Fair Value of Financial Instruments

6 Months Ended

12 Months Ended

Jun. 30, 2024

Dec. 31, 2023

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

11.Fair Value of Financial Instruments

The Company believes the carrying amounts of its cash, accounts payable and accrued expenses, and debt balances approximate their fair values due to their near-term maturities. There were no transfers among Level 1, Level 2 or Level 3 categories.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy

	Fair Value Measurement at June 30, 2024
	Total		Level 1		Level 2		Level 3
								-
Derivative liability		1,853,694		—		—		1,853,694
Warrant liability	Less than $1			—		—	Less than $1
Total Liabilities	$	1,853,694	$	—	$	—	$	1,853,694

	Fair Value Measurement at December 31, 2023
	Total		Level 1		Level 2		Level 3
								-
Derivative liability		361,704		—		—		361,704
Warrant liability	Less than $1			—		—	Less than $1
Total Liabilities	$	361,704	$	—	$	—	$	361,704

The table below presents the changes in Level 3 liabilities (assets) measured at fair value on a recurring basis during the three months ended June 30, 2024 and 2023:

	White Lion Derivative Liability			Key Company Stockholder Forward Liability (Asset)			Private Placement Warrants Liability			November 2022 Convertible Note Liability		April 2023 Conversion Feature Liability		April 2023 Convertible Notes Warrants Liability			December 2023 Conversion Feature Liability		May 2024 Conversion Feature Liability
Balance at January 1, 2023	$	1,000		$	(13,000	)	$	525,000		$	165,000	$	—	$	—		$	—	$	—
Change in fair value		(1,000	)		13,000			(525,000	)		—		—		—			—		—
Balance at March 31, 2023	$	—		$	—		$	—		$	165,000	$	—	$	—		$	—	$	—
Inception Date		—			—			—			—		849,146		2,402,161			—		—
Capital Contribution to Equity on Exercise of Warrants		—			—			—			—		—		(244,261	)		—		—
Change in fair value		—			—			—			—		548,233		712,857			—		—
Balance at June 30, 2023	$	—		$	—		$	—		$	165,000	$	1,397,379	$	2,870,757		$	—	$	—
Balance at January 1, 2024	$	—		$	—		$	—		$	—	$	—	$	—		$	361,704	$	—
Issuance of December 2023 Convertible Notes		—			—			—			—		—		—			211,842		—
Change in fair value		—			—			—			—		—		—			114,709		—
Balance at March 31, 2024	$	—		$	—		$	—		$	—	$	—	$	—		$	688,255	$	—
Issuance of May 2024 Convertible Notes		—			—			—			—		—		—			—		927,150
Change in fair value		—			—			—			—		—		—			172,064		66,225
Balance at June 30, 2024	$	—		$	—		$	—		$	—	$	—	$	—		$	860,319	$	993,375

White Lion Derivative Liability

The White Lion Derivative Liability is valued using Monte Carlo simulation model and a such is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The significant unobservable inputs used to determine the fair value were the projected volume weighed average share price at each trading date and the use of the maximum draw down potential. The fair value of the White Lion Derivative Liability at June 30, 2023 of $0 was determined using the Monte Carlo Model based on the projected stock price of $0.83, expected volatility of 88%, risk-free rate of 4.63% and discounted by 2.5% for the probability of the Company timely filing all SEC documents and meeting the OTC Market listing requirements. The fair value of the White Lion Purchase Agreement was $0 at June 30, 2024.

The following weighted average assumptions were used in determining the fair value of the White Lion Purchase Agreement at June 30, 2024 and 2023:

	June 30,			June 30,
	2024			2023
Stock Price	$	0.01		$	0.83
Expected volatility		78.5	%		88.0	%
Risk-free interest rate		4.84	%		4.63	%
Discount related to the probability of timely filing all SEC documents and meeting the NASDAQ listing requirements		25.0	%		2.5	%
Expected dividend yield		—	%		—	%

April 2023 Convertible Note Warrants and Placement Agent Warrants

The April 2023 Convertible Note Warrants and Placement Agent Warrants were accounted as a liability at the issuance date and were fair valued using a Black Scholes Option Pricing Model, and is considered to be a Level 3 fair value measurement, as the fair value of the instruments was determined based on significant inputs not observable in the market. On November 1, 2023, all outstanding April 2023 Convertible Note Warrants were reclassified from liability into equity (see Note 10).

The fair value of the April 2023 Convertible Note Warrants at the reclassification date was based on the following assumptions:

Stock price	$0.08
Expected volatility	74.9	%
Risk-free interest rate	4.65	%
Expected term (in years)	4.49
Expected dividend yield	0	%

Private Placement Warrants

The fair value of the Private Placement Warrants was estimated using a Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The fair value of the Private Placement Warrants at both June 30, 2024 and June 30, 2023 was $0.

The fair value of the Private Placement Warrants was based on the following assumptions:

	June 30,			June 30,
	2024			2023
Stock Price	$	0.01		$	0.83
Expected volatility		100.0	%		45.5	%
Risk-free interest rate		4.52	%		4.12	%
Expected term (in years)		3.34			4.34
Expected dividend yield		—	%		—	%

April 2023 Conversion Feature Liability

On January 1, 2024, on adoption of ASU 2020-06, the April 2023 Conversion Feature Liability met the derivative accounting scope exception and the conversion feature no longer required bifurcation form the April 2023 Convertible Notes and 2023 April 2023 Convertible Notes, related party. On January 1, 2024, the fair value of the fair value of the April 2023 Conversion Feature Liability was $0.

December 2023 Conversion Feature Liability

The fair value of the December 2023 Conversion Feature Liability was estimated based on the probability weighted settlement scenarios, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. At June 30, 2024, the fair value of the derivative liability related to the Automatic Conversion Feature was estimated at $860,319 by applying the probability of a business combination of 75% to the Automatic Discount of 43%. At June 30, 2024, the fair value of the derivative liability related to the Optional Conversion Feature was deemed immaterial as the probability that the Company is listed on a public exchange in absence of a business combination prior to the maturity of the December 2023 Convertible Notes was deemed minimal.

May 2024 Conversion Feature Liability

The fair value of the December 2023 Conversion Feature Liability was estimated based on the probability weighted settlement scenarios, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. At June 30, 2024, the fair value of the derivative liability related to the Automatic Conversion Feature was estimated at $993,375 by applying the probability of a business combination of 75% to the Automatic Discount of 100%.

12.Fair Value of Financial Instruments

The Company believes the carrying amounts of its cash and cash equivalent and debt approximate their fair values due to their near-term maturities. There were no transfers among Level 1, Level 2 or Level 3 categories in the years ended December 31, 2023 and 2022.

As of December 31, 2023 and 2022, the carrying amounts of the Company’s cash, accounts payable and accrued expenses approximate their respective fair values due to the short-term nature of these instruments.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy:

	Fair Value Measurement at December 31, 2023
	Total		Level 1		Level 2		Level 3
								-
Derivative liability		361,704		—		—		361,704
Warrant liability		—		—		—		—
Total Liabilities	$	361,704	$	—	$	—	$	361,704

	Fair Value Measurement at December 31, 2022
	Total			Level 1		Level 2		Level 3
									-
Derivative asset		(13,000	)		—		—		(13,000	)
Derivative liability		166,000			—		—		166,000
Warrant liability		525,000			—		—		525,000
Total Liabilities	$	678,000		$	—	$	—	$	678,000

The table below presents the changes in Level 3 liabilities (assets) measured at fair value on a recurring basis during the years ended December 31, 2023 and 2022:

	White Lion Derivative Liability			Key Company Stockholder Forward Liability (Asset)			Forward Share Purchase Liability			Private Placement Warrants Liability			November 2022 Convertible Note Liability			April 2023 Conversion Feature Liability			April 2023 Convertible Notes Warrants Liability			December 2023 Conversion Feature Liability
Balance at January 1, 2022	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Inception Date		1,900,000			—			—			—			165,000			—			—			—
Business Combination with Ignyte		—			12,000			68,110			450,000			—			—			—			—
Change in fair value		(1,899,000	)		(25,000	)		(68,110	)		75,000			—			—			—			—
Balance at December 31, 2022	$	1,000		$	(13,000	)	$	—		$	525,000		$	165,000		$	—		$	—		$	—
Inception Date		—			—			—			—			—			849,146			2,402,160			361,704
Extinguishment of Debt		—			—			—			—			(165,000	)		—			—			—
Capital Contribution from Exercise of Warrants		—			—			—			—			—			—			(761,568	)		—
Capital Contribution from Reclassification of Warrants		—			—			—			—		$	—			—			(65,469	)		—
Change in fair value		(1,000	)		13,000			—			(525,000	)		—			(849,146	)		(1,575,123	)		—
Balance at December 31, 2023	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	361,704

Key Company Stockholder Forward Purchase Liability

The Key Company Stockholder Forward Purchase Liability is accounted and fair valued under ASC 815, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The significant unobservable inputs used to determine the fair value is the probability of the key company stockholder obtaining a margin loan and the Company meeting the NASDAQ listing requirements.

The fair value of the Key Company Stockholder Forward Purchase Agreement at December 31, 2022 was valued using a probability weighted scenario analysis with a Black Scholes Option Pricing Model based on a stock price of $4.21, expected volatility of 82.2%, risk-free rate of 4.5% and discounted at 0.5% for the probability of the Company closing the Business Combination Agreement, the key company stockholder obtaining a margin loan and the Company meeting the NASDAQ listing requirements. The fair value of the Key Company Stockholder Forward Purchase Agreement at December 31, 2023 was valued at $0 as the time to fund concluded on March 31, 2023, resulting in a change in fair value of derivative asset of $13,000 for the year ended December 31, 2023.

White Lion Derivative Liability

The White Lion Derivative Liability is valued using Monte Carlo simulation model and a such is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The significant unobservable inputs used to determine the fair value were the projected volume weighed average share price at each trading date and the use of the maximum draw down potential. The fair value of the White Lion Purchase Agreement was $1,000 at December 31, 2022, and the change in fair value of the derivative liability was $1,899,000 for the year ended December 31, 2022. The fair value of the White Lion Purchase Agreement was $0 at December 31, 2023, and the change in fair value of the derivative liability was $1,000 for the year ended December 31, 2023.

The following weighted average assumptions were used in determining the fair value of the White Lion Purchase Agreement at December 31, 2023 and 2022:

	As of December 31,
	2023			2022
Stock Price	$	0.18		$	4.19
Expected volatility		95.3	%		81.0	%
Risk-free interest rate		4.23	%		4.16	%
Discount related to the probability of timely filing all SEC documents and meeting the NASDAQ listing requirements		2.5	%		0.3	%
Expected dividend yield		—	%		—	%

April 2023 Convertible Note Warrants and Placement Agent Warrants

The April 2023 Convertible Note Warrants and Placement Agent Warrants are carried at fair value and fair valued using a Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market.

The fair value of the April 2023 Convertible Note Warrants, excluding the warrants held by the founder, as of December 31, 2023 was $0. On November 1, 2023, the remaining April 2023 Convertible Note Warrants were reclassified from liability into equity (see Note 10). The Company recorded a change in fair value of $1,552,578 through the reclassification date.

The fair value at December 31, 2023 for the remaining 176,292 April 2023 Convertible Note Warrants held by the founder was valued at $0. The Company recorded a change in fair value of $22,545 through the reclassification date.

The fair value of the April 2023 Convertible Note Warrants was determined using a Black Scholes Option Pricing Model based on the following assumptions at the reclassification date:

Stock price	$0.08
Expected volatility	74.9	%
Risk-free interest rate	4.65	%
Expected term (in years)	4.49
Expected dividend yield	0	%

Private Placement Warrants

The fair value of the Private Placement Warrants was estimated using a Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The fair value at December 31, 2023 and 2022 was valued at $0 and $525,000, respectively, using a Black Scholes Option Pricing Model based on the following assumptions:

	As of December 31,
	2023			2022
Stock Price	$	0.18		$	4.19
Expected volatility		84.0	%		30.0	%
Risk-free interest rate		4.01	%		3.99	%
Expected term (in years)		3.84			4.84
Expected dividend yield		—	%		—	%

April 2023 Conversion Feature Liability

The fair value of April 2023 Conversion Feature Liability was estimated using a Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market.

At December 31, 2023, the fair value of the April 2023 Conversion Feature Liability related to the 2023 April Convertible Notes was valued at $0 using a Black Scholes Option Pricing Model based on the following assumptions:

	December 31,
	2023
Stock Price	$	0.18
Expected volatility		73.7	%
Risk-free interest rate		4.68	%
Expected term (in years)		0.08
Expected dividend yield		—	%

The Company recorded a change in fair value of $560,436 for the year ended December 31, 2023.

At December 31, 2023, the fair value of the April 2023 Conversion Feature Liability related to the 2023 April Convertible Notes, related party was valued at $0 using a Black Scholes Option Pricing Model based on the following assumptions:

	December 31,
	2023
Stock Price	$	0.18
Expected volatility		73.7	%
Risk-free interest rate		4.68	%
Expected term (in years)		0.08
Expected dividend yield		—	%

The Company recorded a change in fair value of $288,710 for the year ended December 31, 2023.

December 2023 Conversion Feature Liability

The fair value of the December 2023 Conversion Feature Liability was estimated based on the probability weighted settlement scenarios, which is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The fair value of the derivative liability related to the Automatic Conversion Feature was estimated at $0.4 million by applying the probability of a business combination of 50% to the Automatic Discount of 43%. The fair value of the derivative liability related to the Optional Conversion Feature was deemed immaterial as the probability that the Company is listed on a public exchange in absence of a business combination prior to the maturity of the December 2023 Convertible Notes was deemed minimal.