Exercise Price  $3.10 

The fair value of the Series A and Series B Warrants as of March 31, 2026, was $2,997,150 and $0, respectively. The $0 fair value for the Series B Warrants reflects that all Series B Warrants had been exercised by this date. This resulted in a non-cash gain from the change in fair value of derivatives of $386,750 for the three months ended March 31, 2026, respectively. As of March 31, 2026, investors had exercised 591,145 Series A Warrants and 114,992 Series B Warrants, resulting in the issuance of 670,137 common shares. As of March 31, 2026, 508,857 Series A Warrants and no Series B Warrants remained outstanding.

 

Warrants – Series C and D

 

The Company’s Series C Warrants and Series D Warrants were classified as derivative liabilities and carried at fair value through the date of exercise. As of December 31, 2025, all Series C and Series D Warrants had been exercised and no warrants remained outstanding. Accordingly, no fair value measurement was required for these instruments as of March 31, 2026, and no gain or loss from change in fair value was recognized for the three months ended March 31, 2026.

 

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2026.

 

   Fair Value 
   Measurement 
   Using Level 3 
Forward Purchase Agreement  Inputs Total 
Balance, December 31, 2025  $1,388,700 
Change in fair value   (174,600)
Balance, March 31, 2026   1,214,100 

 

   Fair Value 
   Measurement 
   Using Level 3 
Warrants – Series A  Inputs Total 
Balance, December 31, 2025  $3,383,900 
Change in fair value   (386,750)
Balance, March 31, 2026   2,997,150 

 

Stock-based compensation – Awards with Market-Based Conditions

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the awards with market-based conditions at the date of the Merger, which included the following assumptions: stock price of $226.50, risk free rate of 3.9%, volatility of 72.5%, dividends yield of 0% and duration of 6 years.