7. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following at June 30, 2026 and December 31, 2025:

 SCHEDULE OF ACCOUNTS RECEIVABLE

The allowance for credit losses was $7,817,225 and $700,000 as of June 30, 2026 and December 31, 2025, respectively, consisting of an allowance of $2,605,401 against trade accounts receivable and $5,211,824 against a receivable arising related to the disposition of inventory by our largest customer. The increase in the allowance at June 30, 2026 reflects updated loss-rate assumptions and customer risk ratings based on significant deterioration in the creditworthiness of the Company’s largest customer, a distributor of consumer cellular products. For the three and six months ended June 30, 2026, the Company recognized bad debt expense of $1,836,366 and $1,836,366, respectively, compared to $0 and $0 for the three and six months ended June 30, 2025.

During the three and six months ended June 30, 2026, the Company’s largest customer, a distributor of consumer cellular products that historically accounted for a substantial majority of the Company’s Forever 8 revenues, experienced a significant deterioration in its financial condition, including the liquidation of inventory positions and an inability to satisfy amounts owed to the Company on a timely basis. In response, the Company suspended new order fulfillment for this customer, ceased purchasing new inventory to support this customer relationship, recognized bad debt expense of $1,836,366 during the six months ended June 30, 2026 with respect to receivables from authorized ordinary-course sales, and, upon determining that inventory funded by the Company had been disposed of by the customer without authorization, recognized a $5,211,824 receivable for amounts recoverable from the customer with respect to that disposition and fully reserved such receivable given the customer’s financial condition. The Company is engaged in ongoing discussions with the customer regarding the resolution of outstanding amounts owed and is actively evaluating alternatives to recover its economic exposure. The Company can provide no assurance as to the ultimate outcome of these discussions, and future adverse developments could result in additional charges to earnings in subsequent periods. See Note 8 — Inventory for further discussion of the disposition.

During the six months ended June 30, 2026, the Company revised its loss-rate assumptions to reflect the significant deterioration in the creditworthiness of its largest customer described below, and increased the allowance accordingly. Management exercises significant judgment in determining expected credit losses, including in evaluating the amount and probability of any recoveries from ongoing customer discussions or other remedies. Actual credit losses may differ materially from management’s estimates, and additional charges may be required in future periods.