Note 10 – Fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the three-level fair value hierarchy described in Note 2, Summary of significant accounting policies, which gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The level in the hierarchy is determined by the lowest-level input that is significant to the measurement as a whole. See Note 2, Summary of significant accounting policies.

The Company had no assets or liabilities measured at fair value on a recurring basis as of June 30, 2026 or June 30, 2025. Accordingly, no recurring fair value hierarchy table and no reconciliation of recurring Level 3 measurements is presented for either period. One liability, the Convertible Promissory Note, was measured at fair value on a nonrecurring basis during the year ended June 30, 2026. There were no nonrecurring fair value measurements during the year ended June 30, 2025.

The Company recognizes transfers between levels of the fair value hierarchy as of the beginning of the reporting period in which the transfer occurs. There were no transfers between Level 1, Level 2 and Level 3 during the years ended June 30, 2026 and 2025.

Nonrecurring fair value measurement

Convertible promissory note

On April 1, 2026 the Company issued the Convertible Promissory Note described in Note 7, Debt, in exchange for the Existing Hall Note. Because the exchange was accounted for as an extinguishment of the Existing Hall Note, the Convertible Promissory Note was required to be measured at fair value on initial recognition. There was no quoted market price for the Convertible Promissory Note and no observable market for a comparable instrument.

The following table presents the nonrecurring fair value measurement:

The Company estimated fair value using a probability-weighted, risk-neutral lattice and expected-recovery model. The model incorporated the contractual debt cash flows, the holder’s conversion rights, the full-ratchet conversion-price adjustment, the holder’s rights upon an Organic Change, issuer nonperformance risk, and the transfer restrictions applicable to the conversion shares. The measurement was categorized within Level 3 of the fair value hierarchy because inputs that are significant to the measurement as a whole are unobservable. There was no change in valuation technique during the year ended June 30, 2026.

The following table presents quantitative information about the significant unobservable inputs used in the Level 3 measurement:

The conversion-price input was developed by probability-weighting the outcomes that could arise under the full-ratchet conversion-price adjustment. The scenarios and weightings were $0.12, $0.08, $0.05 and $0.03 per share at 50%, 25%, 15% and 10%, respectively, producing a probability-weighted conversion price of $0.096 per share. Because the measurement relates to a single instrument, each amount presented above is both the input used and the weighted average of that input.

Of the $1,379,432 measured fair value, approximately $876,561 was attributable to the expected recovery on the straight-debt host and approximately $502,871 to the incremental value of the embedded conversion right and the other contractual features. Those amounts are components of a single whole-instrument valuation; they are not separately recognized and should not be combined with, or compared to, a conversion value computed independently.

Relationship of unobservable inputs to fair value. A lower assumed conversion price increases the number of shares deliverable on conversion and generally increases the measured fair value. A higher expected volatility generally increases the value attributable to the conversion right. A higher issuer credit spread or a lower expected recovery rate generally reduces the value attributable to the debt host. A larger discount for lack of marketability reduces the value attributable to the conversion shares. The effect of a change in any individual input may be magnified or offset by changes in the other inputs, which are not independent of one another.

The Convertible Promissory Note was converted in full into 23,064,634 shares of common stock on June 1, 2026 and was not outstanding as of June 30, 2026. Because the measurement was nonrecurring and the instrument was not held at the reporting date, no reporting-date sensitivity analysis is required. The measurement nevertheless determined the $1,388,324 credited to additional paid-in capital on the extinguishment described in Note 7, Debt, and the Company therefore provides the following information. Holding all other inputs constant, a 10% increase in the $0.045 common-stock price input would have increased the measured fair value by approximately $137,943, and a 10% decrease would have decreased it by approximately $137,943, with a corresponding and opposite effect on the amount credited to additional paid-in capital.

Fair value of common stock issued as consideration

During the years ended June 30, 2026 and 2025 the Company issued common stock in settlement of liabilities and in exchange for services and other consideration. In each case the equity issued was measured at the fair value of the common stock on the measurement date, determined by reference to the closing price quoted for the Company’s common stock on that date, without adjustment. The following table summarizes those measurements:

Separately, on May 7, 2026 the Company issued 228,858 shares of common stock to Steve Hall at a negotiated subscription price of $0.12 per share in satisfaction of a $27,463 payable. That price was fixed by the subscription agreement and was not determined by reference to a quoted market price. See Note 8, Related party transactions.

As described in Note 2 under “Obligations settled in the Company’s own equity,” obligations settled with related parties are recognized at their carrying amount, and any difference between that carrying amount and the fair value of the shares issued is recorded in additional paid-in capital as a capital transaction rather than in earnings. See Note 8, Related party transactions, and Note 9, Stockholders’ equity.