v3.26.3
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 5 – Fair Value Measurements

 

The following tables sets forth the fair value of the Company’s financial liabilities measured at fair value, based on the three-tier fair value hierarchy:

 

    June 30, 2026  
    Level 1     Level 2     Level 3     Total  
Liabilities                        
Convertible notes payable   $ -     $         -     $ 513,731     $ 513,731  
Other current liabilities     1,050       -       -       1,050  
    $ 1,050     $ -     $ 513,731     $ 514,781  

 

    December 31, 2025  
    Level 1     Level 2     Level 3     Total  
Liabilities                        
Convertible notes payable   $ -     $          -     $ 779,960     $ 779,960  
Other current liabilities     646,600       -       105,040       751,640  
    $ 646,600     $ -     $ 885,000     $ 1,531,600  

 

As described in Note 7, the Company elected to record the convertible notes payable using the fair value option. The Company measures these convertible notes payable to fair value using a Scenario Base Model (“SBM”) and, accordingly, classifies these liabilities as Level 3. The key inputs to the valuations are underlying interest rates, stock prices, discount rates, terms (in years), the probabilities of being held to conversion, the probabilities of default and the probabilities of being held to maturity. A change in these significant unobservable inputs might result in a significantly higher or lower fair value measurement at the reporting date. Changes to fair value of these instruments are recorded in change in fair value of convertible notes payable on the statements of operations and comprehensive loss.

 

As described in Note 3, in November 2025 the Company incurred an obligation to issue 5,300,000 shares of restricted common stock as part of the RSO asset acquisition. The unadjusted quoted price of the Company’s common stock was used to estimate the fair value of this current liability. These shares were issued prior to March 31, 2026.

 

During the three months ended June 30, 2026, the Company incurred an obligation to issue 750,000 shares of restricted common stock in conjunction with the note payable it issued in May 2026 (see Note 6). Because the Company did not have sufficient legally authorized shares to issue these shares of restricted common stock as of June 30, 2026, the Company recorded a liability when the principal balance was received from the note holder and subsequently remeasured this liability as of June 30, 2026. The unadjusted quoted price of the Company’s common stock was used to estimate the fair value of the current liability as of June 30, 2026, with nil gain or loss being recorded during the three months ended June 30, 2026.

 

As described in Note 7, as part of the Convertible Bridge Notes, the Company incurred an obligation to issue 1,300,000 shares of restricted common stock to the holders of the Convertible Bridge Notes. The Company measured the obligation to issue shares of restricted common stock using an option pricing model. The key inputs to the valuation is the underlying stock price, which was $0.10 on the grant date, and the 20% discount used to adjust the stock price for a lack of marketability (“DLOM”). These shares were issued prior to March 31, 2026.

 

The following significant unobservable inputs were used in the fair value measurement of the convertible notes payable:

 

    June 30,
2026		  
Significant Unobservable Input of Level 3 Instruments   Weighted Average  
Probabilities of default     66 %
Probabilities of held to maturity     34 %
Terms (in years)     1.0  
Interest rate     12 %

 

    December 31,
2025		  
Significant Unobservable Input of Level 3 Instruments   Weighted Average  
Probabilities of conversion     50 %
Probabilities of default     50 %
Probabilities of held to maturity     0 %
Terms (in years)     1.0  
Discount rate     25.8 %
Interest rate     12 %

 

The following table provides a reconciliation of the estimated fair value of the convertible notes payable and other current liabilities in level 3 for the six months ended June 30, 2026:

 

Balance at December 31, 2025   $ 885,000  
Issuance of convertible notes payable     131,500  
Repayments of convertible notes payable     (70,000 )
Fair value adjustment for other current liabilities     15,860  
Issuance of common stock, to satisfy other current liabilities     (120,900 )
Convertible notes payable converted into equity     (163,841 )
Fair value adjustment for convertible notes payable     (163,888 )
Balance at June 30, 2026   $ 513,731