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Fair Value Measurements
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements

NOTE 8 – FAIR VALUE MEASUREMENTS

The Company did not have any financial assets measured on a recurring basis. The following tables summarize our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of December 31, 2024 and 2023.

 

 

 

Fair Value at December 31,

 

 

 

Level

 

2024

 

 

2023

 

Liabilities

 

 

 

 

 

 

 

 

37N Note embedded derivative

 

3

 

$

—

 

 

$

702,291

 

Put option liability

 

3

 

 

—

 

 

 

5,637,162

 

Litigation financing

 

3

 

 

56,950,377

 

 

 

52,115,647

 

2022 Warrants

 

3

 

 

2,060,773

 

 

 

13,399,822

 

March 2023 Warrants

 

3

 

 

1,910,950

 

 

 

—

 

December 2023 Warrants

 

3

 

 

827,036

 

 

 

2,392,563

 

March 2023 Note Conversion Option

 

3

 

 

2,745,000

 

 

 

—

 

December 2023 Note Conversion Option

 

3

 

 

307,000

 

 

 

—

 

Total of fair valued liabilities

 

 

 

$

64,801,136

 

 

$

74,247,485

 

 

At December 31, 2023, the Company recorded the 37N Note at fair value, Level 3, for which the valuation techniques used to measure the fair value of the Company’s debt instruments are generally based on observable inputs other than quoted prices in an active market. The OML Put Option valuation as of December 31, 2023, was based on expected timing and likelihood of completing the subsequent closings, the exercise period of the equity exchange agreement, share price and volatility. At December 31, 2024 and 2023, the Litigation financing was measured at fair value, Level 3. The Litigation financing valuation was based on the following assumptions: amounts funded by the Funder, the corresponding IRR calculation, applicable percentage applicable to the recovery percentage calculation and management’s good-faith estimates for estimated outcome probabilities and estimated debt repayment dates. The 2022 Warrants, the December 2023 Warrants and the March 2023 Warrants are measured at fair value, Level 3, using a Black-Scholes valuation model. The assumptions used in this model included the use of key inputs, including expected stock volatility, the risk–free interest rate, the expected life of the option and the expected dividend yield. Expected volatility is calculated based on the historical volatility of our Common Stock over the term of the warrant. Risk–free interest rates are calculated based on risk–free rates for the appropriate term. The expected life is estimated based on contractual terms as well as expected exercise dates. The dividend yield is based on the historical dividends issued by us. If the volatility rate or risk-free interest rate were to change, the value of the warrants would be impacted. The embedded derivative for the conversion options on the March 2023 Notes and December 2023 Notes are measured at fair value, Level 3, using the with-and-without valuation method. The assumptions used in this model included the use of

key inputs, including expected stock volatility, the risk–free interest rate, the expected life of the option, the expected dividend yield, and the appropriate discount rate. Expected volatility is calculated based on the historical volatility of our Common Stock over the term of the notes. Risk–free interest rates are calculated based on risk–free rates for the appropriate term. The expected life is estimated based on contractual terms. The dividend yield is based on the historical dividends issued by the Company. The discount rate is implied based on other inputs to backsolve the concluded issuance date valuation to the market rate. If the volatility rate or risk-free interest rate were to change, the value of the notes would be impacted.

The following tables summarize the fair values and related carrying values of financial instruments at December 31, 2024 that are not required to be remeasured at fair value on a recurring basis.

 

 

 

December 31, 2024

 

 

 

Level

 

Carrying Value

 

 

Fair Value

 

Liabilities

 

 

 

 

 

 

 

 

March 2023 Note (1)

 

2

 

$

13,101,995

 

 

$

12,422,050

 

December 2023 Note (1)

 

2

 

$

6,550,164

 

 

$

6,622,108

 

(1) As of December 31, 2023, prior to the 2024 amendments disclosed in Note 7, Loans Payable which added a conversion feature, the carrying value of the March 2023 Notes and December 2023 Notes approximated their fair value.

Items not included in the above disclosures include cash and cash equivalents, accounts and other related party receivables, other current assets and accounts payable. The carrying values of those items, as reflected in the Consolidated Balance Sheets, approximate their fair value at December 31, 2024 and 2023. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents (Level 1).

Changes in our Level 3 fair value measurements were as follows:

 

 

37N Note
Conversion Option

 

 

March 2023
Warrants

 

 

December 2023
Warrants

 

 

Put option
liability

 

 

March 2023
Conversion Option

 

 

December 2023
Conversion Option

 

 

Litigation
financing

 

 

2022 Warrants

 

 

Total

 

Balance as of December 31, 2022

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

45,368,948

 

 

$

13,602,467

 

 

$

58,971,415

 

Issuance of new instrument

 

 

423,696

 

 

 

—

 

 

 

2,392,563

 

 

 

4,516,007

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,332,266

 

Issuance of new funding

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,633

 

 

 

—

 

 

 

4,633

 

Change in fair value

 

 

457,690

 

 

 

—

 

 

 

—

 

 

 

1,121,155

 

 

 

—

 

 

 

—

 

 

 

6,742,066

 

 

 

(18,045

)

 

 

8,302,866

 

Warrants Exercised

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(184,600

)

 

 

(184,600

)

Debt conversion to equity

 

 

(179,095

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(179,095

)

Balance as of December 31, 2023

 

$

702,291

 

 

$

—

 

 

$

2,392,563

 

 

$

5,637,162

 

 

$

—

 

 

$

—

 

 

$

52,115,647

 

 

$

13,399,822

 

 

$

74,247,485

 

Debt conversion to equity

 

 

(341,601

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(341,601

)

Added conversion option (embedded derivative)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

690,000

 

 

 

161,000

 

 

 

—

 

 

 

—

 

 

 

851,000

 

Classification of warrants as liability

 

 

—

 

 

 

7,754,438

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,754,438

 

Warrant repricing (Note 7)

 

 

—

 

 

 

808,508

 

 

 

348,168

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,156,676

 

Change in fair value

 

 

(360,690

)

 

 

(6,651,996

)

 

 

(1,913,695

)

 

 

(5,637,162

)

 

 

2,055,000

 

 

 

146,000

 

 

 

4,834,730

 

 

 

(11,339,049

)

 

 

(18,866,862

)

Balance as of December 31, 2024

 

$

—

 

 

$

1,910,950

 

 

$

827,036

 

 

$

—

 

 

$

2,745,000

 

 

$

307,000

 

 

$

56,950,377

 

 

$

2,060,773

 

 

$

64,801,136

 

 

Additional information about the litigation financing liability and embedded derivative liability related to the March 2023 Notes and December 2023 Notes is included in Note 9, Derivative Financial Instruments.