Note 9 - Loans and Fair Value Measurements 

SAFE Notes

Prior to the June 18, 2025 Business Combination, SEE ID had issued SAFE agreements totaling $8.5 million in proceeds. The SAFE agreements provided for conversion or settlement upon specified triggering events, including equity financings, liquidity events, or dissolution events. The Company classified the SAFE agreements as derivative liabilities and measured them at fair value using a probability-weighted expected return method.

Upon closing of the Business Combination, which qualified as an equity financing under the SAFE agreements, all outstanding SAFE notes automatically converted into 2,909,057 shares of Common Stock, equivalent to approximately 116,362 shares after giving effect to the Company’s 1-for-25 reverse stock split. As a result, the Company recognized a $17.4 million fair value adjustment during the second quarter of 2025 based on the $14.00 per share closing price. 

J.J. Astor Loans and Subsequent Assumption by LHT I

On December 5, 2025, the Company entered into a loan agreement with J.J. Astor & Co. (“J.J. Astor”) for up to $5,000,000 in senior secured convertible loans, consisting of an initial $2,000,000 tranche and up to three additional $1,000,000 tranches. The initial tranche was issued as a $2,000,000 convertible note, of which $1,810,000 was funded, net of fees. The note matures on November 30, 2026 and is repayable in twelve monthly installments, consisting of an initial payment of $108,334 followed by eleven monthly payments of approximately $226,515, totaling $2,600,000. Each additional tranche, if funded at the lender’s discretion and subject to specified conditions (including equity line of credit (“ELOC”) availability, Nasdaq listing, minimum stock price, and trading volume requirements), will be issued as a $1,000,000 convertible note with $960,000 funded net of fees and accompanied by a warrant. The Company is required to use proceeds from its ELOC to make monthly payments, with 80% of ELOC proceeds remitted directly to the lender. Certain extraordinary receipts must also be applied toward repayment.

In connection with the initial funding, the Company issued a warrant to purchase 230,770 shares at $1.69 per share, equivalent to approximately 9,231 shares at an exercise price of $42.25 per share after giving effect to the Company’s 1-for-25 reverse stock split. Additional tranches, if funded, would include similar convertible notes and warrants. The agreement also requires the use of ELOC proceeds for repayment, with 80% of such proceeds remitted directly to the lender, and certain extraordinary receipts applied to outstanding balances. See “Derivative Liabilities” below for further discussion of the accounting for the warrant and embedded features.

For the three and six months ended June 30, 2026, the Company paid $794,078 and $1,568,894, respectively, to J.J. Astor. Including the initial repayment of $108,334 in December 2025, the Company had repaid $1,677,228 as of June 30, 2026, leaving an outstanding balance of $922,772. On June 23, 2026, J.J. Astor & Co. entered into a Note Purchase and Assignment Agreement with LHT I, LLC, pursuant to which LHT I, LLC acquired J.J. Astor’s remaining rights and interests under the loan agreement and assumed the related lender obligations under the existing terms. In connection with the assignment, LHT I, LLC paid $924,616 directly to J.J. Astor. The difference of $1,844 was recorded as interest expense towards to J.J. Astor loan and rolled into the principal pf the LHT I loan. Accordingly, the Company recorded the remaining obligation as a short-term loan payable to LHT I, LLC as of June 30, 2026.

The Company had also capitalized $190,000 of loan origination fees associated with the J.J. Astor financing, which are being amortized over the 12-month term of the loan at $15,833 per month. As of June 30, 2026, the remaining unamortized deferred financing costs were $79,167. Following the assignment of the loan to LHT I, LLC, the deferred financing costs remained associated with the outstanding loan and will continue to be amortized at $15,833 per month through the loan’s maturity date.

White Lion loans

On April 17, 2026, the Company entered into a financing arrangement with White Lion Capital, LLC (“White Lion”) consisting of an equity purchase facility and senior secured convertible promissory notes. Under the equity purchase facility, the Company may sell up to $10.0 million of its common stock to White Lion from time to time through purchase notices, subject to specified pricing terms, ownership limitations, and other conditions.

In addition, the Company entered into a note purchase agreement pursuant to which White Lion agreed to purchase senior secured convertible promissory notes with an aggregate principal amount of up to $2.875 million, reflecting a 20% original issue discount on aggregate cash proceeds of up to $2.3 million. The notes are secured by substantially all of the Company’s assets, and are convertible into common stock at a discount to the market price, subject to further reductions in the conversion price upon certain events of default. In connection with the financing, White Lion is also entitled to commitment shares valued at $120,000 and warrants to purchase up to $2.0 million of common stock at an exercise price equal to 99% of the closing market price on the trading day immediately preceding the applicable exercise date. Aggregate share issuances under the agreements are subject to a 19.99% cap on the Company’s outstanding common stock unless stockholder approval is obtained.

As of June 30, 2026, White Lion had funded $690,000 to the Company under the convertible note arrangement, net of $172,500 of issuance costs. Under the $10.0 million equity purchase facility, the Company had submitted purchase notices totaling $640,192 and issued 329,898 shares of common stock to White Lion. In addition, White Lion had exercised $180,000 of warrants, resulting in the issuance of 65,596 shares of common stock.

The Company elected to account for the White Lion convertible notes under the fair value option, with changes in the fair value of the notes recognized in earnings each reporting period through settlement. During the second quarter of 2026, White Lion converted the outstanding notes and accrued amounts into shares of the Company’s common stock. In connection with these conversions, the Company issued 360,165 shares of common stock in satisfaction of an aggregate of approximately $895,155 of principal and accrued interest. The related note liability was derecognized upon conversion, and by June 26, 2026, the White Lion convertible notes had been fully converted and satisfied. Accordingly, no White Lion convertible note liability remained outstanding as of June 30, 2026.

Phillips Loan

On June 23, 2026, the Company entered into a note purchase agreement with Phillips Equities & Trust, LLC (“Phillips”), pursuant to which Phillips agreed to provide $500,000 of financing in the form of secured convertible debt. The note matures 12 months from the issuance date and bears interest at 6% per annum. The note is convertible, at the holder’s option, into shares of the Company’s common stock at a conversion price equal to 80% of the applicable market price, subject to the exchange cap, beneficial ownership limitations, applicable securities laws, and trading market requirements. The Company expects to use the proceeds primarily for general corporate purposes, including supporting liquidity and servicing existing debt obligations.

Derivative Liabilities

Derivative instruments that are not traded on an exchange are valued using conventional valuation models that incorporate both observable and unobservable inputs. Although the Company is publicly traded, the valuation of these derivative instruments requires significant unobservable inputs, including assumptions related to expected volatility, term, probability-weighted scenarios, and other model-based estimates. Accordingly, these derivative instruments are classified within Level 3 of the fair value hierarchy.

Upon completion of the Business Combination, all outstanding SAFE notes were converted into shares of the Company’s common stock, resulting in a significant reduction in the related derivative liabilities during the six months ended June 30, 2025.

During 2025, the Company entered into a loan agreement with J.J. Astor that included detachable warrants and embedded derivative features, including a conversion feature and a call option. These instruments and features did not qualify for equity classification under ASC 815 and were therefore bifurcated and accounted for as derivative liabilities at fair value, with changes in fair value recognized in the condensed consolidated statements of operations.

In addition, on April 17, 2026, the Company entered into a warrant purchase agreement with White Lion Capital, LLC. Pursuant to the agreement, White Lion has the right to purchase up to $2.0 million of the Company’s common stock at an exercise price equal to 99% of the closing market price on the trading day immediately preceding the applicable exercise date. The warrant does not qualify for equity classification under ASC 815 and is therefore accounted for as a derivative liability at fair value, with changes in fair value recognized in the condensed consolidated statements of operations.

At issuance, the fair value of the J.J. Astor warrant liability was $210,776, and the fair value of the combined embedded conversion and call option derivative liability was $26,100. These amounts were bifurcated from the related loan proceeds. The derivative liabilities are remeasured at fair value at each reporting date. The fair value of the J.J. Astor warrant liability decreased to $52,535 as of December 31, 2025 and further decreased to $12,736 as of June 30, 2026.

At issuance, the fair value of the White Lion warrant liability was $101,243. The warrant liability is remeasured at fair value at each reporting date, and its fair value increased to $158,906 as of June 30, 2026.

As reflected in the table below, derivative liabilities are presented at fair value at the beginning and end of each reporting period. As of June 30, 2026, the Company’s derivative liabilities consisted of (i) the J.J. Astor warrant liability of $12,736, (ii) the White Lion warrant liability of $158,906, and (iii) the J.J. Astor embedded conversion and call option derivative liability of $26,100, for total derivative liabilities of $197,742. The fair value of the embedded conversion and call option derivative liability is estimated using the Probability-Weighted Expected Return Method (“PWERM”) model, which incorporates significant unobservable inputs, including expected monthly installment payments, the repayment percentage, the applicable discount factor, and scenario probability assumptions. The warrant liability is measured using the Black-Scholes option pricing model, with key inputs including Company asset volatility, Company equity volatility, Company size-adjusted asset volatility, Company size-adjusted equity volatility, the risk-free interest rate, and the liquidity horizon. Changes in the fair value of these derivative instruments during the periods are recognized in the condensed consolidated statement of operations in the periods in which they occur.