| FAIR VALUE MEASUREMENTS |
NOTE
13—FAIR VALUE MEASUREMENTS
The
carrying amounts of financial assets and liabilities, including cash and cash equivalents, accounts receivable, inventories, prepaid
expenses, accounts payable and accrued expenses, and contract assets and liabilities approximate fair value due to the short-term nature
of these instruments. The carrying amounts of lease obligations, notes payable, and convertible notes payable approximate fair value
as the stated interest rates on these instruments reflect current market rates for instruments with similar terms and credit risk.
Recurring
Fair Value Measurements
The
following table presents the fair value of financial instruments measured on a recurring basis as of December 31, 2025 and 2024:
| | |
Fair Value Measurements as of December 31, 2025 | |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Derivative liabilities | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
| Warrant liabilities | |
| – | | |
| – | | |
| 8,424,500 | | |
| 8,424,500 | |
| Total recurring fair value measurements | |
| – | | |
| – | | |
$ | 8,424,500 | | |
$ | 8,424,500 | |
| | |
Fair Value Measurements as of December 31, 2024 | |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Derivative liabilities | |
$ | – | | |
$ | – | | |
$ | 185,000 | | |
$ | 185,000 | |
| Warrant liabilities | |
| – | | |
| – | | |
| 85,779,788 | | |
| 85,779,788 | |
| Total recurring fair value measurements | |
| – | | |
| – | | |
$ | 85,964,788 | | |
$ | 85,964,788 | |
The
following table presents a rollforward of changes for financial instruments measured at fair value on a recurring basis for the years
ended December 31, 2025 and 2024:
Derivative
Liabilities | |
Amount | |
| Balance as of December 31, 2023 | |
$ | 1,389,203 | |
| Initial fair value of derivative liabilities upon issuance (limited to proceeds) | |
| 1,699,727 | |
| Gain on change in fair value of derivative liabilities | |
| (1,401,373 | ) |
| Extinguishment of derivative liabilities upon conversion | |
| (1,502,557 | ) |
| Balance as of December 31, 2024 | |
$ | 185,000 | |
| Gain on change in fair value of derivative liabilities | |
| (185,000 | ) |
| Balance as of December 31, 2025 | |
$ | – | |
| Warrant Liabilities | |
Amount | |
| Balance as of December 31, 2023 | |
$ | – | |
| Fair value of warrant liabilities upon issuance (limited to proceeds) | |
| 24,667,526 | |
| Loss on change in fair value of warrant liabilities | |
| 77,638,662 | |
| Extinguishment of warrant liabilities upon exercise | |
| (16,526,400 | ) |
| Balance as of December 31, 2024 | |
$ | 85,779,788 | |
| Gain on change in fair value of warrant liabilities | |
| (76,904,488 | ) |
| Extinguishment of warrant liabilities upon exercise | |
| (254,700 | ) |
| Extinguishment of warrant liabilities upon issuance of series F preferred shares | |
| (196,100 | ) |
| Balance as of December 31, 2025 | |
$ | 8,424,500 | |
Nonrecurring
Fair Value Measurements
Certain
assets, including long-lived assets and goodwill, are measured at fair value on a nonrecurring basis when impairment indicators are present
using Level 3 inputs. During the years ended December 31, 2025 and 2024, the Company recorded goodwill impairment charges of $0 and $679,175,
respectively.
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