NOTE 7: CONVERTIBLE DEBT

The fair value of convertible debt as on:

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2026 Convertible Notes

The Company entered into nine convertible note agreements with a total principal of $2,007,150 issued at a discount for proceeds of $1,861,000 during the quarter ended March 31, 2026 (the “Q1 2026 Convertible Notes”). The Q1 2026 Convertible Notes bear interest at rates ranging from 10.0% to 20.0% per annum, with certain notes bearing one-time interest charges ranging from 10.0% to 14.0% and the remaining notes bearing interest at 20.0% per annum. The Q1 2026 Convertible Notes have maturity dates that range from 210 days to one year from the convertible note issuance date, optional conversion periods that range up to 210 days or upon default, and conversion prices that range from $8.00 to $12.80 for fixed-price notes. Certain notes contain variable conversion price provisions as described below.

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* The conversion price upon default has been calculated using the VWAP-based conversion price as per the respective agreements. This price may vary depending on the market conditions prevailing on the reporting date.

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As of issuance and at March 31, 2026, the fair value of the remaining 2026 Convertible Notes was determined to be $1,861,000 and $1,798,510 respectively (see Note 9).

The 2026 Convertible Notes were convertible into 1,109,421 shares of the Company’s common stock on March 31, 2026.

SEPA Convertible Note

In December 2024, in connection with its Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD. (“Yorkville”), the Company issued a Convertible Promissory Note (the “SEPA Convertible Note”) with an original principal amount of $2,500,000 and received net proceeds of $2,300,000 after an 8.0% original issue discount.

During the three months ended March 31, 2026, the Company made three cash payments totaling $375,000, of which $343,543 was applied to principal, $7,409 to accrued interest, and $24,048 to prepayment premiums. In addition, Yorkville converted $52,297 of principal and $11,194 of accrued interest into post split – 11,548 shares of common stock at a variable price of $5.50 per share pursuant to Section 3(a)(9) of the Securities Act of 1933.

As of March 31, 2026, the outstanding principal balance of the SEPA Convertible Note was approximately $991,135. The fair value of the SEPA Convertible Note was approximately $1,146,000 as of March 31, 2026, and is included within “Convertible debt, at fair value” under current liabilities on the condensed consolidated balance sheets. The change in fair value recognized in earnings was $71,119, for the three months ended March 31, 2026 and is included in “Other income (expense), net” in the condensed consolidated statements of operations and comprehensive loss.