Note 11 – Simple Agreements For Future Equity

During the three months ended June 30, 2026 and year ended March 31, 2026, the Company received aggregate gross proceeds of $1,650 and $2,149 respectively, from the issuance of SAFEs.

During the three months ended June 30, 2026, the Company issued SAFEs that provided for mandatory conversion into shares of common stock upon the occurrence of specified events, namely a corporate transaction, merger, qualifying equity financing, initial public offering, or exchange listing. The conversion price was determined based on either a valuation-cap-based price or a discounted price derived from the applicable transaction price, with discount percentages varying by conversion event. Holders could also elect to convert the SAFEs prior to a mandatory conversion event at a price based on the valuation cap. In the event of dissolution prior to conversion, holders were entitled to repayment of the investment amount, ranking pari passu with common stock and junior to any outstanding convertible debt or other indebtedness.

The SAFEs were classified as a liability based on management’s evaluation of the characteristics of the instruments.

The Company had issued SAFEs that include automatic/ optional conversion triggers. Based on the terms affixed to the SAFEs, a scenario-based valuation approach have been considered to estimate the fair value.

The following are the key steps of the valuation approach adopted:

Based on the signed Business Combination Agreement, Management’s confirmation of no competing financing events as per the defined Next Equity Financing, and the explanations mentioned herein earlier, we assigned a 100% probability to the Corporate Transaction scenario.

The Company also had issued SAFEs that include automatic/ mandatory conversion triggers. Based on the terms affixed to the SAFEs, a scenario-based valuation approach has been considered to estimate the fair value.

The following are the key steps of the valuation approach adopted:

Based on the signed Business Combination Agreement, Management’s confirmation of no competing financing events as per the defined Next Equity Financing, and the explanations mentioned herein earlier, we have assigned a 100% probability to the Corporate Transaction scenario.

The following table summarizes the significant inputs not observable in the market upon which the fair value measurements associated with the SAFEs were determined:

Schedule of Significant Unobservable Inputs Used to Determine Fair Value of SAFEs 

Notes to valuation assumptions:

Following the execution of the Business Combination Agreement by and among Athena Technology Acquisition Corp. II (“Athena”), Athena Technology Sponsor II, LLC, a Delaware limited liability company, the Company, and Project Atlas Merger Sub Inc., a Delaware corporation and direct wholly owned subsidiary of Athena, as amended pursuant to the First Amendment thereto dated as of March 19, 2026 and the Second Amendment thereto dated as of April 18, 2026 (the “Merger Agreement”), the Company updated the valuation methodology used to measure the SAFEs. The Merger Agreement contemplates a concurrent equity financing transaction in connection with the transactions contemplated thereby (the “Business Combination”), based on an agreed pre-money equity valuation with anticipated participation from existing insiders, strategic investors, and institutional investors, subject to closing conditions.

Management’s best estimate of the equity value at conversion is based on the expected transaction price implied by the contemplated financing, which reflects the negotiated pre-money valuation set forth in the Merger Agreement and the expected capitalization at closing. While the Business Combination had not been completed as of the measurement dates, the implied transaction price per share represents a more direct and observable market-based measure of equity value; therefore, expected volatility and simulation were no longer assumed or applied in the valuation for measurement dates after December 4, 2024. As a result, the valuation of the SAFEs for these periods became primarily sensitive to changes in the assumed equity value per share and the expected timing of conversion, rather than to changes in volatility.

Fair value measurements associated with SAFEs were determined based on significant inputs not observable in the market and therefore represent Level 3 measurements within the fair value hierarchy. Increases and decreases in the fair value of the SAFEs may result from updates to assumptions such as the expected timing of conversion, the probability of triggering events, and the equity value per share, as discussed above. Judgment is applied in determining these assumptions at the initial valuation date and at each subsequent reporting period. Changes or updates to these assumptions could have a material impact on the reported fair value of the SAFEs, the change in fair value of the SAFEs, and the results of operations in any given period.

On June 30, 2026, all the SAFEs holders except one SAFEs holder agreed to convert the SAFEs into common stock of the Company. Immediately prior to conversion, the Company remeasured the SAFE liabilities to fair value and recognized the resulting change in fair value in the statement of operations. Upon conversion, the Company derecognized the SAFE liabilities and recorded the issuance of equity shares within stockholders’ equity, consisting of common stock at par value and additional paid-in capital for the excess amount. Following the conversion, no SAFEs remained outstanding as of June 30, 2026.

One SAFE holder did not convert its SAFE into equity shares. Instead, the Company and the holder agreed to settle the SAFE through the issuance of a promissory note on June 30, 2026. The Company accounted for the settlement as an extinguishment of the SAFE liability. Immediately prior to settlement, the Company remeasured the SAFE liabilities to fair value and recognized the resulting change in fair value in the statement of operations. Upon settlement the carrying amount of the related SAFE liability was derecognized, the promissory note was recognized as a note payable, and the difference between the carrying amount of the SAFE liability extinguished and the fair value of the promissory note issued was recognized as a gain on extinguishment and presented within “Gain on extinguishment of convertible notes and SAFEs” in the statement of operations. The promissory note has a principal balance of $250 thousand and provides a 15% internal rate of return. Repayment is to be made in equal monthly installments beginning no earlier than 45 days after, and concluding no later than 18 months after, the completion of a business combination with a special purpose acquisition company.

The following table summarizes the changes in fair value of SAFEs at the beginning or end of the periods presented:

Schedule of changes in fair value of SAFEs

* During the three months ended June 30, 2026, the Company issued SAFEs for total consideration of $1.650 million, consisting of $1.350 million of cash proceeds and $300 thousand issued in exchange for engineering services.