NOTE 9 – CONVERTIBLE DEBT AND NOTES PAYABLE

Convertible Debenture – Arena

On November 22, 2024, the Company entered into a Securities Purchase Agreement (the “Arena SPA”) with the Arena Finance Markets, LP (“Arena Finance”), Arena Special Opportunities Partners III, LP (together with Arena Finance, the “Arena Investors”). Under the Securities Purchase Agreement, the Company will issue 10% original issue discount one or more secured convertible debentures (“Debentures”) in a total principal amount of up to $12,222,222, divided into up to three separate tranches that are each subject to certain closing conditions. The conversion price per share of each Debenture is equal to 92.5% of the lowest daily VWAP (as defined in the Debentures) of the Company’s shares of common stock during the five trading day period ending on the trading day immediately prior to delivery or deemed delivery of the applicable conversion notice, subject to adjustments related to the trading price of the Company’s common stock.

The closing of the first tranche was consummated on November 25, 2024 (the “First Closing”) and the Company issued to the Arena Investors Debentures in an aggregate principal amount of $3,333,333 (the “First Closing Debentures”). The First Closing Debentures were sold to the Arena Investors for a purchase price of $3,000,000, representing an original issue discount of ten percent (10%). The convertible debenture will mature eighteen months from the First Closing.

The First Closing Debentures contain customary events of default. If an event of default occurs, until it is cured, the holder may increase the interest rate applicable to the First Closing Debentures to two percent (2%) per annum and accelerate the full indebtedness under the First Closing Debentures, in an amount equal to 125% of the outstanding principal amount and accrued and unpaid interest. Subject to limited exceptions, the First Closing Debentures prohibit the Company and, as applicable, its subsidiaries from incurring any new indebtedness that is not subordinated to the First Closing Debentures and, as applicable, any subsidiary’s obligations in respect of the First Closing Debentures until the First Closing Debentures are paid in full.

As consideration for the Arena Investors’ consummation of the First Closing, concurrently with the First Closing, the Company issued to each Arena Investor participating in the First Closing its pro rata portion of the 55,000 shares of common stock (the “SPA Commitment Fee Shares”) issued to the Arena Investors as a commitment fee upon the execution of the Securities Purchase Agreement. Furthermore, as consideration for the Arena Investors’ consummation of subsequent closings, the Company shall issue to the Arena Investors participating in such closing a certain number of Company common stock as agreed upon among the Company and the Arena Investors participating. The fair value of the shares of common stock issued was $420,200, which was included as a debt discount as noted below.

Pursuant to a Security Agreement, dated November 25, 2024, the Company granted to the Arena Investors a security interest in all of its assets to secure the prompt payment, performance, and discharge in full of all of the Company’s obligations under the Debentures. In addition, the Company’s wholly-owned subsidiary, Scienture, entered into a Guarantee Agreement, dated November 25, 2024, with the Arena Investors, pursuant to which it agreed to guarantee the prompt payment.

Interest accrued on the outstanding principal amount of this Debenture at a rate equal to 10.00% per annum paid in kind (the “PIK Interest”) unless there is an Event of Default (as defined in the Debenture), in which case Default Interest accrues and is payable instead of PIK Interest. Any PIK Interest is added to the outstanding principal amount of the Debenture on a monthly basis as additional principal obligations hereunder and shall automatically and thereafter constitute a part of the outstanding principal amount for all purposes hereof (including the accrual of interest thereon at the rates applicable to the principal amount generally). The Company will not issue additional debentures to satisfy and pay any PIK Interest. Interest is calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and accrues daily commencing on the Original Issue Date (as defined in the Debenture) until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.

During the year ended December 31, 2025 and 2024, the Company incurred $141,977 and $33,333, respectively, in interest expense pertaining to the First Closing Debentures.

As a result of the issuance of the First Closing Debentures, the Company recognized an aggregate debt discount of $3,333,333. Through December 31, 2024, $869,692 of the debt discount was amortized to interest expense. In February 2025, the Company repaid $1,642,143 of principal and accrued interest. In August and September 2025, the Company repaid aggregate of $1,866,501 of the remaining outstanding principal and accrued interest, including a 20% early redemption premium, resulting in the immediate amortization of all remaining unamortized debt discount of $2,721,058 to interest expense during the year ended December 31, 2025, respectively. The outstanding amount owed on the First Closing Debentures was converted during October 2025. As a result, the First Closing Debentures are no longer outstanding as of December 31, 2025 (see Note 15).

On October 3, 2025, the Company entered into a letter agreement with Arena Investors to amend the conversion terms of its First Closing Debentures. Pursuant to this agreement, the Company issued an aggregate of 224,998 shares of common stock in full satisfaction of all remaining outstanding obligations. The Company recognized the fair value of the shares issued, totaling $189,673, as interest expense during the period.

Upon issuance of the shares, all conditions of the conversion were satisfied, and all prior obligations, security interests, and liens under the transaction documents dated November 25, 2024, were irrevocably discharged and terminated. Consequently, the Company has no further payment or financial obligations under the First Closing Debentures.

The following is a summary of the First Closing Debentures:

SCHEDULE OF THE ARENA DEBENTURES

Derivative Liability

The Company evaluated the terms of the conversion features of the First Closing Debentures as noted above in accordance with ASC Topic No. 815 - 40, “Derivatives and Hedging - Contracts in Entity’s Own Stock,” and determined they are not indexed to the Company’s common stock and that the conversion feature, which is akin to a redemption feature, meet the definition of a liability. The First Closing Debentures contain an indeterminate number of shares to settle with conversion options outside of the Company’s control. Therefore, the Company bifurcated the conversion feature and accounted for it as a separate derivative liability. Upon issuance of the First Closing Debentures, the Company recognized a derivative liability at a fair value of $2,477,217, which is recorded as a debt discount and will be amortized over the life of the First Closing Debentures. Upon repayment of the debentures in 2025, the remaining unamortized debt discount was fully amortized to interest expense.

The Company measured the derivative liability at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the derivative liability uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of the contingent consideration liability related to updated assumptions and estimates are recognized within the statements of operations.

The Company valued the derivative liability using a Black-Scholes method using following assumptions:

SCHEDULE OF DERIVATIVE LIABILITY

The following is a summary of the derivative liability:

SCHEDULE OF THE DERIVATIVE LIABILITY LIABILITY

Scienture Convertible Debt

In September 2023, Scienture entered into a Loan and Security Agreement (the “NVK Loan Agreement”) with NVK Finance, LLC, a Nebraska Limited Liability Company (“NVK”) for $2,000,000. The debt accrues interest at a per annum rate equal to the Prime Rate (as defined in the NVK Loan Agreement) plus 7% and the prime rate is adjusted quarterly. As of both on total repayment in 2025 and December 31, 2024, the interest rate was 15.50%. The debt is collateralized by all of Scienture’s receivables, cash and cash equivalents and its right, title and interest in, to and under its Intellectual Property (as defined in the NVK Loan Agreement) and all proceeds thereof. The principal is entirely repayable on the maturity date in September 2025 and interest is payable monthly following a Qualified Financing (as defined in the NVK Loan Agreement). The NVK debt is convertible into common stock of Scienture at a fully-diluted Scienture valuation of $60,000,000.

On October 10, 2025, the Company executed a second amendment to its loan agreement with NVK, extending the maturity date to December 8, 2025, and obtaining a waiver for all existing defaults. As consideration for this extension, the Company agreed to pay a maturity extension fee of $25,000 and issued 250,000 common shares with a fair value of $175,250. Both the cash fee and the fair value of the shares were recognized as interest expense during the year ended December 31, 2025.

As of October 15, 2025, the outstanding balance of the loan, comprising principal and accrued interest, was $2,656,250. Under the terms of the amendment, early repayment required the payment of this balance plus an additional interest charge of $791.67 per day for fourteen days. On October 15, 2025, the Company fully repaid the outstanding balance and all applicable fees, totaling $11,083 in additional interest, thereby satisfying all obligations under the NVK loan agreement.

The balance of the NVK debt at December 31, 2025 and 2024, was $0 and $2,000,000, respectively. An aggregate interest expense on the NVK debt was $462,316 and $231,639, for the years ended December 30, 2025 and 2024, respectively.

Streeterville Note

On October 14, 2025, the Company entered into a note purchase agreement with Streeterville Capital, LLC (the “Lender”), providing for the issuance of a senior secured promissory note in the aggregate principal amount of $3,911,111.11 (the “Streeterville Note”). The Streeterville Note carried an original issue discount of $391,111.11 and an interest rate of 9% per annum. After deducting the original issue discount and $20,000 in transaction costs, the Company received net proceeds of $3,500,000, which were utilized to repay the outstanding balance of the Scienture Convertible Debt and for general corporate purposes.

During the year ended December 31, 2025, the Streeterville Note was fully repaid. In connection with this repayment, the Company recognized interest expense of $13,981 representing accrued interest through the date of payoff. Additionally, the Company fully amortized the $391,111.11 original issue discount and the $20,000 in transaction costs, which were recognized as interest expense during the period. As of December 31, 2025, the Note had no outstanding balance, and there was no remaining unamortized debt discount or transaction costs associated with this obligation.

August 2024 Note

In August 2024, the Company issued a convertible note of $360,000, for which the Company received $314,000 in net proceeds. On the six-month anniversary of the issuance, the Company was required to make a payment of $360,000 to the noteholder and each month thereafter the Company was required to make a payment of $7,200 to the noteholder towards repayment of the note (each, an “Amortization Payment”). The note bears interest at 12% per annum and is deemed earned in full and guaranteed as of the note issuance date. If the Company fails to pay any Amortization Payment, the noteholder will have the right to convert the outstanding principal and accrued interest at a conversion price equal to the Conversion Price (as defined below and subject to a floor price of $1.50). The Conversion Price is the lesser of (i) $8.36 or (ii) 85% of the lowest volume-weighted average prices of the preceding five trading days. The note matures on August 20, 2025.

In connection with the note, the Company issued 76,923 warrants to purchase common stock to the noteholder. The warrants have an exercise price of $9.36 per share, are immediately exercisable and have a term of 5 years. The fair value of the warrant was $71,332, which was recognized as a debt discount and will be amortized to interest expense over the life of the note.

Total debt discount recognized in connection with the note was $117,332, with $42,755 amortized through December 31, 2024, and an additional $28,931 amortized during the year ended December 31, 2025. The net carrying value of the note payable, after deducting the remaining unamortized discount of $45,646, was $357,554, including $43,200 of accrued interest. On March 31, 2025, the Company converted the outstanding note into equity by issuing 274,000 shares of common stock at a fair value of $411,000. As a result, it recognized a $53,446 loss on conversion, reported as a non-operating expense in the consolidated statements of operations.

Debt Summary

The following is a summary of the Company’s debt as of December 31, 2025 and 2024:

SCHEDULE OF DEBT

Superlatus Notes

On November 17, 2023, the Company issued a promissory note to Moku Foods, Inc. (the “Moku Foods November 2023 Note”) in the amount of $50,000. The promissory note accrues interest at 11.5% per annum, compounded monthly and is payable upon demand at any time after November 30, 2023. As of December 31, 2023, the balance of the Moku Foods November 2023 Note was $50,000. The Company has accrued interest of $945 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities.

On October 16, 2023, the Company issued a promissory note to Moku Foods, Inc. (the “Moku Foods October 2023 Note”) in the amount of $150,000. The promissory note accrues interest at 11.5% per annum, compounded monthly and is payable upon demand at any time after October 31, 2023. As of December 31, 2023, the balance of the Moku Foods October 2023 Note was $150,000. The Company has accrued interest of $4,300 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities.

On September 27, 2023, the Company issued a promissory note to Perfect Day, Inc. (the “Perfect Day Note”) in the amount of $4,400,000 as consideration for the TUC APA (see Note 3). The promissory notes do not accrue interest and are payable upon demand at any time after October 31, 2023. The entire aggregate, unpaid principal sum of the note is immediately due and payable upon the occurrence of a change in control, as defined in the agreement. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities.

On September 14, 2023, the Company issued a promissory note to Wellgisitcs (the “Wellgistics Note”) in the amount of $300,000. The Company received a deposit of $200,000 on September 14, 2023, and an additional deposit of $100,000 on October 13, 2023. The Wellgisitcs Note accrues interest at 0% per annum and is due and payable no later than 30 days after a change in control of borrower, as defined in the note agreement. As of December 31, 2023, the balance of the Wellgistics Note was $50,000. The Wellgistics Note was fully paid off in February 2024.

On June 16, 2023, the Company issued a secured debenture to Eat Well Investment Group, Inc. (the “Eat Well June 2023 Note”) in the amount of $1,150,000 for the purchase of Sapientia, a wholly-owned subsidiary of Superlatus. The Eat Well June 2023 Note is secured by 100% of the membership interests in Sapientia. The Eat Well June 2023 Note began accruing interest at 12% per annum, compounded monthly, as of October 31, 2023. The Eat Well June 2023 Note matured on December 31, 2023. As of December 31, 2023, the balance of the Eat Well June 2023 Note was $1,150,000. The Company has accrued interest of $23,063 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities.

On February 8, 2023, Sapientia, a wholly-owned subsidiary of Superlatus, entered into a Loan Agreement with Eat Well Investment Group, Inc. (the “Eat Well February 2023 Note”) in the amount of $25,000. The Eat Well February 2023 Note is unsecured, accrues interest at a rate of 1.87% per annum, and matures February 7, 2025. As of December 31, 2023, the balance of the Eat Well February 2023 Note was $25,000. The Company has accrued interest of $418 as of December 31, 2023. On March 5, 2024, the Company entered into the Superlatus SPA, whereby the Company sold its entire interest in Superlatus to Superlatus Foods, Inc. thereby transferring all assets and liabilities.