NOTE 3. FAIR VALUE OF FINANCIAL INSTRUMENTS

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, digital asset loan receivable, and accrued expenses and other current liabilities, approximate fair value due to the short-term nature of these instruments.

The Company holds digital assets consisting primarily of BERA and BERA-equivalent holdings. Native BERA and BERA-equivalent holdings, including staked, wrapped, or protocol-based receipt tokens, are each measured at fair value using quoted prices in active markets for the respective identical asset. Management separately monitors the conversion relationship between BERA-equivalent holdings and native BERA for treasury management and performance reporting purposes; such conversion metrics are not used to measure fair value. The Company uses treasury reporting tools to support custody tracking, wallet reconciliation, and conversion-rate documentation; such tools are not the primary pricing source for fair value measurement.

The Company classifies digital assets within the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. Native BERA is classified as Level 1 when quoted prices in active markets for identical assets are available. BERA-equivalent holdings are classified based on the observability of the underlying BERA price and the related conversion characteristics used to determine fair value. To the extent quoted prices for identical assets are not available for BERA-equivalent holdings, the Company considers the observability of the underlying BERA price and applicable protocol conversion characteristics in determining the appropriate fair value hierarchy classification.

If a Level 1 input is available, it is required to be utilized as a measure of fair value without adjustment, including adjustments that would reflect the size of the Company’s holdings or blockage factors. Due to the inherent volatility of digital asset markets, the fair value of these assets may fluctuate significantly, which could materially impact the Company’s financial position and results of operations.

Our financial instruments measured at fair value on a recurring basis were as follows at the dates indicated (in thousands):

SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS

Digital assets included in these tables consist of BERA and BERA-equivalent tokens. Stablecoins classified as cash equivalents are excluded from the tables above because they are carried at amounts that approximate fair value due to their short-term nature and redeemability into U.S. dollars. Fair value for Stablecoin-related protocol instruments is determined with reference to the quoted market price of the underlying U.S. dollar-denominated stablecoin, adjusted for the applicable protocol’s published exchange rate, accrual index, or redemption ratio as of the measurement date. These instruments are classified within Level 2 of the fair value hierarchy because their value is derived from observable inputs other than quoted prices in active markets for the instruments themselves.

There were no transfers between Level 1 and Level 2 and no transfers to or from Level 3 of the fair value hierarchy during the six months ended June 30, 2026 or the year ended December 31, 2025.

Equity Securities Without a Readily Determinable Fair Value

The Company’s investment in equity securities without a readily determinable fair value consists of an ownership interest in Airgraft Inc., a private company. The Company determined that its ownership interest does not provide the Company with significant influence over Airgraft Inc.; accordingly, the investment is accounted for as an equity security.

Because the equity securities do not have a readily determinable fair value, the Company elected to measure the investment using the measurement alternative under ASC 321, at cost, less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer.

The Company evaluates the investment each reporting period for impairment indicators and observable price changes. During the three and six months ended June 30, 2026, the Company identified impairment indicators and recorded an impairment charge of approximately $1.8 million to reduce the carrying value of the investment to its estimated fair value of approximately $0.1 million, which is included in “Impairment of investments” in the condensed consolidated statements of operations and comprehensive loss. The entire charge was recorded during the three months ended June 30, 2026. The Company did not identify any impairment or observable price changes requiring adjustment during the three and six months ended June 30, 2025.

This nonrecurring fair value measurement was classified within Level 3 of the fair value hierarchy. Fair value was estimated on a net asset (liquidation) basis, reflecting the investee’s total equity value and the priority of its cumulative preferred liquidation preferences relative to the Company’s investment, as observable pricing from the investee’s most recent financing rounds was not for identical securities and therefore was not used as the primary basis for the estimate.

As of June 30, 2026 and December 31, 2025, the carrying value of the Company’s investment in Airgraft Inc. was approximately $0.1 million and $1.9 million, respectively, and was included within “Other assets” in the condensed consolidated balance sheets.