TAO Synergies Inc. Fair Value Disclosure
Note 9 - Fair Value on a Recurring Basis:
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 estimated fair value of the warrant liability and bifurcated embedded derivatives represent Level 3 measurements. The valuation methodologies and significant assumptions used to estimate the fair value of the warrant liabilities and bifurcated embedded derivative liabilities are described in Note 6 – Stockholders’ Equity. The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at December 31, 2025 and December 31, 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| December 31, |
| December 31, | |||||
Description | | Level | | 2025 | | 2024 | ||
Liabilities: |
| |
| |
| | ||
Warrant liability (Note 6) |
| 3 | $ | 9,000 | $ | 3,766,000 | ||
Derivative liability (Note 6) |
| 3 | $ | 2,114,000 | $ | 6,177,000 | ||
The following table sets forth a summary of the change in the fair value of the Series B Warrant liability that is measured at fair value on a recurring basis:
Balance on December 31, 2024 | $ | 310,000 | |
Change in fair value of warrant liabilities | (301,000) | ||
Balance on December 31, 2025 | $ | 9,000 |
The following table sets forth a summary of the change in the fair value of the Series C Warrant liability that is measured at fair value on a recurring basis:
Balance on December 31, 2024 | $ | 3,456,000 | |
Change in fair value of warrant liabilities | 5,114,270 | ||
Reclassification of warrant liability upon amendment | (8,570,270) | ||
Balance on December 31, 2025 | $ | — |
The following table sets forth a summary of the change in the fair value of the Series D Warrant liability that is measured at fair value on a recurring basis:
Balance on December 31, 2024 | | $ | — |
Fair value of warrant liabilities upon issuance |
| 5,248,062 | |
Change in fair value of warrant liabilities |
| 7,608,316 | |
Reclassification of warrant liability upon amendment |
| (12,856,378) | |
Balance on December 31, 2025 | $ | — |
The following table sets forth a summary of the change in the fair value of the Series C Preferred Stock bifurcated embedded derivative liability that is measured at fair value on a recurring basis:
Balance on December 31, 2024 | | $ | 6,177,000 |
Change in fair value from January 1, 2025 to June 9, 2025 |
| 222,000 | |
Balance on June 9, 2025 prior to amendment |
| 6,399,000 | |
Change in fair value of derivative liability Series C Preferred Stock based upon amendment |
| (6,361,000) | |
Balance on June 9, 2025 after amendment |
| 38,000 | |
Change in fair value of derivative liability from June 9, 2025 to June 30, 2025 |
| (37,000) | |
Balance on June 30, 2025 |
| 1,000 | |
Change in fair value of derivative liability third and fourth quarters 2025 |
| (1,000) | |
Balance December 31, 2025 | $ | — |
The following table sets forth a summary of the change in the fair value of the Series D Preferred Stock bifurcated embedded derivative liability that is measured at fair value on a recurring basis:
Balance on December 31, 2024 | | $ | — |
Fair value of derivative liability upon issuance |
| 113,000 | |
Change in fair value of derivative liability Series D Preferred Stock |
| (111,000) | |
Balance December 31, 2025 | $ | 2,000 |
The following table sets forth a summary of the change in the fair value of the Series E Preferred Stock bifurcated embedded derivative liability that is measured at fair value on a recurring basis:
Balance on December 31, 2024 | | $ | — |
Fair value of derivative liability upon issuance |
| 7,741,000 | |
Change in fair value of derivative liability Series E Preferred Stock |
| (5,629,000) | |
Balance December 31, 2025 | $ | 2,112,000 |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 21, 2023 | |
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.