Note 8. DEBT

Outstanding debt consists of the following:

SCHEDULE OF OUTSTANDING DEBT 

As of March 31, 2026 and December 31, 2025, unamortized debt discount was $2,268,898 and $1,568,776, respectively.

Merchant Cash Advance

On October 20, 2025, the Company entered into a merchant cash advance agreement with Cedar Advance LLC (the “October 2025 MCA”). Under the October 2025 MCA, the stated purchase price was $2,898,000, of which $1,198,800 was applied directly to satisfy the outstanding balance under the Company’s prior merchant cash advance arrangement, and $701,200 was remitted to the Company for working capital purposes. The total repayment obligation under the October 2025 MCA resulted in a principal balance of $1,900,000, repayable in fixed weekly installments of $56,800 over an estimated 51-week term.

The Company accounts for the merchant cash advance as a debt obligation. The difference between the total repayment obligation and the net proceeds received has been recorded as a debt discount and is amortized to interest expense over the term of the arrangement using the effective interest method.

For the three months ended March 31, 2026, the Company made total repayments of $181,800 under the merchant cash advance arrangement, of which $90,281 represented reduction of the principal balance and $91,519 represented amortization of the debt discount, recorded as interest expense in the condensed consolidated statements of operations.

As of March 31, 2026, the gross contractual repayment obligation under the merchant cash advance was $2,365,400. The related unamortized debt discount was $711,547, resulting in a net carrying amount of $1,653,853, which is classified as a current liability in the condensed consolidated balance sheet. As of December 31, 2025, the gross contractual repayment obligation was $2,547,200. The related unamortized debt discount was $803,066, resulting in a net carrying amount of $1,744,134, classified as a current liability in the condensed consolidated balance sheet.

Loan Payable

On October 29, 2025, the Company entered into a financing arrangement with Agile Capital Funding LLC (“Agile”) pursuant to which it received net proceeds of $533,889. Total contractual repayments under the arrangement were $2,880,000, with fixed weekly payments of $75,789 over an estimated 38-week term. A portion of the proceeds was applied directly to satisfy the outstanding balance of the prior Agile obligation. The Company accounts for the arrangement as a debt obligation. The difference between the total contractual repayment amount and the net proceeds received was recorded as a debt discount and is amortized to interest expense over the term of the arrangement using the effective interest method.

During the three months ended March 31, 2026, the Company repaid in full all amounts outstanding under the Agile arrangement for total cash payments of $2,145,789. The Company accounted for the settlement as a debt extinguishment in accordance with ASC 470-50. In connection with the extinguishment, the Company derecognized the gross contractual repayment obligation and the related unamortized debt discount. Regular amortization of debt discount recognized as interest expense during the three months ended March 31, 2026 prior to extinguishment was $41,232. The remaining unamortized debt discount of $544,737 was charged to interest expense upon extinguishment.

As of March 31, 2026, there were no amounts outstanding under the Agile arrangement. As of December 31, 2025, the net carrying amount of the Agile obligation was $1,601,056, net of unamortized debt discount of $765,710, and was classified as a current liability in the condensed consolidated balance sheets.

Note payable – sellers of Wellgistics, LLC

On July 24, 2025, the Company and the owners of Wellgistics LLC executed the Eighth Amendment to the Membership Interest Purchase Agreement (“MIPA”), pursuant to which the principal amount of the seller promissory note was increased from $15.0 million to $17.5 million. Under the amended note, $5,000,000 of principal is payable on each of the first and second anniversaries, and $7,500,000 of principal is payable on the third anniversary, of the effective date of the promissory note. The note bears simple interest at a rate equal to the Prime Rate as published by The Wall Street Journal on January 1 of the applicable year.

For the three months ended March 31, 2026 and 2025, the Company recognized interest expense of $366,781 and $318,750, respectively, related to the seller promissory note. As of March 31, 2026 and December 31, 2025, accrued interest on the note totaled $1,018,836 and $652,055, respectively, and is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheets. As of March 31, 2026 and December 31, 2025, $5,000,000 of the promissory note was classified as a current liability and the remaining $12,500,000 was classified as non-current in the condensed consolidated balance sheets.

Note Payable – Third party

On January 2, 2025, the Company entered into an unsecured promissory note agreement with Arvoda Consulting LLC for a principal amount of $448,411, bearing interest at a rate of 10% per annum, with both principal and accrued interest due in full on May 15, 2025. In the event of default, interest accrues at a default rate of 12% per annum. In connection with this note, the Company received net proceeds of $415,000, with the remaining $33,411 recognized as a debt discount, which was fully amortized as of December 31, 2025. During the three months ended March 31, 2026, the Company settled the outstanding principal and accrued interest under the Arvoda note through a combination of share issuances to Silverback Capital Corporation pursuant to a court-approved settlement agreement under Section 3(a)(10) of the Securities Act of 1933, and a direct cash payment by the Company. For the three months ended March 31, 2026 and 2025, the Company recognized interest expense of $399 and $11,304, respectively. For the three months ended March 31, 2025, the Company also recognized amortization of debt discount of $22,107. As of March 31, 2026, the note payable to Arvoda Consulting LLC had been fully satisfied and there were no amounts outstanding. As of December 31, 2025, accrued interest payable on this note was $44,442 and the outstanding principal of $448,411 was classified as a current liability in the condensed consolidated balance sheets.

On February 2, 2025, the Company entered into two separate unsecured promissory note agreement, each for a principal amount of $100,000, bearing interest at a rate of 10% per annum, with both principal and accrued interest originally due in full on August 15, 2025. In the event of default, interest accrues at a default rate of 12% per annum. Under the terms of the promissory note, an event of default occurs only if the maker fails to pay any amount due within five (5) days after receipt of written notice from the payee. As of March 31, 2026, the Company had not received any such written notice and, accordingly, no event of default had occurred. For the three months ended March 31, 2026 and 2025, the Company recognized aggregate interest expense of $5,000 and $3,124, respectively, related to this note. As of March 31, 2026 and December 31, 2025, aggregate accrued interest payable on this note was $23,124 and $18,124, respectively, and the aggregate outstanding principal of $200,000 is classified as a current liability in the condensed consolidated balance sheets.

On April 8, 2025, the Company issued a promissory note to Strategic EP, LLC in the principal amount of $250,000, bearing interest at a rate of 10% per annum. Under the terms of the agreement, the outstanding principal and accrued interest are payable on the earlier of (i) April 8, 2026, or (ii) within five business days following the Company’s receipt of aggregate gross proceeds of at least $10 million from one or more equity or debt financings. On February 27, 2026, the Company received a demand letter from Strategic EP, LLC indicating that the Company was in default under the terms of the promissory note. Upon the occurrence of a default, interest accrues at a default rate of 18% per annum. For the three months ended March 31, 2026 and 2025, the Company recognized interest expense of $11,250 and $0, respectively, related to this note, accrued at the default rate of 18% per annum. As of March 31, 2026 and December 31, 2025, accrued interest payable on this note was $33,372 and $22,122, respectively, and the outstanding principal of $250,000 is classified as a current liability in the condensed consolidated balance sheets.

In September 2023, the Company entered into a promissory note agreement with a third party investor for a principal amount of $100,000, bearing interest at a rate of 8% per annum. Under the terms of the note, the lender is entitled to receive 35,000 shares of the Company’s common stock upon the consummation of a SPAC transaction or merger. As of March 31, 2026, this condition had not been met and accordingly no shares have been issued. For the three months ended March 31, 2026 and 2025, the Company recognized interest expense of $2,000 and $2,000, respectively, related to this note. As of March 31, 2026 and December 31, 2025, accrued interest payable on this note was $21,666 and $19,666, respectively, and the outstanding principal of $100,000 is classified as a non-current liability in the condensed consolidated balance sheets.

Revolving line of credit – Wellgistics

In November 2024, Wellgistics, LLC entered into a credit agreement for a revolving line of credit with a maximum borrowing capacity of $10,000,000. The line of credit bears interest at a rate equal to the Term Secured Overnight Financing Rate (“SOFR”) plus 11.5%, calculated and prorated daily on the outstanding balance, representing an aggregate rate of approximately 16.84% per annum. The line of credit is collateralized by accounts receivable and inventory balances of Wellgistics, LLC. For the three months ended March 31, 2026 and 2025, the Company recognized interest expense of $68,227, and $332,439, respectively, related to the revolving line of credit. As of March 31, 2026 and December 31, 2025, the outstanding balance under the revolving line of credit was $1,500,398 and $1,643,923, respectively, and is classified as a current liability in the condensed consolidated balance sheets.

Convertible notes payable

On January 16, 2026, the Company entered into a Note Purchase Agreement with certain investors pursuant to which the Company issued and sold secured convertible promissory notes (the “Notes”) in an aggregate principal amount of $8,125,000 for aggregate gross proceeds of $6,500,000, reflecting a 20% original issue discount. The Notes mature on the earlier of (i) July 16, 2026, or (ii) the closing date of a qualified financing, as defined in the Note Purchase Agreement. The Notes bear interest at 0% per annum, except upon an event of default, in which case interest accrues at 18% per annum. As of March 31, 2026, no event of default had occurred. If not sooner repaid, all outstanding amounts under each Note are convertible, at the election of the holder, into shares of the Company’s common stock at a conversion price of $0.4057 per share. The Notes are secured by substantially all of the assets of the Company and its wholly-owned subsidiaries.

In connection with the offering, the Company paid placement agent fees of $422,500 and legal fees of $75,000 directly from the gross proceeds. The Company also issued warrants to the placement agent and its designees to purchase an aggregate of 1,097,640 shares of common stock at an exercise price of $0.41 per share, with a five-year term. The fair value of the placement agent warrants of $416,965, determined using the Black-Scholes option pricing model, was recorded as a debt issuance cost. Total debt discount and issuance costs are being amortized to interest expense over the term of the Notes using the straight-line method. For the three months ended March 31, 2026 and 2025, the Company recognized amortization of debt discount and issuance costs of $982,114 and $0, respectively,as interest expense in the condensed consolidated statements of operations. As of March 31, 2026, the gross principal amount of the Notes was $8,125,000 and the unamortized debt discount and issuance costs were $1,557,351, resulting in a net carrying amount of $6,567,649, classified as a current liability in the condensed consolidated balance sheets.

The following table presents, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of warrants granted during the three months ended March 31, 2026:

SCHEDULE OF GRANT- DATE FAIR VALUE OF WARRANTS 

The following table is a summary of annual principal payments of the Company’s outstanding debt:

SCHEDULE OF ANNUAL PRINCIPAL PAYMENTS