NOTE 4—NOTES PAYABLE

In December 2023, the Company entered into two short-term notes payable with unrelated parties, Hewlett Fund and AIGH Investment Partners, LLC. The notes are for $125,000 each, for a total of $250,000 in borrowings utilized for the funding of NewStem. The notes bear interest at 12% per annum and originally matured on December 21, 2024. The maturity date for both notes has been extended until December 21, 2025, at which time all principal and accrued interest are due and payable. The note agreements include a provision whereby, in the event of a capital raise transaction by the Company, the note holders would be entitled to participate in the transaction in an amount equal to 133% of the amounts owed on the note agreements at the closing of the transaction. Interest expense related to these notes was $14,876 and $7,479, respectively, for the six and three months ended June 30, 2025.

Long-term notes payable are summarized as follows:

 SCHEDULE OF LONG TERM NOTES PAYABLE

In May 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a shareholder and member of the Board, to borrow up to an aggregate of $600,000 for working capital needs. The note agreements were amended in March 2024 to increase the total borrowing to $650,000 and extend the maturity date. The note agreements were refinanced in August 2024 providing for total borrowings of $750,000. The agreements provide for interest at a rate of 10% per annum and mature December 31, 2025. As of the date of these financial statements, the full amount of $750,000 has been funded pursuant to these agreements. Interest expense related to these agreements was $42,774 and $22,511 for the six and three months ended June 30, 2025, respectively.

On May 5, 2023, the Company entered into a long-term note payable with a shareholder for $300,000 in financing to be funded $150,000 at inception and $150,000 in October 2023. This note bore interest at zero percent (0%) and originally matured on May 5, 2025. The note included a guarantee which was identified as an embedded derivative with a fair value of a liability of $650,000 at December 31, 2024 which is reported separately on the balance sheet. The fair value of the note exceeded the proceeds, and the note was discounted at inception so that the net liability was the fair value of the derivative. Accretion of the note discount of $60,417 and $16,769, respectively, has been reflected as part of interest expense in the statement of operations for six and three months ended June 30, 2025. This note agreement was amended in May 2025 to provide for a fixed amount of interest in lieu of the guarantee and to extend the maturity date to September 30, 2025. This amendment, which was determined to be accounted for pursuant to the provisions of ASC 470 for troubled debt restructurings with related parties, ended the discounting of the note and the separate recording of an embedded derivative, as the note now bears interest and contains no identifiable embedded derivative. As such, the relief of the guarantee was recorded as an adjustment to equity in the accompanying financial statements. Additionally, as a result of this amendment, interest expense of $36,000 was accrued and treated as a reduction to equity during the six and three months ended June 30, 2025.

Note Payable, Litigation Funding Agreement

On February 11, 2022, the Company entered into a nonrecourse litigation funding agreement (the “Agreement”) with Omni Bridgeway (Fund 4) Invt. 3 L.P. (“Omni”) related to an arbitration proceeding disclosed in Note 7. The Agreement provided for Omni to fund all costs related to the arbitration up to $1,000,000 in exchange for an assignment of a certain portion of rights to and interest in claims related to this arbitration. The agreement provided for specific calculations of the portion of any claims collected to be received by Omni with the remainder collectible by the Company. Additionally, the agreement provided for repayment of funded costs pursuant to the same multiple calculations in the event of a favorable outcome that does not include the collection of claims.

During July 2023, the arbitration was settled. As a result of the ruling disclosed in Note 7, the liability became probable and reasonably estimable, and the Company recorded the full liability due to Omni as of December 31, 2023. This liability consists of expenses funded by Omni of $933,065, including $310,000 advanced for working capital, and related fees or investment return to Omni calculated as contractual multiples of funding totaling $1,886,131 as of December 31, 2023 for a total liability of $2,819,196. This agreement bore interest at 5% per annum beginning January 2024 and was payable in full on January 10, 2025. The Company accrued interest related to the Agreement of $37,400 during the six and three months ended June 30, 2025.

The Company began negotiations for settlement of this Agreement during 2024 and on May 9, 2025, the Company entered into a Settlement Agreement and Release with our JV partner in NetCo, C.P. Group, and Omni whereby our interest in NetCo was sold in exchange for funds of $1,300,000 which were paid directly to Omni by CP Group in full settlement and release of all liabilities related to the Litigation Funding Agreement.

Bridge Loan

During the three months ended March 31, 2025, Jan Loeb, Executive Chairman, began advancing funds to the Company for operating expenses in the form of an interim bridge loan until alternate funding sources can be found. The Company is accruing interest at 10% per annum for these advances. The total advanced during the six months ended June 30, 2025 was $105,500. Interest expense related to these advances was $1,452 and $1,022, respectively, during the six and three months ended June 30, 2025.

Convertible Debt

In April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. These agreements bear interest at 10% per annum and mature December 30, 2025. The unpaid principal balance of these notes and any accrued interest may be converted into shares of the Company’s common stock at a conversion price of $0.13 per share. Interest expense related to these agreements was $5,950 and $2,992, respectively, during the six and three months ended June 30, 2025.