v3.25.1
FAIR VALUE MEASUREMENTS
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

NOTE 7 — FAIR VALUE MEASUREMENTS

 

The Company’s non-financial assets measured at fair value on a nonrecurring basis include goodwill and intangible assets. The determination of our intangible fair values includes several assumptions and inputs (Level 3) that are subject to various risks and uncertainties. Management believes it has made reasonable estimates and judgments concerning these risks and uncertainties. All other financial assets and liabilities are carried at amortized cost.

 

The Company’s cash balances are representative of their fair values, as these balances are comprised of deposits available on demand. The carrying amounts of accounts receivable, notes receivable, prepaid and other current assets, accounts payable and other non-current liabilities approximate their fair values because of the short turnover of these instruments.

 

Financial Disclosures about Fair Value of Financial Instruments

 

The tables below set forth information related to the Company’s consolidated financial instruments:

                    
   Level in   March 31, 2025   December 31, 2024 
   Fair Value   Carrying   Fair   Carrying   Fair 
   Hierarchy   Amount   Value   Amount   Value 
Assets:                    
Cash and cash equivalents  1   $7,085,260   $7,085,260   $8,203,842   $8,203,842 
Restricted cash  1    925,004    925,004    925,004    925,004 
                         
Liabilities:                        
Convertible notes payable  3   $5,875,000   $5,770,000   $5,100,000   $5,065,000 
Convertible note payable at fair value  3    300,000    300,000    320,000    320,000 
Contingent consideration(1)  3    486,000    486,000    486,000    486,000 

 

(1)On December 31, 2024, the Company calculated the final contingent consideration to be $486,000 and it was paid on April 14, 2025.

 

Convertible notes payable

 

As of March 31, 2025, the Company has sixteen outstanding convertible notes payable with aggregate principal amount of $5,875,000. See Note 8 for further information on the terms of these convertible notes.

                    
       March 31, 2025   December 31, 2024 
   Level   Carrying Amount   Fair Value   Carrying Amount   Fair Value 
                     
10% convertible notes due in October 2026  3   $800,000   $785,000   $800,000   $793,000 
10% convertible notes due in November 2026  3    300,000    294,000    300,000    298,000 
10% convertible notes due in December 2026  3    650,000    635,000    650,000    643,000 
10% convertible notes due in January 2027  3    900,000    928,000    800,000    839,000 
10% convertible note due in March 2027  3    100,000    100,000    —      —   
10% convertible notes due in June 2027  3    150,000    146,000    150,000    148,000 
10% convertible notes due in August 2027  3    2,000,000    1,924,000    2,000,000    1,955,000 
10% convertible notes due in September 2027  3    400,000    384,000    400,000    389,000 
10% convertible notes due in January 2028  3    100,000    100,000    —      —   
10% convertible note due in March 2029  3    50,000    50,000    —      —   
10% convertible notes due in February 2030  3    425,000    425,000    —      —   
       $5,875,000   $5,771,000   $5,100,000   $5,065,000 

 

The estimated fair value of the convertible notes was computed using a Monte Carlo Simulation, using the following assumptions: 

       
Fair Value Assumption – Convertible Debt   March 31, 2025   December 31, 2024
Stock Price   $ 1.01     $ 1.07  
Minimum Conversion Price   $ 1.00 – 5.00     $ 4.00 – 5.00  
Annual Asset Volatility Estimate     60 %     65 %
Risk Free Discount Rate     3.89 % - 3.96 %     4.23% -4.26 %

 

 

 

Fair Value Option (“FVO”) Election – Convertible note payable and freestanding warrants

 

Convertible note payable, at fair value

 

As of March 31, 2025, the Company had one outstanding convertible note payable with a face value of $500,000 (the “March 4th Note”), which is accounted for under the ASC 825-10-15-4 FVO election. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is presented as a single line item within other (expenses) income in the accompanying condensed consolidated statements of operations under the caption “Change in fair value of convertible note.”

 

The March 4th Note is measured at fair value and categorized within Level 3 of the fair value hierarchy. The following is a reconciliation of the fair values from December 31, 2024 to March 31, 2025:

    
   March 4th Note 
Beginning fair value balance reported on the condensed consolidated balance sheet at December 31, 2024  $320,000 
Gain on the change in fair value reported in the condensed consolidated statements of operations   (20,000)
Ending fair value balance reported on the condensed consolidated balance sheet at March 31, 2025  $300,000 

  

The estimated fair value of the March 4th Note as of March 31, 2025 and December 31, 2024, was computed using a Black-Scholes simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate of return, using the following assumptions: 

        
   March 31, 2025   December 31, 2024 
Face value principal payable  $500,000   $500,000 
Original conversion price  $7.82   $7.82 
Value of common stock  $1.01   $1.07 
Expected term (years)   4.93    5.18 
Volatility   90%   90%
Risk free rate   3.96%   5.18%

 

Warrant

 

In connection with the March 4th Note, the Company issued the Series I Warrant, which is exercisable for 10,000 shares. The Series I Warrant is measured at fair value and categorized within Level 3 of the fair value hierarchy. The fair values of the Series I Warrant was nominal as of March 31, 2025 and December 31, 2024. The Series I Warrant expire on September 4, 2025.