Balance Labs, Inc.

Item 8. Consolidated Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Balance Labs, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Balance Labs, Inc. (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations, changes in stockholders’ (deficit), and cash flows for each of the years in the two-year period ended December 31, 2025 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s accumulated deficit and stockholders deficit, as well as its working capital deficit and net capital deficiency, raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated, or required to be communicated, to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

Due to the net loss for the year, the Company evaluated the need for a going concern.

Auditing management’s evaluation of a going concern can be a significant judgement given the fact that the Company uses management estimates on future revenues and expenses which are not able to be substantiated.

To evaluate the appropriateness of the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concern and management’s disclosure on going concern.

/s/M&K CPAS, PLLC

PCAOB Firm ID is 2738

We have served as the Company’s auditor since 2024

The Woodlands, TX

April 10, 2026

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Stockholders’ (Deficit)

Consolidated Statements of Cash Flows

Note 1. Business Organization and Nature of Operations

Balance Labs, Inc. was incorporated in Delaware on June 5, 2014. The Company is a digital asset advisory firm providing consulting services to institutions navigating the digital asset economy.

Note 2. Going Concern

The Company has an accumulated deficit of $(37,651,646) and stockholders deficit of $(3,376,339) at December 31, 2025. The Company reported a net loss of $31,768,325 for the year ended December 31, 2025. These conditions, as well as the Company’s working capital deficit and net capital deficiency, raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue operations is dependent upon obtaining additional capital through equity or debt financings and generating revenue from its advisory services.

Note 3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. At December 31, 2025 and 2024, the Company hadno cash equivalents. Cash balances were $358,975 and $13,199 at December 31, 2025 and 2024, respectively.

Revenue Recognition

The Company accounts for its revenues under FASB ASC 606, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company considers revenue realized or realizable and earned when all the five following criteria are met: (1) Identify the Contract with a Customer, (2) Identify the Performance Obligations in the Contract, (3) Determine the Transaction Price, (4) Allocate the Transaction Price to the Performance Obligations in the Contract, and (5) Recognize Revenue When (or As) the Entity Satisfies a Performance Obligation.

The Company recognizes consulting income when the services are performed, and performance obligations are satisfied over time or point of time. The Company generated $6,000 in revenue during the fourth quarter of 2025 from advisory services. No revenue was generated in 2024.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of items that have been included or excluded in the financial statements or tax returns. Deferred tax assets and liabilities are determined on the basis of the difference between the tax basis of assets and liabilities and their respective financial reporting amounts (“temporary differences”) at enacted tax rates in effect for the years in which the temporary differences are expected to reverse.

The Company adopted the provisions of Accounting Standards Codification (“ASC”) Topic 740-10, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Management has evaluated and concluded that there are no material tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2025. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. The Company’s, 2021, 2022, 2023, and 2024 tax returns remain open for audit for Federal and State taxing authorities.

The Company’s policy is to classify assessments, if any, for tax related interest as interest expense and penalties as general and administrative expenses in the statement of operations.

Marketable Securities

The Company accounts for marketable equity securities under ASU 2016-01,Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. Under this guidance, equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) are measured at fair value, with changes in fair value recognized in net income.

The Company accounts for its investment in NextNRG Inc. (formerly known as EZFill Holdings, Inc.), which was registered pursuant to an S-1 Registration Statement declared effective on September 14, 2021, as an equity security measured at fair value. Accordingly, unrealized gains and losses on this investment for the years ended December 31, 2025 and 2024 have been recognized in Other Income.

At December 31, 2025, the Company owned 26,573 shares of NextNRG Inc., with a fair value of $38,531 (approximately $1.45 per share), which is reported on the balance sheet as Marketable securities – related party. The Company recognized an unrealized loss of $43,845 on this investment during 2025.

Investments – Related Parties

When the fair value of an investment is indeterminable, the Company accounts for its investments that are under 20% of the total equity outstanding using the cost method. For investments in which the Company holds between 20-50% equity and is non-controlling are accounted for using the equity method. For any investments in which the Company holds over 50% of the outstanding stock, the Company consolidates those entities into their consolidated financial statements herein.

The Company holds one investment as of December 31, 2025, and one investment as of December 31, 2024.

Business Segments

The Company’s Chief Executive Officer, who serves as the Chief Operating Decision Maker (“CODM”), evaluates the Company’s financial performance and allocates resources based on a consolidated view of the business. Consequently, the Company operates as a single reportable segment under the guidelines of ASC 280, Segment Reporting. The CODM classifies this segment as Consulting.

The Company’s operations, which include marketing and professional services, are managed centrally. The CODM assesses financial performance using metrics such as revenue, operating profit, and key operating expenses, which are outlined below as the primary cost components for evaluating the Company’s performance.

Additionally, the CODM measures income generated from the Company’s assets by focusing on net income as a key performance indicator. This metric is used to assess the return on assets and supports strategic decision-making.

Advertising, Marketing and Promotional Costs

Advertising, marketing, and promotional expenses are expensed as incurred and are included in selling, general and administrative expenses on the accompanying consolidated statement of operations. For the twelve months ended December 31, 2025, and December 31, 2024, advertising, marketing, and promotion expense was $0 and $4,969, respectively.

Property and equipment

Property and equipment consist of furniture and office equipment and is stated at cost less accumulated depreciation. Depreciation is determined by using the straight-line method for furniture and office equipment, over the estimated useful lives of the related assets, generally three tofive years.

Expenditures for repairs and maintenance of equipment are charged to expense as incurred. Major replacements and betterments are capitalized and depreciated over the remaining useful lives of the related assets.

Depreciation expense for the year ended December 31, 2025 and 2024 totaled $0 and $0 respectively. There were no additions during the year ended December 31, 2025 and 2024 respectively.

Property and equipment as of December 31, 2025, and December 31, 2024 consisted of the following:

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities.

We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share-based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

As of December 31, 2025, the Company had both Level 1 assets and a Level 3 liability measured at fair value on a recurring basis. The Level 3 liability relates to the derivative feature embedded in the Chief Executive Officer’s employment agreement, which provides anti-dilution protection until the Company raises an aggregate of $1 billion in total capital. The derivative liability was valued using a Monte Carlo simulation model incorporating assumptions regarding the timing and probability of future financing events and is remeasured at fair value each reporting period, with changes recognized in other income (expense).

The following table presents certain assets of the Company’s measured and recorded at fair value on the Company’s balance sheet on a recurring basis and their level within the fair value hierarchy as of December 31, 2025.

Schedule of Fair Value - December 31, 2025

Schedule of Fair Value - December 31, 2024

Stock-Based Compensation

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. For employees, the fair value of the award is measured on the grant date and for non-employees, the fair value of the award is generally re-measured on vesting dates and financial reporting dates until the service period is complete. The fair value amount is then recognized over the period during which services are required to be provided in exchange for the award, usually the vesting period. Awards granted to directors are treated on the same basis as awards granted to employees.

During 2025, the Company recognized stock-based compensation expense of $12,700,399. This includes the fair value of 780,264 shares granted to Alan Campbell as CEO under his employment agreement, which vest ratably over a three-year period and are valued at the grant date fair value of $2.80 per share. The Company also issued 6,823,847 shares to other employees and service providers for services and equity awards, valued using the closing stock price on the date of issuance. These issuances, together with the Company’s debt-to-equity conversion in November 2025, triggered an anti-dilution provision in Mr. Campbell’s employment agreement, resulting in the issuance of an additional 906,420 shares to Mr. Campbell at $1.57 per share, which were expensed upon issuance.

Derivative Liability

In connection with the employment agreement entered into with the Company’s Chief Executive Officer, Alan Campbell, on August 22, 2025, the Company identified a derivative liability related to an anti-dilution feature that entitles Mr. Campbell to maintain a fixed ownership percentage of the Company’s common stock until the Company has raised an aggregate of $1 billion in total capital. The feature meets the definition of a derivative under ASC 815 and does not qualify for the equity scope exception, as the number of shares to be issued upon future dilutive events is variable and contingent on factors outside the Company’s control.

The derivative liability was initially measured at fair value on the grant date using a Monte Carlo simulation model, which captures the probability and timing of future financing events and the corresponding adjustments required under the agreement. The derivative is remeasured at fair value at each reporting date, with changes in fair value recognized in the Company’s consolidated statements of operations within other income (expense).

The derivative was initially recorded at $3,425,796 upon the CEO appointment in August 2025. As of December 31, 2025, the derivative liability was remeasured at $1,944,806, resulting in a gain on the change in fair value of $1,480,990 for the year ended December 31, 2025.

Under the terms of the employment agreement, the anti-dilution feature is eliminated upon termination of Mr. Campbell’s employment. As a result, the associated derivative liability would be extinguished upon such termination, and any remaining carrying value would be recognized as a gain on extinguishment at that time.

Investments

On January 29, 2021, the Company received 20% ownership of Pharmacy No, 27, Ltd, a company based in Israel, as part of a Note Receivable from a third party. As of December 31, 2025 and 2024, the investment has a fair value of $0, based upon the quoted closing trading price and it is recorded on our consolidated balance sheet using the equity method. During each twelve months ended December 31, 2025 and 2024 the Company recorded $0 of unrealized loss from this investment.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash, cash equivalents and marketable securities. As of December 31, 2025 and 2024, the carrying value of marketable securities was $38,531 and $82,376, respectively. The securities are included in the Marketable securities – Related Party on the consolidated balance sheets, which consist of common shares held in one (1) investment which currently is trading on the Over-the-Counter Bulletin Board (OTCBB).

Principles of Consolidation

The consolidated financial statements include the Company and its wholly owned subsidiary, Balance Labs LLC. Balance Labs LLC is used to conduct certain operating activities of the Company, including the processing of payroll and payment of operating expenses.

Net Loss Per Common Share

Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the periods. The weighted average shares outstanding reflect the impact of issuances during the period, including shares issued in connection with equity awards granted in August 2025, which were included on a time-weighted basis from the date of issuance through the end of the period.

For the years ended December 31, 2025 and 2024, the weighted average number of common shares outstanding was 25,723,927 and 21,674,000, respectively.

There is a potentially dilutive effect from 50,000 and 4,218,372 shares from convertible notes payable for the years ended December 31, 2025 and 2024, respectively, and no outstanding warrants as of December 31, 2025 and 2024. However, these potentially dilutive securities are anti-dilutive due to the net loss in both 2025 and 2024 and, accordingly, are excluded from the computation of diluted net loss per share.

Recently Issued Accounting Pronouncements

The Company has evaluated all new accounting standards that are in effect and may impact its consolidated financial statements and does not believe that there are any other new accounting standards that have been issued that might have a material impact on its financial position or results of operations.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures(“ASU 2023-07”). ASU 2023-07 aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of segment profit or loss. The update also requires disclosure regarding the CODM and expands the interim segment disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of ASU 2023-07 did not have a material impact on the Company’s consolidated financial statements.

Note 4. Stockholders Deficit

The Company is authorized to issue 500,000,000 shares of common stock, with a par value of $0.0001 per share, and 50,000,000 shares of preferred stock, with a par value of $0.0001 per share. No shares of preferred stock were issued or outstanding as of December 31, 2025 or December 31, 2024. At December 31, 2025,46,852,319 shares of common stock were outstanding (including 16,667,788 shares issued in November 2025 from the debt-to-equity conversion). At December 31, 2024,21,674,000 shares of common stock were outstanding.

During 2025, the Company issued 780,264 shares to its CEO under an employment agreement and 6,823,847 shares to other employees and service providers for equity awards and services rendered. An additional 906,420 shares were issued to the CEO pursuant to an anti-dilution provision described in Note 11. The Company also issued 16,667,788 shares on November 5, 2025 in connection with the conversion of debt principal and accrued interest totaling $4,167,005 into common stock (see Note 8).

Additional paid-in capital increased from $810,048 at December 31, 2024 to $34,270,622 at December 31, 2025, reflecting stock-based compensation and debt-to-equity conversion activity.

Note 5. Note Receivable

On September 3, 2021, Balance Labs Inc. made a loan to Four Acquisition, Ltd., an unrelated party in the principal amount of $22,000 which loan has an interest rate of 10% per annum and a maturity date of September 30, 2022. As of December 31, 2024, this receivable is fully reserved against. For the twelve months ended December 31, 2025 and 2024, the Company recorded $0 and $0, respectively, of interest income in relation to this note.

On January 29, 2021, Balance Labs Inc. made a loan to Four Acquisitions Ltd., an unrelated party in the principal amount of $119,000 which has an interest rate of 10% per annum and a maturity date of January 28, 2022. Additionally, in connection with the loan, the Company received a 20% interest in the recently acquired business and related assets of Four Acquisitions Ltd. Initially, this investment had a purchase price of $43,000, which was recorded as a discount from the note which will be amortized over the life of the note. The Company recorded an allowance of 100% against this receivable of $141,000 as of December 31, 2022.

Note 6. Related Party Transactions

As of December 31, 2025 and December 31, 2024, the Company had related party accounts payable of $926,659 owed to Michael Farkas, the Company’s Chairman (formerly President and Chief Executive Officer). This amount relates to consulting services provided to the Company from 2015 through 2022, for which payment has not yet been made. The balance is non-interest bearing and does not have fixed repayment terms.

The Company and Mr. Farkas intend to formalize the terms of this obligation. The Company expects to resolve the outstanding balance through one or a combination of cash repayment, conversion to equity, or other mutually agreed arrangements. The timing and structure of such resolution will be determined based on the Company’s capital resources and strategic objectives.

The Company’s Chairman earned $10,000 per month under a consulting agreement effective from October 31, 2023 through August 31, 2025. The Company recorded compensation expense of $80,000 and $120,000 within general and administrative expenses — related parties for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and December 31, 2024, $230,000 and $180,000, respectively, of compensation was unpaid and included in accounts payable — related party on the consolidated balance sheets.

Notes Payable — Related Party

During 2016, 2017, and 2019, Balance Group LLC loaned an aggregate of $66,850 to the Company. On October 3, 2019, the Company received $40,000 from The Sammy Farkas Foundation Inc. (the “Foundation”) in exchange for a promissory note bearing 12% interest per annum. Both the Balance Group LLC notes and the Foundation note were in default prior to their conversion. On November 5, 2025, all of these balances, together with accrued interest, were converted into shares of common stock as part of the comprehensive debt-to-equity conversion described in Note 8.

During 2025, the Company received $500,000 in financing from The Farkas Group, Inc., a related party, consisting of a $250,000 promissory note dated November 3, 2025 and a $250,000 promissory note dated November 11, 2025. Both notes bear interest at 8% per annum and mature six months from the date of issuance. Additionally, the Company received a $18,000 promissory note from Michael Farkas, the Chairman, dated October 14, 2025 bearing an interest rate of 18% per annum maturing twelve months from the date of issuance

Convertible Notes Payable — Related Party

On September 30, 2016, Balance Group LLC loaned $120,000 to the Company as a convertible note payable at an interest rate of 10%, due October 1, 2017. On June 27, 2021, the Company received $50,000 from Michael D. Farkas in exchange for a convertible promissory note with a face value of $53,192, bearing 12% interest per annum, due June 27, 2022. Both notes were in default and were converted into shares of common stock on November 5, 2025 as part of the comprehensive debt-to-equity conversion described in Note 8.

Short-Term Advances — Related Party

As of December 31, 2024, the President and companies controlled by the President had loaned the Company a total of $1,731,058 in short-term advances carrying interest rates of 8%,10%, and 18%, maturing one year and one day from the date of each loan. During 2025, the Company received an additional $84,800 in advances from Michael Farkas consisting of 11 individual notes. On November 5, 2025, $1,797,858 of these advances, together with accrued interest, were converted into shares of common stock. The $18,000 note remains outstanding at December 31, 2025 and is classified as short-term advances — related party on the consolidated balance sheet.

Summary of Related Party Notes and Accrued Interest

The following table summarizes all related party notes, including principal balances and accrued interest as of December 31, 2025:

As of December 31, 2024, prior to the debt-to-equity conversion, related party notes and accrued interest were as follows:

Related Party Interest Expense

The following related party notes recognized interest expense for the years ended December 31, 2025 and 2024:

Employment Agreements

On August 22, 2025, the Company entered into an employment agreement with Alan Campbell upon his appointment as Chief Executive Officer. The agreement provides for an annual salary of $350,000 and an initial equity grant of 780,264 shares of common stock representing 3.6% of fully diluted common stock. The shares vest over a three-year period, with one-third vesting on each anniversary of the issuance date, subject to continued service. The total grant-date fair value was $2,184,739, which is being recognized as stock-based compensation expense over the vesting term using the graded vesting method. The agreement also contains an anti-dilution provision that resulted in a derivative liability (see Note 11).

In connection with the debt-to-equity conversion completed on November 5, 2025 (see Note 7 and 8) and other equity issuances, the anti-dilution provision was triggered, resulting in the issuance of an additional 906,420 shares of common stock to Mr. Campbell to maintain his proportional ownership interest. These shares were valued at $1.57 per share (the closing price on the date of issuance), resulting in stock-based compensation expense of $1,423,079. In total,1,686,684 shares of common stock were issued to Mr. Campbell during the year ended December 31, 2025.

The following table summarizes the expected recognition of stock-based compensation expense related to Mr. Campbell’s equity grant over the vesting term:

During the year ended December 31, 2025, a total of 1,686,684 shares of common stock were issued to Mr. Campbell, consisting of 780,264 shares under the employment agreement and 906,420 shares under the anti-dilution provision. The Company recognized total stock-based compensation expense of $1,902,179 attributable to Mr. Campbell, comprising $479,100 related to the graded vesting of the employment agreement equity grant and $1,423,079 related to the additional shares issued under the anti-dilution provision. As of December 31, 2025, there was $1,705,639 of unrecognized compensation cost related to the equity grant, which is expected to be recognized over a weighted-average period of approximately 2.3 years. All other employment agreements do not have anti-dilutive features.

Note 7. Convertible Notes and Notes Payable

On December 23, 2015, the Company issued a convertible note payable to Chase Mortgage, Inc., not a related party, for $25,000, at an interest rate of 8%, due on December 23, 2018. The note also included 100,000 warrants at an exercise price of $1 per share, which expired on December 23, 2020. The note is convertible at the holder’s discretion into the Company’s common stock at a price of $0.50 per share. The note has matured and is in default, which triggered an increased interest rate of 18%. The accrued interest balance on this note as of December 31, 2025, is $12,003, and the note is recorded under convertible note payable in the liabilities section of the balance sheet. As of December 31, 2025, the note maintains a balance of $25,000.

On April 1, 2016, the Company received $500,000 from Newell Trading Group in exchange for a convertible debenture due April 2, 2017 bearing interest at 10% and convertible into common stock at $0.25 per share unless the note is paid by the Company prior to the election of the holder to convert. The Company recognized a beneficial conversion feature expense of $500,000 that has been fully amortized. On October 3, 2019, Newell Trading Group assigned its rights and interests in its $500,000 convertible debenture to the Sammy Farkas Foundation Inc., (the “Foundation”), a related party. The convertible note payable, net of debt discount of $0 and $0 as of December 31, 2025 and December 31, 2024 of $500,000 and $500,000, respectively was recorded under current liability on the balance sheet and no additional debt discount adjustment is required upon adoption of ASU 2020-06.

The Foundation then entered into an agreement with the Company to extend the maturity date of the convertible debenture to October 10, 2024 in exchange for 54,000 shares of the Company’s stock. The shares have a fair value of $56,700 which was recorded as a debt discount and was being amortized over the life of the extension. On November 11, 2019, The Sammy Farkas Foundation transferred all the rights and interests of the note to another party, 16th Avenue Associates, a non-related party company. The terms remain the same and the transfer has no effect on the financial statements. During the years ended December 31, 2025 and 2024, the Company amortized $0 and $0, respectively of debt discount.

On November 5, 2025, 16th Avenue Associates elected to convert the full outstanding principal balance of $500,000, together with all accrued interest of $480,000, into shares for $0.25 per share. As a result, the convertible note payable to 16th Avenue Associates was reduced to $0 as of December 31, 2025. No gain or loss was recorded due to the conversion. The conversion was recorded as an increase to additional paid-in capital and a corresponding elimination of the convertible note payable and related accrued interest. As of the date of this report, this note has been fully settled through conversion.

The details of convertible notes payable, including accrued interest as of December 31, 2025, were as follows:

The following non-related party convertible notes accrued interest for the years ended December 31, 2025 and 2024:

Year ended December 31, 2025:

● Chase Mortgage, Inc.:$6,500

● 16th Avenue Associates:$46,986

●Total Recognized Interest Expense:$53,486

Year ended December 31, 2024:

● Chase Mortgage, Inc.:$5,521

● 16th Avenue Associates:$50,137

●Total Recognized Interest Expense:$55,658

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:

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.

Note 9. Commitments and Contingencies

Litigation, Claims and Assessments

In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

The Company has no material commitments or contingencies at December 31, 2025.

Note 10. Other Income Settlement of Accounts Payable

The Company recognized a gain of $127,579 during the year ended December 31, 2025 from the settlement of accounts payable related to prior legal service obligations. The settlement was completed at a favorable discount to the original obligation.

Note 11. Derivative Liability

On August 22, 2025, the Company recorded a derivative liability of $3,425,796 related to an anti-dilution provision in the CEO employment agreement. This provision protects the CEO from ownership dilution below 3.6% fully diluted.

The derivative liability was remeasured at December 31, 2025 using a Monte Carlo simulation (Level 3 measurement). The change in fair value of the derivative resulted in a gain of $1,480,990 for the year ended December 31, 2025.

The following table summarizes the activity of the derivative liability for the year ended December 31, 2025:

The fair value of the derivative liability was estimated using a Monte Carlo simulation model with the following key inputs and assumptions:

The expected volatility was based on the historical volatility of the Company’s stock. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the valuation date for maturities consistent with the expected term.

The derivative liability will continue to be remeasured at fair value at each reporting period until the underlying obligation is settled or the anti-dilution provision expires.

Note 12 –Income Tax

The Company has the following net deferred tax asset:

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

As of December 31, 2025, the Company had approximately $10,408,000 of federal and state net operating loss carryovers (“NOLs”). From this amount, $711,000 expire after 20 years, and can be carried back 2 years, according to the old tax law, while $9,697,000 can be carried forward indefinitely and cannot be carried back, in accordance with the new tax rules. The valuation allowance increased by approximately $9,861,000 for the year ended December 31, 2025, and increased by approximately $164,000 for the year ended December 31, 2024.

The Company, after considering all available evidence, fully reserved its deferred tax assets since it is more likely than not that such benefits may be realized in future periods. The Company has not yet established that it can generate taxable income. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.

Note 13. Subsequent Events

Subsequent to December 31, 2025, the following events occurred:

On February 6, 2026, the Board of Directors appointed Alexander Farkas as President and Chief Operating Officer of the Company, effective February 9, 2026. Mr. Farkas is eligible to receive an annual base salary of $120,000. Upon meeting pre-determined annual Key Performance Indicators, Mr. Farkas will have a target bonus of 65% of his base salary, with a maximum bonus of up to 125% of base salary, payable in cash or shares at Mr. Farkas’s election. The employment has an initial term of two years with automatic two-year renewals. Mr. Farkas is the son of Michael D. Farkas, the Company’s Chairman.

The Company recognized approximately $40,000 in advisory revenue during the first quarter of fiscal year 2026.