House of Doge Inc. Fair Value Disclosure
NOTE 10 — FAIR VALUE MEASUREMENTS
Cloud Computing Arrangements - Technology Purchase Agreements
In accordance with ASC 820, “Fair Value Measurements and Disclosures”, the Company uses various inputs to measure the fair value of its stock-based compensation liability resulting from the cash-settled written put options related to the MSA with Artemis and the SaaS with EVEMeta on a recurring basis to determine the fair value of these liabilities. The Company determines the fair value of the stock-based compensation liability using a Monte Carlo simulation.
Further, as of May 12, 2025, the Company completed a fair value measurement for the cash settlement provision of its agreements with Artemis and EVEMeta, the liability classified award, using a Monte Carlo simulation model as a result of the amendment of the agreements and determined a total fair value measurement of $2,942,136. The Company recognized a stock-based compensation liability from the total fair value only to the extent in which services were provided to the Company through the amendment date, which resulted in partial recognition and was an estimate by the Company as of period end. This resulted in the recognition of a stock-based compensation liability of $116,669 as of May 12, 2025, of which $72,277 was recognized as an increase during the period April 1, 2025 to May 12, 2025 to the existing stock-based compensation liability of $44,392 as of March 31, 2025. Of the total of $72,277, $41,331 was capitalized to capitalized implementation costs and $30,946 was expensed as a software expense. These amounts did not have an impact on the balance of the Company’s stockholders’ equity. Lastly, as a result of the amendment, the stock-based compensation liability was settled and no longer exists as of May 12, 2025. Please refer to Note 2 for further details on the modification and settlement of the stock-based compensation liability.
The following table presents the changes in the Level 3 measurement of the stock-based compensation liability at fair value for the year ended December 31, 2025. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.
| Stock-Based Compensation Liability | ||||
| Balance as of December 31, 2024 | $ | |||
| Change in fair value - Capitalized Implementation Costs | 76,671 | |||
| Change in fair value - Software Expense | 39,998 | |||
| Settlement of Stock-Based Compensation Liability | (116,669 | ) | ||
| Balance as of December 31, 2025 | $ | |||
The key inputs for the Monte Carlo simulation for the stock-based compensation liability as of May 12, 2025 were as follows:
| Stock-Based Compensation Liability: Key Valuation Inputs* | ||||
| Valuation Date Stock Price | $ | 0.59 | ||
| Volatility | 102 | % | ||
| Risk-Free Rate | 4.08 | % | ||
| Credit Risk Adjusted Rate | 13.90 | % | ||
| Time period (years) | ||||
| * | The valuation was based on a Monte Carlo simulation analysis of 100,000 iterations. |
Private Investment into Public Entity (PIPE)
On July 24, 2025, the Company entered into a Securities Purchase Agreement with investors for the PIPE Offering of 15,000 shares of its Series B Preferred Stock and an aggregate of 15,923,567 PIPE Warrants to acquire up to 15,923,567 shares of Common Stock. The PIPE Offering closed on July 30, 2025. Additionally, the Company issued a total of 1,057,543 Placement Agent Warrants to acquire up to 1,057,543 shares of Common Stock at an exercise price of $0.942 per share, and 536,093 H.C. Wainwright Warrants to acquire up to 536,093 shares of Common Stock at an exercise price of $1.884 per share.
The fair value of the PIPE Warrants, Placement Agent Warrants and H.C. Wainwright Warrants was estimated using the Black-Scholes option pricing model. This valuation approach represents a Level 3 measurement within the fair value hierarchy as it incorporates significant unobservable inputs. Please refer to the PIPE section in Note 5.
Pre-Funded Warrants
On September 2, 2025, the Company invested $4,000,000 in Pre-Funded Warrants of CleanCore Solutions, Inc. with a purchase price of $1 per warrant. The exercise price of the warrants is $0.0001 per share and each warrant is for one share of Class B Common Stock of CleanCore Solutions, Inc., a publicly traded company. The investment is accounted for as an equity security under ASC 321, Investments – Equity Securities, and is measured at the fair value of the consideration that was transferred, which was $4,000,000 in cash, with changes in fair value recognized in earnings. In November 2025, the Company exercised the pre-funded warrants and received 4,000,000 shares of CleanCore Solutions, Inc Class B Common Stock. As of December 31, 2025, the investment had a carrying value of $1,100,000 which was determined using the quoted market price of CleanCore’s Class B Common Stock on the NYSE American Exchange, representing a Level 1 measurement within the fair value hierarchy. Please refer to Notes 1 and 11.
Yorkville Convertible Note
On December 4, 2025, concurrently with the Yorkville Purchase Agreement, the Company and House of Doge, jointly and severally, authorized the issuance of the Yorkville Convertible Note to Yorkville. The Company has elected to account for this convertible debt instrument with the FVO in accordance with ASC 825, “Financial Instruments”. Please refer to Note 7 for further details on the Yorkville Convertible Note.
The following table presents changes in the Level 3 measurement of the convertible debt at fair value for the year ended December 31, 2025. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.
| Convertible Debt | ||||
| Balance as of December 4, 2025 | $ | 3,727,014 | ||
| Change in Fair Value | 44,831 | |||
| Balance as of December 31, 2025 | $ | 3,771,845 | ||
The key inputs for the PWERM for the Yorkville Convertible Note as of December 31, 2025 were as follows:
| Convertible Debt: Key Valuation Inputs | ||||
| Variable Weighted Average Price for Conversion | $ | 0.4041 | ||
| Expected Stock Price at Conversion | 0.4044 | |||
| Volatility | 87.55 | % | ||
| Risk-Free Rate | 3.48 | % | ||
| Credit Risk Adjusted Rate | 14.52 | % | ||
| Discount Rate | 18 | % | ||
| Probability Merger occurs by March 31, 2026 | 90 | % | ||
| Probability Merger does not occur by March 31, 2026 | 10 | % | ||
Yorkville Warrant
On December 4, 2025, concurrently with the execution of the Yorkville Purchase Agreement and the issuance of the Yorkville Convertible Note, on December 4, 2025, the Company issued the Yorkville Warrant. The Yorkville Warrant is required to be measured at fair value pursuant to ASC 815, “Derivatives and Hedging” (“ASC 815”) at the date of issuance, December 4, 2025, and in subsequent reporting periods.
The following table presents changes in the Level 3 measurement of the warrant liability at fair value for the year ended December 31, 2025. Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.
| Warrant Liability | ||||
| Balance as of December 4, 2025 | $ | 5,341,589 | ||
| Change in Fair Value | (1,354,543 | ) | ||
| Balance as of December 31, 2025 | $ | 3,987,046 | ||
The key inputs for the Monte Carlo simulation for the Yorkville Warrant as of December 31, 2025 were as follows:
| Warrant Liability: Key Valuation Inputs* | ||||
| Valuation Date Stock Price | $ | 0.40 | ||
| Volatility | 87.55 | % | ||
| Risk-Free Rate | 3.55 | % | ||
| Time period (years) | 2.93 | |||
| * | The valuation was based on a Monte Carlo simulation analysis of 100,000 iterations. |
The following table classifies the Company’s assets and liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2025:
| December 31, 2025 | ||||||||||||||||
| Assets | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Investment in Equity Securities | $ | 1,100,000 | $ | 1,100,000 | $ | $ | ||||||||||
| Total Assets | $ | 1,100,000 | $ | 1,100,000 | $ | $ | ||||||||||
| December 31, 2025 | ||||||||||||||||
| Liabilities | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Yorkville Convertible Note | $ | 3,771,845 | $ | $ | $ | 3,771,845 | ||||||||||
| Yorkville Warrant | $ | 3,987,046 | $ | $ | $ | 3,987,046 | ||||||||||
| Total Liabilities | $ | 7,758,891 | $ | $ | $ | 7,758,891 | ||||||||||
The Company did not have any assets or liabilities measured at fair value on a recurring basis as of December 31, 2024.
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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.