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

2. FAIR VALUE MEASUREMENTS

 

Certain assets and liabilities that are measured at fair value on a recurring basis at March 31, 2026 and December 31, 2025 are measured in accordance with FASB ASC Topic 820-10-05, Fair Value Measurements. FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the unaudited condensed consolidated financial statements.

 

The statement requires fair value measurement be classified and disclosed in one of the following three categories:

 

Level 1:   Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities;
Level 2:   Quoted prices in markets that are not active or inputs which are observable either directly or indirectly for substantially the full term of the asset or liability; and
Level 3:   Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity).

 

 

The following table summarizes our financial instruments measured at fair value at March 31, 2026 and December 31, 2025:

 

                 
   Fair Value Measurements at March 31, 2026 
   Total   Level 1   Level 2   Level 3 
Liabilities:                
Derivative liabilities  $983,952   $-   $983,952   $- 
Convertible notes at fair value  $2,143,461   $-   $-   $2,143,461 

 

                 
   Fair Value Measurements at December 31, 2025 
   Total   Level 1   Level 2   Level 3 
Liabilities:                
Derivative liabilities  $960,382   $-   $960,382   $- 
Convertible notes at fair value  $2,046,469   $-   $-   $2,046,469 

 

We valued derivative liabilities using the number of potential convertible shares for convertible notes with fixed conversion price that are recorded at amortized cost times the closing stock price of our restricted common stock at March 31, 2026 and December 31, 2025. These derivative liabilities are recorded due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit and the equity environment is tainted, and therefore all convertible debt should be accounted for as liabilities.

 

The following table summarizes assumptions and the significant terms of the convertible notes for which the entire hybrid instrument is recorded at fair value at March 31, 2026 and December 31, 2025:

 

                      

Conversion Price - Lower of Fixed

Price or Percentage of VWAP for

Look-back Period

Debenture  

Face

Amount

  

Interest

Rate

   

Default

Interest

Rate

  

Discount

Rate

    

Anti-Dilution

Adjusted

Price

 

% of stock price for

look-back period

  

Look-back

Period

March 31, 2026   $663,529   8%-10%   19%-24%   N/A     $ 0.00005-$0.00007   50%-60%  3 to 25 Days
December 31, 2025   $663,529   8%-10%   19%-24%   N/A     $ 0.00005-$0.00007   50%-60%  3 to 25 Days

 

 

Using the stated assumptions summarized in the table above, we calculated the inception date and reporting period fair values of each note issued. The following table shows the changes in fair value measurements for the convertible notes at fair value using significant unobservable inputs (Level 3) during the three months ended March 31, 2026 and the year ended December 31, 2025:

 

Description 

March 31,

2026

  

December 31,

2025

 
Beginning balance  $2,046,469   $2,041,464 
Loss from change in fair value (1)   96,992    5,005 
Ending balance  $2,143,461   $2,046,469 

 

(1) The losses related to the valuation of the convertible notes are included in “Change in fair value of convertible notes and derivatives” in the accompanying unaudited condensed consolidated statements of operations.