NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Reverse Recapitalization

On February 27, 2026, Renewal Fuels, Inc. (RNWF, subsequently renamed American Fusion Inc., “AMFN” or the “Company”) consummated a share-exchange transaction with Brent Nelson, the sole shareholder of Kepler Fusion Technologies Inc. (“Kepler”), pursuant to which the Company acquired 100% of the issued and outstanding equity interests of Kepler in exchange for newly issued common stock of the Company. See Note 9.

Upon the consummation of the transaction, the holder of 1000 shares of Kepler common stock was to receive 240 million shares of American Fusion, Inc. common stock at a par value $0.001 per share after giving effect to the Conversion ratio of 240,000 (the “Conversion Ratio”).

Concurrently, an entity controlled by the Company’s CEO sold to an entity controlled by Brent Nelson the one (1) share of Special 2020 Series A Preferred Stock of the Company (the “Control Share”) for $1,000 cash.

The transaction has been accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, American Fusion, Inc. is treated as the “acquired” company and Kepler is treated as the accounting acquirer for financial reporting purposes. The reverse recapitalization accounting treatment was primarily determined based on the fact that Nelson (an individual shareholder) who controlled Kepler before the transaction continued to control American Fusion, Inc. post-transaction and hence Kepler has not undergone a change in control and is the accounting acquirer in a reverse recapitalization transaction.

Accordingly, for accounting purposes, the financial statements of AMFN. represent a continuation of the financial statements of Kepler with the merger being treated as the equivalent of Kepler issuing shares for the net assets of American Fusion, Inc., accompanied by a recapitalization. The net assets of American Fusion, Inc. were recognized as of the closing at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the merger are presented as those of Kepler and the accumulated deficit of Kepler has been carried forward after closing.

Fair Value Measurements

The disclosure requirements within Accounting Standards Codification (ASC) Topic 820-10, Fair Value Measurement, require disclosure of estimated fair values of certain financial instruments. For financial instruments recognized at fair value in the Company’s statements of operations, the disclosure requirements of ASC Topic 820-10 also apply. The methods and assumptions are set forth below:

Asset and liabilities measured and reported at fair value are classified and disclosed in one of the following categories based on inputs: 

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. 

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability. 

Level 3 — Pricing inputs include significant unobservable inputs used in determining the fair value of investments. The types of investments, which would generally be included in this category include equity securities issued by private entities. 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. 

There were no Level 3 liabilities at March 31, 2026 and December 31 and 2025. 

Share-based Compensation

 We account for share-based awards granted to employees, directors and third parties by recording compensation expense based on estimated fair values. We estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our consolidated statements of operations. Share-based awards are attributed to expense using the straight-line method over the vesting period. as permitted under ASC 718, Compensation—Stock Compensation. The assumptions used in calculating the fair value of share-based payment awards represent our best estimates. Our estimates of the fair values of share-based awards granted and the resulting amounts of share-based compensation recognized may be impacted by certain variables.

Contingencies

The Company follows ASC 450, Contingencies, to account for loss contingencies. Liabilities are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share includes the dilutive effect of potential common shares. For periods with a net loss, diluted loss per share equals basic loss per share.

Income Taxes

The Company accounts for income taxes under ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts and their respective tax bases. A valuation allowance is established when it is more likely than not that deferred tax assets will not be realized. The Company experienced a change in control on February 27, 2026 in connection with the Kepler reverse acquisition; accordingly, the utilization of net operating loss carryforwards of the legal acquirer may be limited under IRC Section 382. A Section 382 study is expected to be completed in a future period.