NOTE 16 - FAIR VALUE MEASUREMENTS

 

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, government grant receivables, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value given the short-term nature of these instruments.

 

The carrying amounts of the Company’s notes payable approximate their fair values as they bear prevailing market interest rates.

 

Recurring Fair Value Measurements

 

The fair value of financial instruments measured on a recurring basis as of December 31, 2025 and 2024 consisted of the following:

 

Description   Level 1    Level 2    Level 3    

Total

December 31, 2025

 
Warrant liabilities  $-   $-   $-   $- 

 

Description  Level 1   Level 2   Level 3  

Total

December 31, 2024

 
Warrant liabilities  $-   $-   $45,965   $45,965 

 

 

The changes in the fair value of the warrant liabilities for the years ended December 31, 2025 and 2024 are summarized as follows:

 

 

Fair value at issuance January 1, 2024  $2,130,115 
Change in fair value of warrant liabilities   (2,084,150)
Fair value at December 31, 2024   45,965 
Change in fair value of warrant liabilities   (45,965)
Fair value at December 31, 2025  $- 

 

Non-recurring Fair Value Measurements

 

Certain assets, including long-lived assets and certain financial instruments, are measured at fair value on a non-recurring basis if it is determined that impairment indicators are present using Level 3 inputs.

 

During the year ended December 31, 2025 and 2024, the Company recorded impairments of $1,115,000 and $1,000,000, respectively, related to technology license.

 

During the year ended December 31, 2025, the Company recorded impairments of $431,900 related to its oil and gas properties.

 

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About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.