v3.26.1
FAIR VALUE MEASUREMENTS
 6 Months Ended
Jun. 30, 2026
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 condensed consolidated financial instruments:

                    
   Level in   June 30, 2026   December 31, 2025 
   Fair Value   Carrying   Fair   Carrying   Fair 
   Hierarchy   Amount   Value   Amount   Value 
Assets:                    
Cash and cash equivalents  1   $7,665,608   $7,665,608   $8,756,585   $8,756,585 
Restricted cash  1    925,004    925,004    925,004    925,004 
                         
Liabilities:                        
Convertible notes payable  3   $7,750,000   $7,139,000   $7,710,000   $8,224,000 
Convertible note payable at fair value  3    250,000    250,000    270,000    270,000 
Convertible notes – related party  3    2,774,965    2,661,000    2,904,357    3,458,000 

   

Convertible notes payable

 

As of June 30, 2026, the Company has thirty-one outstanding convertible notes payable with an aggregate principal amount of $7,750,000 and three outstanding convertible notes payable with a related party amounting to $2,774,965. See Note 5 for further information on the terms of these convertible notes and Note 6 for further information on terms of convertible notes with a related party.

Schedule of convertible notes payable                    
       June 30, 2026   December 31, 2025 
   Level   Carrying Amount   Fair Value   Carrying Amount   Fair Value 
                     
10% convertible notes due in May 2026  3   $—   $—   $500,000   $602,000 
10% convertible notes due in October 2026  3    300,000    296,000    300,000    291,000 
10% convertible notes due in November 2026  3    300,000    294,000    300,000    291,000 
10% convertible notes due in December 2026  3    150,000    147,000    150,000    146,000 
10% convertible notes due in January 2027  3    300,000    291,000    300,000    290,000 
10% convertible note due in April 2027  3    —    —    100,000    122,000 
10% convertible notes due in June 2027  3    150,000    142,000    150,000    143,000 
10% convertible notes due in August 2027  3    2,000,000    1,871,000    2,000,000    1,869,000 
10% convertible notes due in September 2027  3    400,000    372,000    400,000    372,000 
10% convertible notes due in January 2028  3    100,000    97,000    100,000    99,000 
10% convertible notes due in July 2028  3    100,000    84,000    100,000    112,000 
10% convertible notes due in October 2028  3    100,000    78,000    100,000    100,000 
10% convertible notes due in December 2028  3    100,000    75,000    100,000    100,000 
10% convertible note due in March 2029  3    50,000    48,000    50,000    65,000 
10% convertible note due in April 2029  3    175,000    163,000    175,000    221,000 
10% convertible note due in May 2029  3    100,000    93,000    100,000    126,000 
10% convertible note due in June 2029  3    —    —    110,000    139,000 
10% convertible note due in July 2029  3    350,000    294,000    350,000    394,000 
10% convertible notes due in January 2030  3    50,000    42,000    —    — 
10% convertible notes due in February 2030  3    425,000    411,000    425,000    553,000 
10% convertible notes due in June 2030  3    100,000    100,000    —    — 
10% convertible notes due in August 2030  3    1,700,000    1,450,000    1,800,000    2,075,000 
10% convertible notes due in September 2030  3    100,000    85,000    100,000    114,000 
10% convertible notes due in May 2031  3    700,000    706,000    —    — 
10% convertible note with related party due in June 2027  3    1,235,358    1,557,000    1,302,795    2,007,000 
10% convertible note with related party due in October 2029  3    1,354,906    974,000    1,409,495    1,286,000 
10% convertible note with related party due in December 2029  3    184,701    130,000    192,067    165,000 
       $10,524,965   $9,800,000   $10,614,357   $11,682,000 

 

 

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

          
     
Fair Value Assumption – Convertible Debt  June 30, 2026   December 31, 2025 
Stock Price  $1.15   $1.56 
Minimum Conversion Price  $1.01 – 5.00   $1.00 – 5.00 
Annual Asset Volatility Estimate   60.0%   65.0%
Risk Free Discount Rate (based on U.S. government treasury obligation with a term similar to that of the convertible note)   3.90% – 4.19%   3.47% –3.71%

    

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

 

Convertible note payable, at fair value

 

As of June 30, 2026, 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, 2025 to June 30, 2026:

    
   March 4th Note 
Fair value as of December 31, 2025  $270,000 
Gain on change of fair value reported in the condensed consolidated statements of operations   (20,000)
Fair value as June 30, 2026  $250,000 

  

The estimated fair value of the March 4th Note as of June 30, 2026 and December 31, 2025, 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:

Schedule of estimated fair value of assumptions    
   June 30, 2026   December 31, 2025 
Face value principal payable  $500,000   $500,000 
Original conversion price  $7.82   $7.82 
Value of common stock  $1.47   $1.56 
Expected term (years)   3.68    4.18 
Volatility   60%   75%
Risk free rate   4.16%   3.66%