Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar, but not identical, assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data;

Level 3	Unobservable inputs in which there is little or no market data available and which require the Company to develop its own assumptions that market participants would use in pricing an asset or liability.

Financial instruments recognized at historical amounts in the balance sheets consist of accounts payable and notes payable. The Company believes that the carrying value of accounts payable and notes payable approximates their fair values due to the short-term nature of these instruments.

There were no transfers between levels during the six months ended June 30, 2026 and 2025.

The Company recorded a loss and a gain on change in fair value of derivative warrant liabilities of $1,177 and $24,654 during the three and six months ended June 30, 2026, respectively. The Company recorded losses on change in fair value of derivative warrant liabilities of $21,410 and $7,553 during the three and six months ended June 30, 2025. The change in value during these periods was largely attributable to changes in the price of the underlying common stock and risk-free rates. During the fiscal year ended December 31, 2024, the Company acquired private warrants in connection with the closing of the Business Combination (the “Closing”) of the transactions pursuant to the Merger Agreement on February 14, 2024 (the “Closing Date”) and issued written call options in connection with the Loan Agreement. The fair value of the written call options decreased to $0 between their issuance and December 31, 2024, and remained at $0 as of June 30, 2026. Such fair value measurements are Level 3 inputs. The following table provides a roll-forward of the aggregate fair values of the warrants.

SCHEDULE OF FAIR VALUES OF WARRANTS

	Derivative warrant liabilities
Balance at January 1, 2025	$	87,180
Change in fair value		7,553
Balance at June 30, 2025	$	94,733

Balance at January 1, 2026	$	26,479
Change in fair value		(24,654	)
Balance at June 30, 2026	$	1,825

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2026, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

Level

Quoted Prices
in Active
Markets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant

Other

Unobservable

Inputs

(Level 3)

Liabilities:

Derivative warrant liabilities

3

$

-

$

-

$

1,825

The Company used a Monte Carlo simulation (“MCS”) valuation methodology to determine the fair value of the freestanding $14,000,000 purchase option and remaining embedded $11,000,000 purchase option associated with the Loan Agreement as of June 30, 2026. The MCS methodology simulates the Company’s future stock price to estimate if and when the 10-day trailing volume weighted average price of the common stock (the “Trailing VWAP”) will reach $500.00 per share (as adjusted for the Reverse Stock Split), and discounts the resulting payoff back to each valuation date using a present value factor. Significant assumptions used in determining the fair value of these options include volatilities of 84.04 % and 78.5% and discount rates of 3.7% and 4.0% for the six months ended June 30, 2026 and 2025, respectively. At June 30, 2026 and December 31, 2025, the MCS produced a fair value of $0 relating to these freestanding and embedded options.

Pre-funded Warrants

Pre-funded Warrants

In May 2026, the Company issued pre-funded warrants to purchase shares of its common stock in a private placement (the “Pre-funded Warrants”). Consistent with the accounting framework described above, the Company evaluated the Pre-funded Warrants under ASC 480 and ASC 815 to determine whether they are freestanding financial instruments that meet the definition of a liability pursuant to ASC 480 and meet all of the conditions for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether they are subject to any provision that could require net cash settlement outside of the Company’s control. Based on this assessment, the Company concluded that the Pre-funded Warrants meet all of the criteria for equity classification and are recorded as a component of additional paid-in capital at the time of issuance, net of issuance costs directly attributable to the offering. The Pre-funded Warrants are not subsequently remeasured.