FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2025

NOTE 12. FAIR VALUE MEASUREMENTS

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at December 31, 2025 and 2024 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

		Quoted Prices in Active Markets		Significant Other Observable Inputs		Significant Other Unobservable Inputs
December 31, 2025	Level	(Level 1)		(Level 2)		(Level 3)
Liabilities:
Convertible Notes	3		—		—	$	1,146,236
Forward Purchase Agreement liabilities	3		—		—		95,662
Derivative liability	3		—		—	$	40,954

Convertible Notes

As discussed in Note 7 - Convertible Notes, the February 2025 Convertible Debentures are classified and accounted for as a financial liability which is measured at fair value on a recurring basis (one of the instruments is accounted for at fair value on a recurring basis under ASC 480-10, as a derivative instrument under ASC 815).

The financial liabilities are valued under a Monte Carlo Model. The estimated fair value of the financial liabilities component is determined using Level 3 inputs. Inherent in the pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate.

The key inputs of the models used to value the Company’s February 2025 Convertible Debentures as of December 31, 2025 were:

SCHEDULE OF CONVERTIBLE NOTES

Inputs	December 31, 2025
Term remaining - years		0.13
Share price		0.13
Debt rate		12.49	%

The change in the fair value of the convertible notes measured using Level 3 inputs is summarized as follow:

	February Notes
Balance, December 31, 2024	$	—
Convertible notes, beginning balance		—
Fair value at issuance		3,000,000
Paid-in-kind interest		217,438
OID amortized		711,996
Repayment of Note		(3,032,645	)
Change in fair value		249,447
Balance, December 31, 2025	$	1,146,236
Convertible notes, ending balance		1,146,236

Forward purchase agreement liabilities

As discussed in Note 9 - Commitment and Contingencies, the forward purchase agreement liabilities are classified and accounted for as financial liabilities which will be measured at fair value on a recurring basis.

The forward purchase agreements liabilities are valued under a Probability Weighted Expected Return Model (“PWERM”) which fair values repayable capital investment and uses a Black Scholes Model that fair values the conversion features within the convertible debt. The PWERM is a multistep process in which value is estimated based on the probability-weighted present value of various future outcomes. The estimated fair value of the forward purchase agreements liabilities are determined using Level 3 inputs. Inherent in the pricing models are assumptions related to expected share-price volatility, expected life and risk-free interest rate. There were no draws for the year ended December 31, 2025; therefore, no valuation was required.

The change in the fair value of the forward purchase agreement liabilities measured using Level 3 inputs is summarized as follows:

Forward purchase agreement liabilities - ELOC Agreement


Balance, December 31, 2024	$	-
Assumed in Reverse Recapitalization		49,034
Change in fair value		(39,133	)
Termination of agreement		(9,901	)
Forward purchase agreement at December 31, 2025	$	-

Forward purchase agreement liabilities - Second ELOC Agreement

Balance, December 31, 2024	$	-
Initial recognition of liability		95,062
Change in fair value		600
Forward purchase agreement liability at December 31, 2025	$	95,662

Derivative liability

As discussed in Note 7 - Convertible Notes, the Company accounted for the August 2025 Notes under ASC 470 and ASC 815 and concluded that bifurcation of multiple embedded features was necessary under ASC 815-15-25-1. As a result, the Company separately accounted for as a single compound derivative. The initial fair value of the derivative liability at issuance was $4,101,583 and estimated using a Monte Carlo Model. For the year ended December 31, 2025, change in fair value of the derivative liability of $75,482 was recorded as an income on the consolidated statements of operations. At December 31, 2025, the fair value of the derivative of $40,954 was included in derivative liability on the accompanying 2025 consolidated balance sheet.

The key inputs of the models used to value the Company’s derivative liability as of December 31, 2025 were:

Inputs	December 31, 2025
Term Remaining - Years		0.14 - 0.39
Share Price		$0.10- $0.42
Risk Free Rate		3.52% - 3.92%

The change in the fair value of the derivative liability measured using Level 3 inputs is summarized as follows

	For the Year ended
	December 31, 2025
Balance, December 31, 2024	$	-
Derivative liability, beginning balance		-
Initial recognition		4,101,583
Conversion of shares		(3,985,147	)
Change in fair value		(75,482	)
Derivative liability at December 31, 2025	$	40,954
Derivative liability, ending balance		40,954

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details

Aspire Biopharma Holdings, Inc. S-1/A