v3.26.1
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 3 Months Ended
Mar. 31, 2026
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  
Basis of Presentation

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as promulgated by the Financial Accounting Standards Board through its Accounting Standards Codification (ASC).
Discontinued Operations

On February 28, 2026 and as described in Note 3, Acquisitions and Dispositions, the Company sold 100% of its equity interest in USS. Prior to the sale, USS operated as a legally and operationally distinct subsidiary of the Company with separately identifiable revenues and direct costs. The Company has determined that the sale of USS represents a strategic shift that has, and will continue to have, a major effect on the Company's operations and financial results. Accordingly, the results of USS operations for all periods presented have been reclassified and reported as discontinued operations.

 

The financial results of the discontinued operations for the three months ended March 31, 2026 and 2025 were as follows

 

 

 

2026

 

 

2025

 

 

 

 

 

 

 

 

Revenue

 

$-

 

 

$846,416

 

Cost of revenues

 

 

-

 

 

 

810,783

 

Gross profit

 

 

-

 

 

 

35,633

 

General and administrative expenses

 

 

-

 

 

 

-

 

Income from discontinued operations, net of tax

 

$-

 

 

$35,633

 

 

Assets and liabilities of the discontinued operations as of March 31, 2026 and December 31, 2025 were as follows:

 

 

 

2026

 

 

2025

 

Assets:

 

 

 

 

 

 

Accounts receivable

 

$-

 

 

$77,515

 

Right of use asset

 

 

-

 

 

 

175,450

 

Total

 

$-

 

 

$252,965

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$-

 

 

$877,514

 

Notes payable

 

 

-

 

 

 

148,947

 

Operating lease liability

 

 

-

 

 

 

207,808

 

Total

 

$-

 

 

$1,234,269

 

The Company’s consolidated revenue, loss from operations, and net loss available to common shareholders for the three months ended March 31, 2026 and 2025 were comprised of continuing and discontinued operations and were presented in the statement of operations as follows:

 

 

 

Continuing 

 

 

Discontinued

 

 

Total

 

 

 

Operations

 

 

Operations

 

 

Operations

 

Three months ended March 31, 2026

 

 

 

 

 

 

 

 

 

Revenue

 

$2,242,566

 

 

$-

 

 

$2,242,566

 

Income (loss) from operations

 

$(874,249 )

 

$-

 

 

$(874,249 )

Net income (loss) available to common shareholders

 

$53,755

 

 

$-

 

 

$53,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2025:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$-

 

 

$846,416

 

 

$846,416

 

Income (loss) from operations

 

$(576,305 )

 

$35,633

 

 

$(540,672 )

Net income (loss) available to common shareholders

 

$(642,697 )

 

$35,633

 

 

$(607,064 )
Use of Estimates and Assumptions

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the recognition of revenues and expenses during the reporting period. Actual results may differ from these estimates, and such differences could be material.
Principles of Consolidation and Non-Controlling Interest

The Company consolidates entities where it has a controlling financial interest, as defined by ASC 810, Consolidation, and continuously evaluates its investments and business relationships to assess consolidation requirements. All intercompany balances and transactions are eliminated in consolidation.

 

In accordance with ASC 810-10, consolidation is required for:

 

 

·

Entities wherein the Company has more than a 50% voting interest, unless control is not with the Company; and

 

·

Variable Interest Entities where the Company is the primary beneficiary, possessing both (i) power over significant activities, and (ii) the obligation to absorb losses or receive benefits.

 

For entities that are consolidated, but not 100% owned by the Company, a portion of the income or loss as well as the corresponding equity is allocated to the other owners of such entities. The aggregate of the income or loss and the corresponding equity that is not owned by the Company is included in Non-Controlling Interests in the consolidated financial statements.
Related Parties

The Company defines related parties in accordance with ASC 850, Related Party Disclosures, and applicable SEC Regulations and discloses such relationships and transactions in its financial statements.

 

That definition includes entities and individuals that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company.

 

Related parties include, but are not limited to:

 

 

·

Principal owners of the Company;

 

·

Any shareholder owning more than 5% of any class of the Company’s voting securities;

 

·

Members of management (including directors, executive officers, and key employees);

 

·

Immediate family members of principal owners and members of management;

 

·

Entities affiliated with principal owners or management through direct or indirect ownership; and

 

·

Entities with which the Company has significant transactions, where one party has the ability to exercise control or significant influence over the management or operating policies of the other.

 

A party is considered related if it has the ability to control or significantly influence the management or operating policies of the Company in a manner that could prevent either party from fully pursuing its own separate economic interests.
Fair Value of Financial Instruments

The Company accounts for financial instruments in accordance with ASC 820, Fair Value Measurements, which establishes a framework for measuring fair value and requires related disclosures. 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. The fair value measurement is based on the Company’s principal market or, if none exists, the most advantageous market for the asset or liability.

 

ASC 820 requires the use of observable inputs whenever available and establishes a three-tier hierarchy for measuring fair value:

 

 

·

Level 1 - Quoted market prices (unadjusted) for identical assets or liabilities in active market;

 

·

Level 2 - Observable inputs other than quoted prices in active markets, such as quoted prices for similar assets and liabilities or inputs that are directly or indirectly observable; and

 

·

Level 3 - Unobservable inputs that require significant judgment, often involving a combination of cost, market, or income approaches, as well as Management’s assumptions about market conditions, pricing, and other factors.

The measurement of the fair value of the Company’s derivative liabilities are discussed in Note 13, Derivative Liabilities. The carrying amounts of the Company’s other financial instruments, such as cash, accounts receivable, accrued expenses, and notes payable, et cetera, approximate their fair values due to the short-term nature of those instruments.
Credit Risks and Concentrations

The Company evaluates and discloses significant concentrations of risk in accordance with ASC 275, Risks and Uncertainties, whereby it specifically considers risks that may arise from concentrations with clients in revenues and/or accounts receivable, reliance upon certain vendors, or general economic factors that could materially impact the Company’s financial position, results of operations, or cash flows.

 

In summary, financial instruments that subject the Company to credit risk consist principally of cash and accounts receivable as follows:

 

 

·

The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits. The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash; and

 

·

The Company does not require collateral for financial instruments subject to credit risk such as accounts receivable. The Company believes that credit risk is limited because the Company is familiar with the nature of operations of its customers. However, if appropriate and based upon the credit risk of its customers, the Company's policy is to establish an allowance for uncollectible accounts and periodically reassess the need for such allowances.

The Company deems a concentration of risk to exist when a single customer, supplier, or market accounts for a significant portion (typically greater than 10%) of the Company’s total revenues, accounts receivable, or vendor purchases. Such concentrations of risk, if any, are disclosed in the related areas of these footnotes.
Cash and Cash Equivalents

The Company considers all money market accounts and highly liquid instruments with a maturity of three months or less as of the purchase date to be cash equivalents.

Accounts Receivable

The Company accounts for accounts receivable in accordance with ASC 310, Receivables, whereby:

 

 

·

The collectability of accounts receivable are periodically assessed;

 

·

An allowance for doubtful accounts is established as circumstances warrant; and

 

·

Accounts are written off against the allowance for doubtful accounts when they are determined to be uncollectible.
Prepaid Expenses

The Company accounts for prepaid expenses in accordance with ASC 340, Other Assets and Deferred Costs, whereby cash disbursements and economic assets which benefit future periods are recorded as prepaid expenses as of each balance sheet date. Such items are then expensed as the economic benefits are realized.
Property and Equipment

The Company accounts for property and equipment in accordance with ASC 360, Property, Plant, and Equipment, whereby such assets are stated at cost, less accumulated depreciation. Such depreciation is provided on the straight-line basis over the estimated useful lives of such assets.

 

Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management periodically reviews the carrying value of its property and equipment as well as whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable in accordance with the provisions of ASC-360-10, Impairment or Disposal of Long-Lived Assets.
Intangible Assets

The Company accounts for intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other, whereby such assets are stated at cost, less accumulated amortization. Such amortization is provided on the straight-line basis over the estimated useful lives of such assets.

 

When intangible assets are sold or otherwise disposed of, the cost and related accumulated amortization are removed from the respective accounts with the resulting gain or loss reflected in operations.

 

Management periodically reviews the carrying value of its intangible assets as well as whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable in accordance with the provisions of ASC-360-10, Impairment or Disposal of Long-Lived Assets.
Operating Lease Right-of-Use Asset

The Company accounts for right-of-use (ROU) assets and lease liabilities for all leases with terms exceeding twelve months in accordance with FASB ASC 842, Leases. The amount of the right-of-use asset is determined by the present value of the estimated future minimum lease payments over the lease term discounted using a collateralized incremental borrowing rate. Such right-of-use asset is then amortized to expense on a straight-line basis over the expected term of the lease.
Accounts Payable and Accrued Expenses

The Company accounts for accounts payable and accrued expenses in accordance with the provisions of ASC 405, Liabilities, whereby debts and other obligations due to external parties requiring future outflows of cash or the transfer of monetary assets are estimated, recorded, and reported.
Notes and Loans Payable

The Company accounts for notes and loans payable in accordance with the provisions of ASC 470, Debt, whereby notes and loans payable due to external parties requiring future outflows of cash or the transfer of monetary assets are estimated, recorded, and reported.
Derivative Liabilities

The Company accounts for eligible financial instruments in accordance with the provisions of ASC 815, Derivatives and Hedging, whereby financial contracts whose value is derived from an underlying asset with obligations due to external parties requiring settlement at a future date with outflows of cash or the transfer of monetary assets are estimated, recorded, and reported at fair value.

 

The fair value of such derivative liabilities is remeasured at the end of each reporting period utilizing the Black-Scholes option pricing model. The change in such value is recognized in the results of operations as a gain or loss on the change in the fair value of derivative liabilities.
Operating Lease Liabilities

The Company accounts for operating lease liabilities in accordance with the provisions of ASC 842, Leases, and, when appropriate, employes the ROU model as described above. Lease classification determines the pattern of expense recognition in the consolidated statement of operations. Specifically, expenses for:

 

 

·

Operating leases are recognized on a straight-line basis over the lease term; and

 

·

Finance leases are recognized via the amortization of the ROU asset plus interest expense on the lease liability.
Contingencies

The Company is subject to litigation claims arising in the ordinary course of business. The Company records litigation accruals for legal matters which are both probable and estimable plus related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries.
Revenue recognition

The Company recognizes revenue and related costs in accordance with the provisions of ASC 606, Revenue From Contracts With Customers, whereby revenue is recognized when it is able to:

 

 

·

Identify a contract with a client;

 

·

Identify the performance obligation specified within the contract;

 

·

Determine the transaction price specified within the contract;

 

·

Allocate the transaction price to the performance obligation specified within the contract; and

 

·

Satisfy the performance obligation specified within the contract.
Marketing and Advertising Costs

The Company accounts for marketing and advertising costs in accordance with the provisions of ASC 720, Advertising Costs, whereby all such costs are expensed as incurred. Such costs are classified within general and administrative expenses in the statement of operations.
Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of ASC 718, Compensation - Stock Compensation, whereby it utilizes the fair value-based method. Under this method, cost is measured as of the grant date based on the fair value of the award determined by using the Black-Scholes option pricing model and such cost is recognized over the requisite service period, typically the vesting period. This method is utilized for awards granted to employees and issuances of equity instruments such as stock and/or warrants to vendors and other parties for services.
Income Taxes

The Company records income tax expense utilizing the asset and liability method in accordance with the provisions of ASC 740, Income Taxes, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect of changes in such tax rates on deferred tax assets and liabilities is recognized as income or expense in the period that the change is effective.

 

Income tax benefits are recognized when it is probable that the related deductions will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit or that future deductibility is uncertain. The Company recognizes uncertain tax positions only if it is more likely than not (greater than 50% likelihood) to be sustained upon examination by tax authorities. Any interest and penalties incurred related to uncertain tax positions are reported in other expense in the consolidated statement of operations.

The Company’s deferred tax assets include certain future tax benefits, such as net operating losses (NOLs), tax credits, and deductible temporary differences. The Company reviews the realizability of such deferred tax assets on a quarterly basis, or more frequently if circumstances warrant, and records a valuation allowance if it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.
Earnings (Loss) Per Share

The Company calculates net earnings (loss) per common share in accordance with ASC 260, Earnings Per Share, whereby:

 

 

·

In net income situations:

 

 

·

“Basic” net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period; and

 

 

·

“Diluted” net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period plus the number of common shares that would result from the exercise of outstanding stock options, warrants, and conversion of eligible debt and/or preferred stock.

 

·

In net loss situations, “Basic and Diluted” net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. No exercise of outstanding stock options, warrants, or conversion of eligible debt and/or preferred stock is assumed as the effect of including such common share amounts would be anti-dilutive.
Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires additional disclosure of the nature of expenses included in the income statement. The standard requires disaggregation of certain costs in a separate note to the financial statements, such as the amounts of employee compensation, depreciation, and intangible asset amortization, included in each relevant expense caption in annual and interim consolidated financial statements. This standard will be effective for the Company’s annual reporting period for the year ending December 31, 2026 and interim periods beginning with the first quarter of 2028, with early adoption permitted.

 

In January 2025, the FASB issued ASU 2025-01, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The requirements should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the disclosure impacts of ASU 2024-03 on its consolidated financial statements as well as the impacts to its financial reporting process and related internal controls.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which removes all references to software development stages (referred to as “project stages”) throughout Subtopic 350-40. The standard requires entities to start capitalizing software costs when both of the following occur: (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. This standard is effective for the Company for the annual and interim periods beginning January 1, 2028, with early adoption permitted. The Company is currently evaluating the impacts of ASU 2025-06 on its consolidated financial statements as well as the impacts to its financial reporting process and related internal controls.

 

In November 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements, which makes targeted improvements to the hedge accounting model. The amendments address five specific areas, including expanding the hedged risks permitted to be aggregated in groups of forecasted transactions, introducing an optional model for hedging choose-your-rate debt instruments, expanding hedge accounting for forecasted purchases and sales of nonfinancial assets, eliminating the net written option test in certain instances, and eliminating recognition and presentation mismatches for dual hedge strategies. The standard is effective for the Company for annual periods beginning January 1, 2027, and interim periods within those annual periods, with early adoption permitted. The Company does not expect this guidance to have a material impact on its consolidated financial statements.
Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The new standard was effective for the Company for the annual period beginning January 1, 2025 on a prospective basis, with a retrospective option, and early adoption is permitted. The Company adopted this standard beginning in 2025 on a prospective basis. There was no impact to its consolidated financial statements upon adoption.

 

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which introduces a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets arising from transactions under Topic 606. The practical expedient allows entities to assume that current conditions as of the balance sheet date would not change for the remaining life of the asset when evaluating expected credit losses. This standard is effective for the Company for the annual and interim periods beginning January 1, 2026, with early adoption permitted, and should be applied prospectively. The Company adopted this standard beginning in 2025. There was no impact to its consolidated financial statements upon adoption.