Note 6 – Debt

The following represents a summary of the Company’s notes payable – SBA government, notes payable – related parties, convertible notes payable and notes payable, key terms, and outstanding balances at December 31, 2025 and 2024, respectively:

Notes Payable – SBA government

Economic Injury Disaster Loan (“EIDL”)

During 2020, this program was made available to eligible borrowers in light of the impact of the COVID-19 pandemic and the negative economic impact on the Company’s business. Proceeds from the EIDL were used for working capital purposes.

Installment payments, including principal and interest, are due monthly (beginning twelve (12) months from the date of the promissory note) in amounts ranging from $74 - $731/month. The balance of principal and interest is payable over the next thirty (30) years from the date of the promissory note. There are no penalties for prepayment. The EIDL Loan was not required to be refinanced by the PPP loan.

 Schedule of Loans Payable

Note Payable – Related Party

The following is a summary of the Company’s Note Payable - Related Party:

 Summary of Notes Payable - Related Parties

On March 12, 2024, as approved by the Audit Committee, the Company consolidated all remaining outstanding principal and accrued interest of $4,584,563 and $498,991, respectively, into a single consolidated note with an aggregate face amount of $5,083,554. The consolidated note bears interest at 10% per annum, with a default interest rate of 15%, and is repayable in equal monthly installments of $164,039 over 36 months, resulting in total aggregate payments of $5,905,427 inclusive of interest. The note is unsecured and was scheduled to be repaid in full by December 2026.

Beginning in July 2025, monthly payments under the consolidated note were temporarily suspended as a result of the Company’s current cash flow constraints. The note holder has confirmed that the suspension does not constitute a default under the note terms; accordingly, the 15% default interest rate has not been triggered, and interest has continued to accrue at the contractual rate of 10% per annum. The suspension did not result in a modification of the note’s contractual terms and does not constitute a troubled debt restructuring. Management is evaluating options to restructure or resume payments in future periods.

See Note 12 for information regarding the conversion of $1,000,000 of note principal into shares of common stock.

The following is a detail of the Company’s Notes Payable - Related Party:

 Schedule of Notes Payable - Related Parties

Convertible Notes Payable

The following is a summary of the Company’s Convertible Notes Payable and related Debt Discounts:

 Schedule of Convertible Notes Payable and related Debt Discounts

The following is a detail of the Company’s Convertible Notes Payable:

 Schedule of Convertible Notes Payable

Convertible Notes Payable - Notes #1 through #6

Overview

During the year ended December 31, 2025, the Company entered into six Note Purchase Agreements with institutional investors and issued Convertible Notes (collectively, the “Notes”) with an aggregate original principal of $9,694,999. Note #1 is a senior secured obligation collateralized by a first-priority lien on substantially all of the Company’s and its subsidiaries’ assets. Notes #2 through #6 are unsecured obligations. The Notes are summarized in detail below.

Note #1 - Senior Secured Convertible Note

On May 12, 2025, the Company entered into a Senior Secured Note Purchase Agreement with an institutional investor, pursuant to which the Company issued a Senior Secured Convertible Note in the original principal amount of $6,999,999 (the “Note”), resulting in net cash proceeds of $5,405,000, after deducting $175,000 in legal fees and $420,000 in broker fees paid directly from the proceeds. The Note is secured by a first-priority lien on substantially all of the Company’s and its subsidiaries’ assets pursuant to a Security and Pledge Agreement and is fully guaranteed by certain subsidiaries of the Company.

In connection with the issuance, the Company repurchased 333,333 shares of its common stock from the investor at $3.00 per share. These shares were cancelled and retired and are recorded as treasury stock (see Note 9).

Interest and Amortization Terms

The Note accrues interest at a rate of 1.25% per month (15% per annum). Interest is payable monthly, either in cash or as payment-in-kind (“PIK Interest”) at the Company’s election. Commencing with the month ending June 30, 2026, the Note obligation amortizes in equal monthly installments of $500,000, with the remaining outstanding balance due on the Maturity Date of October 12, 2027.

Amendment

On January 31, 2026, the Company and the investor entered into an amendment to the Note, which revised the amortization commencement date from January 31, 2026 to June 30, 2026 and extended the Maturity Date from May 12, 2027 to October 12, 2027. The amendment was evaluated in accordance with ASC 470-50 and accounted for as a debt modification. Accordingly, no gain or loss was recognized, and the carrying value of the Note was not adjusted. The remaining unamortized debt discount is being amortized over the revised term to the new Maturity Date using the effective interest method. See Note 12.

Embedded Conversion Feature

The Note contains an embedded conversion option that permits the investor to convert outstanding principal and accrued interest into shares of the Company’s common stock at an initial conversion price of $4.00 per share. The Company evaluated this feature in accordance with ASC 815-10-15-74(a) and ASC 815-40. The conversion option is indexed solely to the Company’s own common stock and satisfies the fixed-for-fixed criteria under ASC 815-40-15, qualifying for the scope exception from derivative accounting. Accordingly, the Note is accounted for in its entirety as a debt instrument.

Warrant Issuance

In connection with the issuance of the Note, the Company issued warrants to purchase 700,000 shares of its common stock at an exercise price of $6.00 per share. The warrants are immediately exercisable and expire on May 12, 2030.

The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants at issuance was estimated at $1,084,927, which was recorded as a debt discount with a corresponding credit to additional paid-in capital.

The assumptions used in the Black-Scholes model were as follows:

 Schedule of Fair Value of Warrants

Debt Discount

In connection with the issuance of the Note, the Company recorded total debt discounts of $1,679,927, consisting of the following:

 Schedule of Debt Discounts

Debt discounts are being amortized to interest expense over the revised contractual term of the Note through the Maturity Date of October 12, 2027 using the effective interest method in accordance with ASC 835-30.

Convertible Notes Payable - Notes #2, #3, #4, #5 and #6

During the period from September 25, 2025 through November 17, 2025, the Company entered into five separate one-year unsecured Note Purchase Agreements with institutional investors and issued Convertible Notes (collectively, the “Notes”). In accordance with ASC 835-30, each Note was issued at a discount arising from original issue discounts, guaranteed interest capitalized at issuance, the fair value of common shares issued to investors as additional consideration, and, where applicable, debt issuance costs. On the commitment date these components are recorded as a reduction of the carrying value of the respective Notes and are amortized to interest expense using the effective interest method over each Note’s one-year contractual term.

These Notes had an aggregate original principal amount of $2,695,000. Guaranteed interest of $215,600 was capitalized at issuance, resulting in a total aggregate obligation of $2,910,600.

The following tables summarize the key terms and debt discount components of each issuance:

 Schedule of Key Terms and Debt Discount Components

The fair value of shares issued to investors was determined based on the quoted closing price of the Company’s common stock on each respective grant date. Total debt discounts of $745,480 are being amortized over the contractual term of each respective Note using the effective interest method in accordance with ASC 835-30.

Interest and Repayment Terms

Each Note accrues interest at 8% per annum, with a default rate of 22% per annum.

The guaranteed interest is capitalized at issuance and included in the total obligation.

Each Note is repayable in five equal monthly installments inclusive of the capitalized guaranteed interest, with any unpaid amounts due and payable as part of the fifth and final installment, as follows:

 Schedule of Note Payments

Embedded Conversion Features

Each Note contains embedded conversion features that allow the investor to convert outstanding principal and accrued interest into shares of the Company’s common stock in three tranches:

Upon the earlier of i) the occurrence of an event of default or ii) the company’s failure to pay any amortization payment when due, all tranches may alternatively be converted at 85% of the lowest daily volume-weighted average price (“VWAP”) of the Company’s common stock during the five trading days immediately preceding the conversion date. All tranches are immediately exercisable at the investor’s option at their respective fixed conversion prices. The fixed conversion prices are subject to customary anti-dilution adjustments for stock splits, stock dividends, or recapitalizations. The Company may also, subject to specified price and volume conditions and with the prior written consent of the investor, effect a mandatory conversion of all or a portion of any Note into common stock.

Accounting Treatment

The Company evaluated the embedded conversion features of the Notes in accordance with ASC 815-10-15-74(a) and ASC 815-40 to determine whether bifurcation as derivative liabilities was required. The fixed-price conversion options ($4.00 and $6.00 per share) are conventional convertible features indexed solely to the Company’s own common stock that satisfy the fixed-for-fixed criteria under ASC 815-40-15 and therefore qualify for the scope exception from derivative accounting.

Each Note also contains a contingent variable conversion feature (85% of the lowest daily VWAP) that is exercisable only upon an event of default. Management has assessed the likelihood of default as remote, based on the Company’s history of compliance with its debt obligations and continued access to capital markets. Accordingly, this contingent feature does not require bifurcation, is considered clearly and closely related to the debt host under ASC 815-10-15-74(a), and qualifies for the equity scope exception under ASC 815-40. Each Note is therefore accounted for in its entirety as a debt instrument.

The Company reassesses the probability of default at each reporting date. Should an event of default no longer be considered remote, the contingent variable conversion feature would be bifurcated and recognized as a derivative liability at fair value, with subsequent changes in fair value recognized in earnings. As of December 31, 2025, the Company was in compliance with all terms and conditions of the Notes.

Notes Payable

The following is a summary of the Company’s Notes Payable:

 Schedule of Notes Payable

The following is a detail of the Company’s Notes Payable:

Note #1 - Note Issuance and Warrants

On September 9, 2025, the Company entered into a six-month (6) Senior Secured Note with an individual (the “Investor”), in the original principal amount of $1,000,000 (the “Note”).

As of December 31, 2025, the Company was in compliance with all terms and conditions of the Note.

Warrant Issuance and Classification

In connection with the issuance of the Note, the Company also issued warrants to purchase 30,000 shares of its common stock at an exercise price of $2.50/share. The warrants are immediately exercisable and remain outstanding through September 9, 2028.

Debt Discount

In connection with the issuance of the $1,000,000 note, the Company issued warrants to purchase 30,000 shares of common stock. The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants was estimated to be $48,418, which was recorded as a debt discount and is being amortized to interest expense over the term of the note. The Company also recorded a corresponding increase to additional paid-in capital of $48,418. See Note 9.

The fair value of the warrants was determined using the Black-Scholes model with the following assumptions:

 Schedule of Fair Value of Warrants

The debt discount will be fully amortized over the contractual term of the note (six-months).

Note #2 – Accounts Receivable Financing Facility and Line of Credit

On September 9, 2025, the Company entered into a one-year (1) Business Loan and Security Agreement (the “Agreement”) with Paragon Bank (“Paragon”) establishing a $1,500,000 accounts receivable financing facility (the “Facility”). The Facility is secured by a first-priority lien on substantially all of the Company’s accounts receivable and related collateral. The Facility is a recourse arrangement under which the Company remains liable to Paragon for all advances, including amounts related to uncollected or disputed customer receivables.

Borrowings under the Facility are available based on eligible accounts (up to 85%), subject to customary reserves and reporting requirements. The Facility is intended to provide working-capital financing and liquidity support for the Company’s operations.

Under the terms of the agreement, each advance is evidenced by a corresponding factoring or receivables purchase transaction recorded through the Company’s Paragon Business Manager account.

During 2025, Paragon purchased $5,628,811 of invoices, of which $4,751,765 had been collected and remitted by period-end. The resulting outstanding balance of $877,046 represents amounts advanced to the Company under the Facility as of December 31, 2025.

Paragon retains a reserve account equal to a portion of factored receivables to cover charge-backs, adjustments, and service fees (15%). At December 31, 2025, the reserve balance was $281,811, which is classified as restricted cash on the Company’s consolidated balance sheet.

Service charges and related finance fees of $86,481 were incurred during the year ended December 31, 2025 and are recognized as interest expense within the consolidated statements of operations

As of December 31, 2025, the Company was in compliance with all covenants and terms of the Facility.

Debt Maturities

The following represents the maturities of the Company’s various debt arrangements for each of the five (5) succeeding years and thereafter as follows:

 Schedule of Debt Maturities