FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2025

3. FINANCIAL INSTRUMENTS

Assets and liabilities recorded at fair value on a recurring basis in the Condensed 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 following table shows the Company’s short-term investments by significant investment category as of September 30, 2025, and December 31, 2024.


	As of September 30, 2025
		Adjusted		Unrealized		Unrealized		Market
		Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	637	$	-	$	-	$	637
Total Financial Assets	$	637	$	-	$	-	$	637


	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

Unrealized gains or losses resulting from our short-term investments are recorded in accumulated other comprehensive gain or loss as they are classified as available for sale. During the nine months ended September 30, 2025, as well as the nine months ended September 30, 2024, no gain (loss) was recorded to comprehensive loss.

The warrant liabilities are measured at fair value on a recurring basis. The subsequent measurement of the warrant liabilities as of September 30, 2025, 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.

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 the warrant liabilities:

SCHEDULE OF FAIR OF WARRANT LIABILITIES


Level 3:		September 30, 2025			December 31, 2024
Fair value at inceptions for December 31, 2024 or the beginning of the period for September 30, 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	)

The Company used a Monte Carlo simulation to estimate the fair value of warrant liabilities as of June 30, 2025, being the date the Company entered into the Series A Warrant Amendment and the 2025 Warrant Amendment. Under ASC 815-40-35-10, the amended instruments qualify for equity-classification on a prospective basis. The effective date of the relating reclassification from warrant liabilities to additional paid-in capital was June, 30, 2025 (the "Reclassification Date"). The valuation was performed based on the amended terms of the Series A Warrants and PIPE Warrants. The following table summarizes the assumptions used to compute the fair value of the Company’s warrants:

MONTE CARLO SIMULATION MODEL – PIPE 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 – 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	$	1.8
Stock Price	$	1.56
Fair Value Per Warrant Share	$	1.132

The Company used the modified Black-Scholes option pricing model to determine the fair value of warrant liabilities as of December 31, 2024. The following table summarizes the assumptions used 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 customer deposits. Due to the short-term nature of these instruments, their fair values approximate their carrying values on the balance sheet.