Annual report [Section 13 and 15(d), not S-K Item 405]

Debt Conversion

v3.26.1
Debt Conversion
 12 Months Ended
Dec. 31, 2025
Debt Disclosure [Abstract]  
Debt Conversion

Note 8. Debt Conversion

 

On November 5, 2025, all outstanding notes payable to related parties, together with accrued interest thereon, were converted into shares of the Company’s common stock at a conversion price of $0.25 per share. A total of $2,595,900 in principal and $1,571,105 in accrued interest, aggregating $4,167,005, was converted into 16,667,788 shares of common stock. The closing market price of the Company’s common stock on the conversion date was $1.57 per share.

 

The converted notes included both convertible and non-convertible instruments. 16th Ave Associates, LLC held a convertible note with a contractual conversion price of $0.25 per share, equal to the actual conversion price; accordingly, no gain or loss was recognized on that conversion. Balance Group, LLC and Michael Farkas each held convertible notes with original contractual conversion prices of $1.00 and $0.70 per share, respectively, which were converted at $0.25 per share. All remaining notes were non-convertible debt that was converted to equity at $0.25 per share.

 

Loss on Settlement of Debt

 

For non-convertible notes, the fair value of the shares issued was measured at the closing market price of $1.57 per share on the conversion date, and the loss on settlement was calculated as the excess of the fair value of shares issued over the carrying amount of the debt extinguished. For previously-convertible notes that were converted at $0.25 per share rather than at their higher original contractual rates, the incremental shares issued beyond what the original conversion terms would have required were measured at the market price of $1.57 per share.

 

The Company recognized a total loss on settlement of debt of $16,595,746, comprising $15,188,918 attributable to non-convertible notes and $1,406,828 attributable to previously-convertible notes converted at the lower $0.25 per share price. The following table summarizes the debt converted on November 5, 2025:

 

    Principal    

Interest Expense

2025

    

Total Debt

Converted

  
Sammy Farkas Foundation   $ 40,000     $ 32,114     $ 72,114  
Balance Group, LLC     186,850       156,265       343,115  
Shilo Holdings LLC     4,700       3,319       8,019  
Michael Farkas     578,700       295,538       874,238  
The Farkas Group     1,285,650       603,869       1,889,519  
16th Ave Associates     500,000       480,000       980,000  
Total converted   $ 2,595,900     $ 1,571,105     $ 4,167,005  

 

The loss on settlement of debt is entirely non-cash in nature. The conversion eliminated $4,167,005 of debt and accrued interest from the Company’s balance sheet, representing a one-time balance sheet restructuring event that significantly strengthened the Company’s equity position. No cash was paid in connection with the conversions, and no additional shares beyond the 16,667,788 contractually required at $0.25 per share were issued.