FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Feb. 28, 2025

NOTE 4 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the six levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of February 28, 2025 and May 31, 2024, respectively:


	Fair Value Measurements at February 28, 2025
	Level 1		Level 2		Level 3
Assets
Cash	$	717,853	$	—	$	—
Total assets		717,853		—		—
Liabilities
Convertible notes payable, related party		—		—		10,500,000
Total liabilities		—		—		10,500,000
Total	$	717,853	$	—	$	(10,500,000	)


	Fair Value Measurements at May 31, 2024
	Level 1		Level 2		Level 3
Assets
Cash	$	764,205	$	—	$	—
Total assets		764,205		—		—
Liabilities
Convertible notes payable, related party		—		—		10,500,000
Total liabilities		—		—		10,500,000
Total	$	764,205	$	—	$	(10,500,000	)

The fair values of our related party debts are deemed to approximate book value, and are considered Level 2 and 3 inputs as defined by ASC Topic 820-10-35.

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the period ended February 28, 2025 or the year ended May 31, 2024.

WEWARDS, INC. 10-Q