FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2025

4. FINANCIAL INSTRUMENTS

Assets and liabilities recorded at fair value on a recurring basis in the Consolidated Balance Sheets and assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company’s short-term investments consisting of US Treasury bill securities and Certificate of Deposits are classified as Level 1 because they are valued using quoted market prices.

The following table shows the Company’s short-term investments by significant investment category as of December 31, 2025 and 2024.


	As of December 31, 2025
		Adjusted		Unrealized		Unrealized		Market
		Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	639	$	-	$	-	$	639
Total Financial Assets	$	639	$	-	$	-	$	639


	As of December 31, 2024
		Adjusted		Unrealized		Unrealized		Market
		Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	631	$	-	$	-	$	631
Total Financial Assets	$	631	$	-	$	-	$	631

The warrant liabilities as of December 31, 2024 are measured at fair value on a recurring basis. The subsequent measurement of the warrant liabilities is classified as Level 3 due to the use of an observable market quote in a non-active market and the management’s assumption of the expected stock price volatility. During the year ended December 2025, the warrant liability was reclassified to equity due to an amendment of the warrant agreement.

The following table presents the fair value in the beginning of the period, the changes in the fair value, and the fair value at the end of the period of warrant liabilities:


Level 3:		December 31, 2025			December 31, 2024
Fair value at inceptions for December 31, 2024 or the beginning of the period for December 31, 2025	$	(10,131	)	$	(19,703	)
Warrants issued with Private Placement		(5,178	)		-
Change in fair value of warrant liabilities		3,158			9,572
Reclassification of warrant liabilities to equity		12,151			-
Fair value as of period end	$	-		$	(10,131	)

MONTE CARLO SIMULATION MODEL - SERIES A WARRANTS


		As of
		June 30, 2025
		Reclassification Date
Expected stock price volatility		86	%
Risk-free interest rate		3.73	%
Dividends yield		0	%
Terms (years)		4.5
Strike Price	$	1.45
Stock Price	$	1.56
Fair Value Per Warrant Share	$	1.235

MONTE CARLO SIMULATION MODEL - FEBRUARY 2025 WARRANTS


		As of
		June 30, 2025
		Reclassification Date
Expected stock price volatility		89	%
Risk-free interest rate		3.77	%
Dividends yield		0	%
Terms (years)		5.15
Strike Price	$	1.80
Stock Price	$	1.56
Fair Value Per Warrant Share	$	1.132

The following table summarizes the assumptions used under the Black-Scholes model to compute the fair value of the Company's warrants:


		As of
		December 31, 2024
Expected stock price volatility		88	%
Risk-free interest rate		4.25	%
Dividends yield		0	%
Weighted average expected life of warrants (years)		3.5
Weighted average exercise price	$	1.45

Our other financial instruments also include accounts receivable, accounts payable, accrued liabilities and business acquisition liabilities. Due to the short-term nature of these instruments, their fair values approximate their carrying values on the balance sheet.