| 12. | Fair Value Measurements |
Fair Value Measurements
Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The U.S. GAAP fair value framework uses a three-tiered approach. Fair value measurements are 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 assets or liabilities; |
| ● Level 2 | Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and |
| ● Level 3 | Prices or valuation techniques where little or no market data is available that requires inputs significant to the fair value measurement and unobservable. |
Recurring Fair Value Measurements
The Company’s financial liabilities that were accounted for at fair value on a recurring basis as of June 30, 2026 and December 31, 2025, by level within the fair value hierarchy as follows:
| | | June 30, 2026 | |
| (in thousands) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Embedded derivative | | $ | - | | | $ | - | | | $ | 287 | | | $ | 287 | |
| Total liability | | $ | - | | | $ | - | | | $ | 287 | | | $ | 287 | |
| | | December 31, 2025 | |
| (in thousands) | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Embedded derivative | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Total liability | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Summary of Level 3 Input Changes
A summary of changes to those fair value measures using Level 3 inputs is as follows:
| (in thousands) | | Embedded Derivative Liabilities | |
| Balance at December 31, 2025 | | $ | - | |
| Initial recognition | | | 287 | |
| Change in fair value recognized in earnings | | | - | |
| Balance as June 30, 2026 | | $ | 287 | |
Significant Assumptions
The valuation mythology and key assumptions used to fair value the embedded derivative is as follows:
| | | Level 3 | |
| Monte Carlo: | | | | |
| Closing Stock Price | | $ | 0.74 | |
| Equivalent term (years) | | | 3.0 | |
| Expected volatility | | | 65.0 | % |
| Risk -free rate | | | 3.61 | % |
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