Note 5. INVESTMENT IN RELATED PARTY

The Company elected the fair value option (“FVO”) under ASC 825 for its investment in VEII, a related party, which would otherwise be accounted for under the equity method. Accordingly, pursuant to ASC 825-10-25-7(b), the Company also applies the FVO to its other eligible financial interests in VEII, including convertible notes receivable. These instruments are measured at fair value at each reporting date, with changes in fair value recognized in earnings. The Company also measures its warrants to purchase VEII common stock at fair value using the Black-Scholes option pricing model, with changes in fair value recognized in earnings.

ASC 825 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. As provided by ASC 825, estimated fair value adjustment of the convertible promissory note and warrants are presented in a single line item within other income (expense) in the accompanying consolidated statements of operations and comprehensive loss.

On September 6, 2023, the Company converted $1,300,000 of the principal amount loaned to VEII into 7,344,632 shares of VEII’s common stock. Under the terms of the Credit Agreement, the Company received common stock warrants to purchase a maximum of 36,723,160 shares of VEII common stock at an exercise price of $0.1770 per share. Such warrants will expire on September 5, 2028, five (5) years from date of their issuance. As of December 31, 2025, this exercisable share number represents 44.27% share capital of VEII.

On September 30, 2026 and December 31, 2025, the Company owned 21,120,795 shares of VEII’s outstanding common stock, which represent 45.69% of share capital of VEII and 36,723,160 warrants with an exercise price of $0.1770 per share. As the Company only owns 45.69% of VEII as voting interest, the Company does not need to consolidate VEII in the financial statements.

Financial assets measured at fair value on a recurring basis are summarized below and disclosed on the consolidated balance sheets as of September 30, 2026 and December 31, 2025:

SCHEDULE OF ASSETS MEASURED AT FAIR VALUE ON A RECURRING BASIS

Unrealized loss on securities investment at fair value-related party was $111,100 and $596,399 in the three months ended September 30, 2026 and 2025, respectively. These losses were recorded directly to net loss.

Unrealized loss on securities investment at fair value-related party was $113,281 and $1,511,199 in the nine months ended September 30, 2026 and 2025, respectively. These losses were recorded directly to net loss.

Warrants

On September 6, 2023, the Company received warrants to purchase shares of VEII. For further details on this transaction, refer to Note 6 - Related Party Balance and Transactions. As of September 30, 2026 and December 31, 2025, the fair value of the warrants was $10,949 and $18,301, respectively. The Company did not exercise any warrants during the nine months ended September 30, 2026 and the year ended December 31, 2025. We value VEII warrants under level 2 category through a Black-Scholes option pricing model.

The fair value of the VEII warrants under level 2 category as of September 30, 2026, and December 31, 2025 was calculated using a Black-Scholes valuation model valued with the following weighted average assumptions:

SCHEDULE OF FAIR VALUE OF WARRANTS 

Changes in the observable input values would likely cause material changes in the fair value of the Company’s Level 2 financial instruments. A significant increase (decrease) in this likelihood would result in a higher (lower) fair value measurement.