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Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 13 — FAIR VALUE MEASUREMENTS

 

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

 

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

 

Level 1—quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

 

Level 2—observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

 

Level 3—unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

 

The following table presents information about the Company’s liabilities that are measured at fair value as of March 31, 2025 and December 31, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

      March 31,   December 31, 
Description:  Level  2025   2024 
Derivative Liabilities:           
Forward purchase agreement  3  $1,134,400   $6,404,100 
Warrants – Series A  3  $689,500   $4,955,300 
Warrants – Series C and D  3  $11,031,300   $13,913,250 

  

Forward purchase agreement

 

The Company used a Monte Carlo analysis to determine the fair value of the FPA, assuming 191,007 FPA Shares.

The fair value measurement of the FPA at March 31, 2025 and December 31, 2024 was calculated using the following range of weighted average assumptions: 

 

   March 31,   December 31, 
   2025   2024 
Risk-free interest rate   3.91%   4.25%
Stock price  $6.00   $35.00 
Expected life   1.8 years    2.1 years 
Expected volatility of underlying stock   125.0%   105.0%
Dividends   0%   0%

  

The model measured the total present value of the Company’s proceeds at approximately $7,838 and the total present value of the Company’s liability at approximately $1,142,277, resulting in a net liability of approximately $1,134,400 as of March 31, 2025. This resulted in a non-cash gain from the change in fair value of derivatives of approximately $5,269,700 for the three months ended March 31, 2025.

 

Warrants – Series A and B

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the Series A Warrants and Series B Warrants at the date of issuance (March 15, 2024), which included the following assumptions:

 

    Series A
Warrants		     Series B
Warrants		  
Expected term (in years)     5.7 years       5.7 years   
Stock price   $ 87.00     $ 87.00  
Risk free rate     4.2 %     4.2 %
Expected volatility     82.5 %     82.5 %
Expected dividend rate   $ 0.00     $ 0.00  
Exercise Price   $ 37.50     $ 0.01  

 

The total fair value of the Series A Warrants and Series B Warrants measured at issuance was $12,656,550 and $82,450, respectively. 

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the Series A Warrants at March 31, 2025, which included the following assumptions:

 

    Series A Warrants  
Expected term     4.7 years  
Stock price   $ 6.00  
Risk free rate     4.0 %
Expected volatility     120.0 %
Expected dividend rate   $ 0.00  
Exercise Price   $ 16.37  

The fair value of the Series A and Series B Warrants as of March 31, 2025, was $689,500 and $0, respectively. The $0 fair value for the Series B Warrants reflects that all Series B Warrants had been exercised by this date. This resulted in a non-cash gain from the change in fair value of derivatives of $4,265,800 for the three months ended March 31, 2025, respectively. As of March 31, 2025, investors received 289,613 and 114,992 common shares from exercise of Series A and Series B warrants, respectively. As of March 31, 2025, 153,221 Series A Warrants and no Series B Warrants remained outstanding.

 

Warrants – Series C and D

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the Series C Warrants and Series D Warrants at the date of issuance on August 30, 2024, which included the following assumptions:

 

    Series C
Warrants		     Series D
Warrants		  
Expected term     5.6 years       5.6 years  
Stock price   $ 16.00     $ 16.00  
Risk free rate     3.7 %     3.7 %
Expected volatility     105.0 %     105.0 %
Expected dividend rate   $ 0.00     $ 0.00  
Exercise Price   $ 16.37     $ 0.0050  

 

The total fair value of the Series C Warrants and Series D Warrants measured at issuance was $8,114,650 and $1,540,150, respectively.

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the Series C Warrants and Series D Warrants at March 31, 2025, which included the following assumptions:

 

    Series C
Warrants		     Series D
Warrants		  
Expected term (in years)     5.7 years       5.7 years  
Stock price   $ 6.00     $ 6.00  
Risk free rate     4.0 %     4.0 %
Expected volatility     120.0 %     120.0 %
Expected dividend rate   $ 0.00     $ 0.00  
Exercise Price   $ 16.37     $ 0.0050  

 

The fair value of the Series C Warrants and Series D Warrants as of March 31, 2025, was $7,862,000 and $3,169,300, respectively. This resulted in a non-cash gain from the change in fair value of derivatives and issuance of warrants of $2,881,950 for the three months ended March 31, 2025. As of March 31, 2025, investors have not exercised any Series C and Series D warrants.

The table below provides a summary of the changes in fair value, including net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2025.

 

   Fair Value 
   Measurement 
   Using Level 3 
Forward Purchase Agreement  Inputs Total 
Balance, December 31, 2024  $6,404,100 
Change in fair value   (5,269,700)
Balance, March 31, 2025   1,134,400 

 

   Fair Value 
   Measurement 
   Using Level 3 
Warrants – Series A  Inputs Total 
Balance, December 31, 2024  $4,955,300 
Change in fair value   (4,265,800)
Balance, March 31, 2025   689,500 

 

   Fair Value 
   Measurement 
   Using Level 3 
Warrants – Series C and D  Inputs Total 
Balance, December 31, 2024  $13,913,250 
Change in fair value   (2,881,950)
Balance, March 31, 2025   11,031,300 

 

HBC earnout shares

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the Earnout Shares at the date of the Merger, which included the following assumptions: stock price of $226.50, risk free rate of 3.98%, volatility of 85%, dividends yield of 0% and duration of 4 years.

 

Stock-based compensation – Awards with Market-Based Conditions

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the awards with market-based conditions at the date of the Merger, which included the following assumptions: stock price of $226.50, risk free rate of 3.9%, volatility of 72.5%, dividends yield of 0% and duration of 6 years.