NOTE 9 – CONVERTIBLE NOTES PAYABLE and ACCRUED INTEREST

On September 9, 2024, the Company entered into a convertible promissory note for $150,000. The note accrued interest at a rate of 10% per annum. The original maturity date was November 9, 2024, whereby an amendment extended the maturity date to December 31, 2025. The holder of the note has the option to convert the principal and accrued interest at a conversion price of the lessor of i) the per Share price at which the Company sells Shares of the Company Common Stock in a Qualified Financing occurring on or before the Maturity Date of this Note, or ii) Fifty Cents ($0.50) per Share (“Conversion Price”); each Share consists of one (1) share of PetVivo Holdings, Inc. restricted common stock (“Common Stock”). On September 27, 2024, the Company entered into another promissory note for an additional $350,000 with the same terms. The original maturity date for this $350,000 note was November 24, 2024, whereby an amendment extended the maturity date to December 31, 2025. From October 10, 2024, through December 30, 2024, the Company entered into additional promissory notes totalling $650,000 with the same terms. The maturity dates of these notes were all amended with the amended maturity date of December 31, 2025. From February 12, 2025, through March 13, 2025, the Company entered into additional promissory notes totalling $540,000 with the same terms. The maturity date on these notes were all amended with the amended maturity date of September 30, 2025. On June 10, 2025, the Company entered into an additional promissory note for $160,000 at a rate of 10% per annum and a maturity date of December 31, 2025. This note included the issuance of 75,000 warrants, with a two-year term and a strike price of $0.75 per share. The warrants were valued at $23,649 using the Black-Scholes option pricing model on the grant date. The fair value is required to be recorded as a debt discount and amortized to interest expense over the term of the note. The Company did not record the debt discount and related amortization in the three months ended June 30, 2025, as the amounts were not considered material. The Company will record the debt discount and recognize the related amortization in the subsequent quarter.

On December 20, 2024, the Company entered into a convertible promissory note for $25,000. The note accrued interest at a rate of 12% per annum. The holder of the note has the option to convert the principal and accrued interest at a conversion price of the greater of: i) the per Share price at which the Company sells Shares of the Company Common Stock in a Qualified Financing occurring on or before the Maturity Date of this Note, or ii) Fifty Cents ($0.50) per Share (“Conversion Price”); each Share consists of one (1) share of PetVivo Holdings, Inc. restricted common stock (“Common Stock”). The original maturity date was June 30, 2025, whereby an amendment extended the maturity date to December 31, 2025.

The total convertible notes payables (reflected as current liability), including accrued interest, for these convertible notes for the quarter ended June 30, 2025 and March 31, 2025 is $1,975,866 and $1,772,021.

Interest expense for the three months ended June 30, 2025 and June 30, 2024 is $43,845 and $1,394, respectively.

Derivative Liabilities – Variable Conversion Features

The Company evaluated the terms of its convertible notes and determined that certain embedded conversion features were not indexed to the Company’s own stock due to variable pricing provisions. As a result, the embedded conversion features were bifurcated and accounted for as derivative liabilities under ASC 815.

For each note with a derivative liability, the fair value of the derivative at inception was recorded as a discount to the carrying value of the note and is being amortized to interest expense over the term of the note using the effective interest method. The fair values of the derivative liabilities at inception dates of the notes, at March 31, 2025 and June 30, 2025 were estimated using a binomial option pricing model with the following key inputs: closing stock price at Note inception dates, at March 31, 2025 and June 30, 2025, strike price of $0.50, since this was lower than the $1.00 per share price at which the Company sold shares in a Qualified Financing, term based on the remaining days to maturity date, volatility rates between 87.1% - 139.3% at inception dates of notes, 81.2% - 115.6% at March 31, 2025, and 82% - 82% at June 30, 2025, risk-free rate rates between 4.14% - 5.18% at inception dates of notes, 4.08% at March 31, 2025, and 4.41% at June 30, 2025, and dividend yield of zero. The fair value of the derivative liabilities at inception and March 31, 2025 was $341,576 and $448,089. The Company recognized an unrealized loss on the change in fair value of derivative liabilities of $ 320,404 and $0 for the three months ended June 30, 2025 and 2024, respectively. Interest expense related to the amortization of the debt discounts associated with derivative liabilities was $66,259 and $0 for the three months ended June 30, 2025 and 2024, respectively.

June 30, 2025 Amendment to Convertible Notes and Extinguishment Accounting

On June 30, 2025, the Company and noteholders entered into an amendment to fix the Conversion Price at $0.50 per share and eliminate the variable pricing feature. As a result of the modification, the conversion feature no longer qualified for derivative accounting under ASC 815 and instead met the criteria for equity classification under ASC 470-20, Debt with Conversion and Other Options.

The Company evaluated the amendment in accordance with ASC 470-50, Modifications and Extinguishments, and concluded that the modification resulted in a substantial change in the terms of the instrument due to the conversion feature’s reclassification from a liability to equity and the resulting change in economic substance. Accordingly, the Company accounted for the transaction as an extinguishment of the existing debt and the issuance of a new convertible instrument.

Prior to extinguishment, the derivative liability was remeasured to its fair value of June 30, 2025 of $768,493, resulting in a loss of $320,404, which was recognized in other income (expense), net, in the consolidated statement of operations for the three and six months ended June 30, 2025. Upon extinguishment, the fair value of the derivative liability was reclassified to additional paid-in capital. The fair values of the derivative liabilities at inception dates of the notes, at March 31, 2025 and June 30, 2025 were estimated using a binomial option pricing model with the following key inputs: closing stock price at Note inception dates, at March 31, 2025 and June 30, 2025, strike price of $0.50, since this was lower than the $1.00 per share price at which the Company sold shares in a Qualified Financing, term based on the remaining days to maturity date, volatility rates between 87.1% - 139.3% at inception dates of notes, 81.2% - 115.6% at March 31, 2025, and 82% - 82% at June 30, 2025, risk-free rate rates between 4.14% - 5.18% at inception dates of notes, 4.08% at March 31, 2025, and 4.41% at June 30, 2025, and dividend yield of zero.

The new debt instrument was recorded at its estimated fair value of $1,215,000, and the Company recognized a beneficial conversion feature (BCF) of $763,259 fair value, calculated as the intrinsic value of the fixed conversion option on the commitment date (i.e., the excess of the Company’s closing stock price of $0.80 over the fixed conversion price of $0.50, multiplied by the number of shares issuable upon conversion). The BCF was recorded as a debt discount and an increase to additional paid-in capital. The debt discount is being amortized to interest expense over the remaining term of the note using the effective interest method.

The accounting impact of the amendment is summarized as follows:

 SCHEDULE OF AMENDMENT TO CONVERTIBLE NOTES AND EXTINGUISHMENT ACCOUNTING

Convertible Notes Issued with Warrants

On February 14, 2025, a total of 250,000 warrants were issued for two Notes totalling $500,000. The warrants have a three-year term with an exercise strike price of $0.90 per share. The warrants were evaluated under ASC 480 and ASC 815 and determined to be equity-classified instruments. The fair value of the warrants at inception was recorded at a discount to the carrying value of the associated notes and is being amortized to interest expense over the term of the notes using the effective interest method. The fair value at issuance was estimated using the binomial option pricing model with the following inputs: closing stock price of $0.74, strike price of $0.90, 3-year term, volatility rate of 113.7%, risk-free rate of 4.26%, and dividend yield of zero. The fair value of the warrants at inception was $98,684. Interest expense related to the amortization of the debt discounts associated with warrants was $10,246 and $0 for the three months ended June 30, 2025 and 2024, respectively.

Fair Value Allocation of Proceeds from Convertible Notes

When convertible notes are issued with warrants, and no derivative liability is present, the proceeds are allocated between the debt and the warrants based on their relative fair values at issuance. When convertible notes are issued with both detachable warrants and embedded derivative liabilities, the proceeds are allocated using a sequential approach: first to the derivative liability at fair value, then to the warrants at fair value, and the residual amount to the debt host. For convertible notes that include only an embedded derivative liability and no warrants, the proceeds are allocated first to the derivative liability at fair value, with the residual amount allocated to the debt host.