At times, the Company may hold (1) assets and liabilities that qualify as financial instruments under ASC 820, “Fair Value Measurement” (“ASC 820”) that are re-measured and reported at fair value at each reporting period, and (2) non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis.

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the factors market participants would use in valuing the asset or liability.

The Company applies a three-level hierarchy to prioritize the inputs used in measuring fair value:

As of March 31, 2026 and December 31, 2025, the Company's financial instruments consisted of cash and cash equivalents, accounts payable, warrants, the SAFE liability and related party debt. The carrying amount of cash and cash equivalents and accounts payable is stated at cost, which approximates fair value. The carrying amount of the warrants and SAFE liability is fair value, as further described below. The Company did not have any Level 1 or Level 2 assets or liabilities as of either balance sheet date.

Financial Instruments Carried at Fair Value

The Company has no Level 3 financial assets measured on a recurring basis. The following table presents the Level 3 financial liabilities measured on a recurring basis:

Fair Value on a Nonrecurring Basis

There were no assets or liabilities measured at fair value on a nonrecurring basis during the three months ended March 31, 2026 and 2025.

Warrant Liability

On July 22, 2025, the Company issued immediately exercisable and fully vested warrants to purchase shares of its common stock as part of the Foothills transaction. The warrants are freestanding financial instruments and do not meet the criteria for equity classification because the exercise price is denominated in a currency other than the Company's functional currency. As a result, the warrants are not considered indexed to the Company's own stock and are classified as a warrant liability.

The Company estimates the fair value of the warrant liability using the Black-Scholes option-pricing model. The significant unobservable inputs used in the fair value measurement of the warrant liability are the fair value of the underlying stock at the valuation date and the estimated term of the warrants. The warrant liability is categorized as Level 3 because it is valued based on unobservable inputs and management's judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such financial instruments.

Changes to the expected term, expected volatility, or the price of the underlying stock could result in a change to the fair value measurement.

SAFE Liability

In December 2025, the Company entered into SAFE agreements to raise $15,080, which are described in Note 10 - Debt. The SAFE agreements were issued to numerous investors, all of which had identical terms. $11,715 of the SAFE agreements were funded as of December 31, 2025. By January 21, 2026, the Company received the remaining proceeds of $3,365 related to the SAFE agreements issued in December 2025.

The Company's SAFE agreements are recorded at fair value on our balance sheet. The Company’s review of the terms of the agreements and the negotiation process corroborated that cash proceeds received at issuance approximated fair value, and the change in fair value between the issuance date and March 31, 2026 was recognized in the consolidated statements of operations. The fair value of the Company's SAFE agreements was based on significant inputs not observable in the market, which cause the instrument to be classified as a Level 3 measurement within the fair value hierarchy.

The fair value of the Company’s SAFE liability was determined using a probability-weighted expected return methodology (“PWERM”), which considers multiple potential liquidity outcomes and their respective likelihoods. Under this framework, the valuation incorporates three primary scenarios: (i) an initial public offering (“IPO”), (ii) a corporate transaction, and (iii) dissolution. The expected economic outcome under each scenario was estimated and then probability-weighted based on management’s assumptions to arrive at an overall fair value as of the valuation date.

In an IPO scenario, the SAFE agreements are assumed to convert into equity at the more favorable of a discounted IPO price or a price implied by the valuation cap. In a corporate transaction scenario, holders are assumed to have the option to receive either cash equal to the original investment or the value of shares issuable upon conversion, whichever is more favorable. In a dissolution scenario, the payoff is based on a recovery of invested capital, adjusted for an assumed recovery rate.

At issuance, the key assumptions used in pricing the SAFE agreements were the expected timing of the Company's IPO, estimated IPO price, common stock price used in the change of control scenario, probability weighting of the change control scenarios and the credit adjusted discount rate. The valuation also incorporates the impact of embedded optionality arising from the SAFE conversion features and holder election rights. This optionality is estimated using a Black-Scholes option pricing framework, which captures the potential upside associated with conversion under favorable equity valuations and the economic value of the holder’s choice in a corporate transaction. The resulting option value is combined with the present value of expected cash or equity payoffs in each scenario to determine total scenario values. The following table summarizes the assumptions used in the Black-Scholes option-pricing model to estimate the fair value of the SAFE Liability: