NOTE 3 – BORROWINGS

Convertible Note Payable

On September 9, 2024, the Company and an investor entered into a convertible promissory note agreement, providing for the issuance of a note in the principal amount of $20,000. The note is due on September 9, 2025. Principal amount is convertible into shares of common stock of the Company at a conversion price of $1.00 per share. In addition, the Company issued the investor a stock purchase warrant to acquire 40,000 shares of common stock of the Company at a per share price of $0.01 (“Pre-Funded Warrants”). The Pre-Funded Warrants are exercisable at September 9, 2025 and until the Pre-Funded Warrants are exercised in full.

In accordance with ASC 470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds so allocated to the warrants are accounted for as additional paid-in capital. The remainder of the proceeds are allocated to the debt instrument portion of the transaction. The fair value of the warrants issued to the investor was $40,000. Therefore, the Company recorded debt discount of $13,333 related to the warrants issued to the investor, which will be amortized over the term of the note.

The convertible note payable as of December 31, 2024 and September 30, 2024 was as follows:

For the three months ended December 31, 2024, amortization of debt discount related to this convertible note payable amounted to $3,333, which have been included in interest expense on the accompanying condensed consolidated statements of operations.

Notes Payable

From time to time, the Company entered into unsecured notes payable with individual investors. The terms of these notes are listed below.

These notes are past due and amounts owed are in dispute at both December 31, 2024 and September 30, 2024.

On May 15, 2025, the Company and Brent Lilienthal entered into a settlement agreement, pursuant to which, the Company settled $217,000 debt owed by issuance of 120,000 shares of common stock of the Company (see Note 7).

Mel Wentz receives a default penalty of $10,000 each month and the note goes unpaid. The Company is currently disputing amount claimed by Mel Wentz under state usury laws (see Note 6). On July 14, 2025, the Company received a letter from a third party legal counsel which states the loan agreement appears to be invalid under Texas usury laws. Therefore, commencing on July 1, 2024, the monthly penalty of $10,000 is not accrued any more.

Interest expense related to borrowings totaled $3,837 and $16,351 for the three months ended December 31, 2024 and 2023, respectively. Default penalties - late fees related to Mel Wentz’s note payable totaled $30,000 for the three months ended December 31, 2023. These late fees are in dispute and have been included in note payable on the accompanying condensed consolidated balance sheets.

Commercial Loan

On April 9, 2020, the Company received a loan from the Small Business Administration pursuant to the Paycheck Protection Program (“PPP”) in the principal amount of $48,750. The note bears interest at a variable rate of approximately 1% and matured in April 2022. The Company applied for loan forgiveness, and the Company is waiting on confirmation that the loan has been forgiven.