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Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
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 June 30, 2026 and December 31, 2025 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

 

        June 30,     December 31,  
Description:   Level   2026     2025  
Derivative Liabilities:                
Forward purchase agreement   3   $ 1,756,700     $ 1,388,700  
Warrants – Series A   3   $ 3,015,191     $ 3,383,900  

  

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 June 30, 2026 and December 31, 2025 was calculated using the following range of weighted average assumptions:

 

    June 30,     December 31,  
    2026     2025  
Risk-free interest rate     4.00 %     3.48 %
Stock price   $ 9.29     $ 7.09  
Expected life     0.5 years       1.1 years  
Expected volatility of underlying stock     197.5 %     175.0 %
Dividends     0 %     0 %

  

The model measured the total present value of the Company’s proceeds at approximately $7,670 and the total present value of the Company’s liability at approximately $1,764,383, resulting in a net liability of approximately $1,756,700 as of June 30, 2026. This resulted in a non-cash non-operating loss from the change in fair value of derivatives of approximately $542,600 and $368,000 for the three and six months ended June 30, 2026.

 

The following table presents the changes in the fair value of the derivative liability associated with the Forward Purchase Agreement, measured at fair value on a recurring basis using significant unobservable inputs (Level 3), for the three and six months ended June 30, 2026:

 

    Fair Value  
    Measurement  
    Using 
Level 3		  
Forward Purchase Agreement   Inputs Total  
Balance, December 31, 2025   $ 1,388,700  
Change in fair value     (174,600 )
Balance, March 31, 2026     1,214,100  
Change in fair value     542,600  
Balance, June 30, 2026     1,756,700  

 

Warrants – Series A and B

 

The Company utilized a Monte Carlo simulation analysis to determine the fair value of the Series A Warrants at June 30, 2026, which included the following assumptions:

 

    Series A
Warrants		  
Expected term     3.4 years  
Stock price   $ 9.29  
Risk free rate     4.1 %
Expected volatility     184.1 %
Expected dividend rate   $ 0.00  
Exercise Price   $ 3.10  

 

The fair value of the Series A and Series B Warrants as of June 30, 2026, was $3,015,191 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 (loss) from the change in fair value of derivatives of $(375,180) and $11,570 for the three and six months ended June 30, 2026, respectively. As of June 30, 2026, investors had exercised 609,476 Series A Warrants and 114,992 Series B Warrants, resulting in the issuance of 687,225 common shares. As of June 30, 2026, 340,315 Series A Warrants and no Series B Warrants remained outstanding.

 

The following table presents the changes in the fair value of the derivative liability associated with the Series A Warrants, measured at fair value on a recurring basis using significant unobservable inputs (Level 3), for the three and six months ended June 30, 2026:

 

    Fair Value  
    Measurement  
    Using
 Level 3		  
Warrants – Series A   Inputs Total  
Balance, December 31, 2025   $ 3,383,900  
Change in fair value     (386,750 )
Balance, March 31, 2026     2,997,150  
Change in fair value     18,041
Balance, June 30, 2026     3,015,191  

 

Warrants – Series C and D

 

The Company’s Series C and Series D Warrants were classified as derivative liabilities and remeasured to fair value each reporting period until their conversion and cancellation in October 2025 (see Note 8). The Company recognized non-cash gains change in fair value of the Series C and Series D Warrants of $1,500,300 and $4,382,250 for the three and six months ended June 30, 2025, respectively.

 

Non-cash gains from the change in the fair value of the Series C and Series D Warrants of $1,500,300 and $4,382,250 were recognized for the three and six months ended June 30, 2025, respectively.

 

As of December 31, 2025, all Series C and Series D Warrants had been exercised and no warrants remained outstanding. Accordingly, no fair value measurement was required for these instruments as of June 30, 2026, and no gain or loss from change in fair value was recognized for the three and six months ended June 30, 2026.

 

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.

 

Placement Agent Warrants

 

In connection with the 2026 Private Placement, the Company issued warrants to the placement agent to purchase up to 116,650 shares of common stock (the “Placement Agent Warrants”), which were classified within stockholders’ equity. Because the Placement Agent Warrants are equity-classified, they are measured at fair value only at issuance and are not remeasured in subsequent periods. Accordingly, the Placement Agent Warrants are not included in the recurring fair value measurement table above.

 

The grant-date fair value of the Placement Agent Warrants of $1,938,014 was measured on a nonrecurring basis using a Black-Scholes option pricing model, which represents a Level 3 measurement given the significant unobservable inputs. The following assumptions were used: stock price of $20.47, exercise price of $17.25, expected term of 5.0 years, expected volatility of 107.5%, risk-free interest rate of 4.26%, and expected dividend yield of 0%. The fair value was recognized as an offering cost of the 2026 Private Placement within additional paid-in capital, with no net effect on total stockholders’ equity. See Note 8 for additional information.