Note 9. Notes Payable

Convertible Notes

Effective August 25, 2025, the Company issued a secured convertible promissory note to Streeterville Capital, LLC in the amount of $2,220,000. The note is convertible into shares of Class A common stock calculated as the converting balance divided by 85% of the NASDAQ valuation price. The note provides for payment of principal and accrued interest at maturity, nine months after the purchase price date. The note has a fixed rate of interest of 6% and is secured by all assets of the Company. The note includes an original issue discount of $200,000 plus additional closing costs of $20,000, which are amortized over the life of the note.

The Company granted warrants associated with this note to acquire shares of Class A common stock. In accordance with ASC 470-20, the warrants are recorded at fair value of $1,427,653 in equity as additional paid-in capital (“APIC”) – warrants, and as a contra-liability (discount on note payable) that is amortized over the life of the note. Effective February 9, 2026, as a result of an amendment to the warrants, the Company determined that the fair value of the warrants increased to $1,570,797, and recorded the incremental fair value as a financing expense. During the fourth quarter of the fiscal year ended March 31, 2026, Streeterville Capital, LLC exercised all 457,143 outstanding debt warrants granted with the August 25, 2025 secured convertible promissory note, which had an aggregate fair value of $1,570,797, through a series of separate cash exercise transactions. In connection with such exercises, the Company received cash proceeds and issued shares of Class A common stock pursuant to the terms of the applicable warrant agreements. See Note 13 for additional information regarding the warrant exercises and related equity activity.

The carrying value of the note at March 31, 2026, was $1,890,469 (principal of $2,220,000, less unamortized deferred loan costs of $4,000 and discount of $325,531). Discount amortization and amortization of loan costs included in interest expense was $1,318,122 for the fiscal year ended March 31, 2026. Interest expense on the note was $79,920 for the fiscal year ended March 31, 2026.

Effective October 30, 2025, the Company issued a secured convertible promissory note to Streeterville Capital, LLC in the amount of $560,000. The note is convertible into shares of Class A common stock calculated as the converting balance divided by 85% of the NASDAQ valuation price. The note provides for payment of principal and accrued interest at maturity, nine months after the purchase price date. The note has a fixed rate of interest of 6% and is secured by all assets of the Company. The note includes an original issue discount of $50,000 plus additional closing costs of $10,000, which are amortized over the life of the note.

The Company granted warrants associated with this note to acquire shares of Class A common stock. In accordance with ASC 470-20, the warrants are recorded at fair value of $358,974 in equity as additional paid-in capital (“APIC”) – warrants, and as a contra-liability (discount on note payable) that is amortized over the life of the note. Effective February 9 and March 11, 2026, as a result of amendments to the warrants, the Company determined that the fair value of the warrants increased to $471,923, and recorded the incremental fair value as a financing expense. As of the fiscal year ended March 31, 2026, all 114,286 debt warrants granted with the October 30, 2025 secured convertible promissory note are still outstanding.

The carrying value of the note at March 31, 2026, was $375,342 (principal of $560,000 less unamortized deferred loan costs of $4,407 and discount of $180,251). Discount amortization and amortization of loan costs included in interest expense was $234,316 for the fiscal year ended March 31, 2026. Interest expense on the note was $14,093 for the fiscal year ended March 31, 2026.

Effective December 19, 2025, the Company issued a secured convertible promissory note to Streeterville Capital, LLC in the amount of $560,000. The note is convertible into shares of Class A common stock calculated as the converting balance divided by 85% of the NASDAQ valuation price. The note provides for payment of principal and accrued interest at maturity, nine months after the purchase price date. The note has a fixed rate of interest of 6% and is secured by all assets of the Company. The note includes an original issue discount of $50,000 plus additional closing costs of $10,000, which are amortized over the life of the note.

The Company granted warrants associated with this note to acquire shares of Class A common stock. In accordance with ASC 470-20, the warrants are recorded at fair value of $358,974 in equity as additional paid-in capital (“APIC”) – warrants, and as a contra-liability (discount on note payable) that is amortized over the life of the note. Effective February 9 and March 11, 2026, as a result of amendments to the warrants, the Company determined that the fair value of the warrants increased to $502,746, and recorded the incremental fair value as a financing expense. As of the fiscal year ended March 31, 2026, all 114,286 debt warrants granted with the December 19, 2025 secured convertible promissory note are still outstanding.

The carrying value of the note at March 31, 2026, was $299,306 (principal of $560,000 less unamortized deferred loan costs of $6,222 and discount of $254,472). Discount amortization and amortization of loan costs included in interest expense was $158,280 for the fiscal year ended March 31, 2026. Interest expense on the note was $9,520 for the fiscal year ended March 31, 2026.

Effective August 25, 2025, the Company entered into a Securities Purchase Agreement with Streeterville Capital, LLC pursuant to which Streeterville Capital, LLC committed to provide up to $50.0 million through one or more prepaid equity advances (each, an “Advance”). Following the Company’s direct listing on January 27, 2026, the Company entered into a Prepaid Purchase Agreement (the “PPP Agreement”) with Streeterville Capital, LLC and received an initial advance with an original principal amount of $8,640,000. Subsequent advances may be requested by the Company, subject to specified conditions, including minimum market capitalization, trading volume, Nasdaq compliance, and other customary conditions.

The Advances do not have a stated maturity date and bear interest at a rate of 6% per annum. The Advances are convertible into shares of the Company’s Class A common stock at conversion prices determined in accordance with the terms of the PPP Agreement. Under certain circumstances, including specified trigger events, the conversion price may be adjusted based on the market price of the Company’s common stock, subject to a minimum floor price of $2.00 per share. The PPP Agreement includes an original issue discount of $640,000, that is amortized over 12 months.

The Company granted warrants associated with this PPP Agreement to acquire shares of Class A common stock. In accordance with ASC 470-20, the warrants are recorded at fair value of $5,610,390 in equity as additional paid-in capital (“APIC”) – warrants, and as a contra-liability (discount on note payable) that is amortized over the life of the note. Effective February 9, 2026 and March 11, 2026, as a result of amendments to the warrants, the Company determined that the fair value of the warrants increased to $7,905,247, and recorded the incremental fair value as a financing expense. The warrants expire six months following the Company’s Nasdaq listing date and are exercisable on a cash-only basis. During the fourth quarter of the fiscal year ended March 31, 2026, Streeterville Capital, LLC exercised 635,000 outstanding debt warrants associated with the PPP Agreement, which had an aggregate fair value of $2,745,221, through a series of separate cash exercise transactions. In connection with such exercises, the Company received cash proceeds and issued shares of Class A common stock pursuant to the terms of the applicable warrant agreements. See Note 13 for additional information regarding the warrant exercises and related equity activity.

The carrying value of the PPP Agreement at March 31, 2026, was $3,500,791 (principal of $8,640,000 less discount of $5,139,209). Discount amortization included in interest expense was $1,111,181 for the fiscal year ended March 31, 2026. Interest expense on the note was $92,160 for the fiscal year ended March 31, 2026.

Effective March 31, 2026, the Company entered into an exchange agreement with Streeterville Capital, LLC (the “Exchange Agreement”) pursuant to which certain previously issued 2024 subordinated promissory notes (see below “2024 Notes”) originally issued to various investors between July 15, 2024 and December 10, 2024 were exchanged for a secured convertible promissory note (the “Exchange Note”) in the aggregate principal amount of $2,681,718. The Exchange Note matures on July 1, 2027, and bears interest at a fixed rate of 6% per annum, compounded daily based on a 360-day year. The Exchange Note includes an original issue discount of $242,883 which is amortized over the life of the note.

Pursuant to the Exchange Agreement, Streeterville Capital, LLC acquired the 2024 Notes from the original holders and surrendered the 2024 Notes to the Company in exchange for the Exchange Note. Streeterville did not acquire the 2024 Note held by Ugo de Charette. Instead, on March 30, 2026, the Company repaid the note in full through a cash payment of $130,723. Upon surrender, the 2024 Notes were cancelled and the Company’s remaining obligations under the 2024 Notes became evidenced solely by the Exchange Note. No additional cash consideration was received by the Company in connection with the transaction.

The carrying value of the Exchange Note at March 31, 2026, was $2,438,835 (principal of $2,681,718 less unamortized discount of $242,883). Discount amortization included in interest expense was $0 for the fiscal year ended March 31, 2026. Interest expense on the note was $0 for the fiscal year ended March 31, 2026. The Exchange Note matures in July 2027 and is classified as long-term debt on the Company’s consolidated balance sheet.

Subordinated Promissory Notes

On July 10, 2024, the Company received Board approval to raise $1,500,000 of subordinated promissory notes (the “2024 Notes”). This authorization was later increased to $2,500,000 on August 8, 2024. Between July and December 2024, the Company raised $2,485,000 through various investors, with an interest rate of 18%.

The 2024 Notes provided for payment of principal and accrued interest at maturity, originally set for December 31, 2024. The Company exercised its option to extend the maturity date to June 30, 2025, then December 31, 2025, and subsequently further extended it to March 31, 2026, per its terms.

In December 2024, in connection with the investors’ purchases of Series B Preferred Stock and Warrants (the “Securities”), the Company and certain noteholders entered into Instruments of Cancellation, under which $117,500 of the principal amount and all accrued but unpaid interest of $7,991 was applied toward the purchase of the Securities. The Company derecognized the extinguished principal and accrued interest and recorded the issuance of Series B Preferred Stock and Warrants as a capital transaction. No gain or loss on extinguishment was recognized. Simultaneously, the Company issued a new subordinated promissory note dated December 10, 2024, for the remaining $17,500 principal balance of one investor’s note, with terms consistent with the original 2024 Notes.

Extinguishment of Certain 2024 Notes

In June 2025, the Company and certain investors amended the terms of the 2024 Notes to allow cancellation in exchange for Series B Preferred Stock and warrants. Under ASC 470, this amendment represented a debt extinguishment. At that time, the Company extinguished $400,000 of principal and $62,975 of accrued interest. In connection with the extinguishment, the Company issued 74,430 shares of Series B Preferred Stock, valued at $462,955 based on the Series B subscription price, and warrants to purchase common stock valued at $122,884 using a Black-Scholes model. As the total fair value of the equity instruments issued exceeded the carrying amount of the debt, the Company recorded a loss on debt extinguishment of $122,864.

Cancellation of Certain 2024 Notes

On June 30, 2025, the amended notes were cancelled in exchange for the issuance of 74,430 shares of Series B Preferred Stock and 74,430 warrants. This exchange was treated as a conversion within the amended terms of the notes, and therefore no additional gain or loss was recognized.

Exchange of 2024 Notes

Effective March 31, 2026, the remaining outstanding 2024 Notes, which had an aggregate principal balance of $1,867,500 and accrued unpaid interest of $561,335, were exchanged for the Exchange Note in the aggregate principal amount of $2,681,718 issued to Streeterville Capital, LLC. The Exchange Note matures on July 1, 2027, and bears interest at a fixed rate of 6% per annum, compounded daily based on a 360-day year. The Exchange Note includes an original issue discount of $242,883 which is amortized over the life of the note. 

Streeterville did not acquire the 2024 Note held by Ugo de Charette. Instead, on March 30, 2026, the Company repaid the note in full through a cash payment of $130,723. Upon surrender, the 2024 Notes were cancelled and the Company’s remaining obligations under the 2024 Notes became evidenced solely by the Exchange Note. No additional cash consideration was received by the Company in connection with the transaction. Refer to “Exchange Note” above for additional information regarding the exchange transaction and related terms.

Related Parties

In July 2024, as part of the 2024 Notes, the Company issued a subordinated promissory note to Ugo de Charette, a member of the Company’s board of directors, in the original principal amount of $100,000. The note is a non-convertible, subordinated promissory note that bears interest and does not include a conversion feature. As of March 30, 2026, the outstanding balance of the note, including all accrued and unpaid interest, was $130,723. The principal and accrued interest on the note were paid back in full on March 30, 2026.

On May 7, 2025, the Company received Board approval to borrow $500,000 through the issuance of subordinated promissory notes (the “2025 Notes”). In May 2025, the Company raised $217,678 through two related party investors, with an interest rate of 18%. The 2025 Notes provided for payment of principal and accrued interest at maturity of September 30, 2025. On September 15, 2025, the Company repaid the 2025 Notes including $217,678 of outstanding principal and $12,873 of accrued interest.

On October 9, 2025, the Company received Board approval to borrow $1,500,000 through the issuance of subordinated promissory notes (the “Second 2025 Notes”). In October and November 2025, the Company raised $225,000 through two related party investors, with an interest rate of 6%. The notes include an original issue discount of 10%. The Second 2025 Notes provided for payment of principal and accrued interest at maturity, originally set for December 31, 2025. The Company exercised its option to extend the maturity date to March 31, 2026. On March 30, 2026, the Company repaid the related party Second 2025 Notes including $247,500 of outstanding principal and $5,488 of accrued interest.

2025 Notes

On October 9, 2025, the Company received Board approval to borrow $1,500,000 through the issuance of subordinated promissory notes (the “Second 2025 Notes”). In October and November 2025, the Company raised $1,500,000 through various investors, with an interest rate of 6%. The Notes provided for payment of principal and accrued interest at maturity, originally set for December 31, 2025. The Company exercised its option to extend the maturity date to March 31, 2026. The notes include an original issue discount of 10%, or $150,000, which is amortized over the life of the notes. The notes are convertible into shares of Class A common stock calculated as the converting balance divided by 85% of the NASDAQ valuation price.

During January and March 2026, holders of certain 2025 Notes converted an aggregate of $797,500 in outstanding principal, $14,588 in accrued unpaid interest, and $25,000 of unamortized debt discount into an aggregate of 109,183 shares of the Company’s Class A common stock pursuant to the terms of the applicable notes. Upon conversion, the corresponding debt obligations were extinguished and reclassified to stockholders’ equity. No gain or loss was recognized in connection with the conversions.

During the fiscal year ended March 31, 2026, the Company also repaid an aggregate of $852,500 in outstanding principal and $21,943 in accrued unpaid interest to holders of certain 2025 Notes. No prepayment penalties or fees were incurred in connection with such repayments. As of March 31, 2026, the notes had no remaining balance.

Interest expense related to the 2024 Notes and 2025 Notes was $414,309 and $298,927 for the fiscal years ended March 31, 2026 and 2025, respectively.

Western Technology Investment Note

Effective April 27, 2022, the Company entered into an agreement to obtain financing with Western Technology Investment. The initial commitment of $1,000,000 was received on April 29, 2022. The terms of the note provide for interest-only payments through February 28, 2023, followed by thirty months of principal and interest payments, which began on March 1, 2023, in monthly installments in the amount of $38,967, with a maturity date of September 1, 2025. The note has a fixed rate of interest of 12.25% and is secured by all assets of the Company.

The Company has granted warrants associated with this note to acquire shares of Series A-2 Preferred Stock, which according to Topic 470-20, Debt, are recorded in equity as additional paid-in capital - preferred stock warrants, at fair value as of the date of issuance, and in liabilities, as a contra account, called discount on note payable, which is amortized over the life of the note.

The discount is being amortized over the life of the note using the effective interest method starting in June 2022. All outstanding obligations under the note were repaid in full on August 22, 2025. The carrying value of the note at March 31, 2026, was $0. The carrying value of the note at March 31, 2025, was $222,476 ($225,508 principal, less unamortized deferred loan costs of $1,500 and discount of $1,532). Discount amortization and amortization of loan costs included in interest expense was $3,032 and $13,727 for the years ended March 31, 2026 and 2025, respectively. Interest expense on the note was $8,295 and $56,359 for the years ended March 31, 2026 and 2025, respectively.

EIDL Loan

On August 29, 2020, the Company received a loan from the U.S. Small Business Administration under its Economic Injury Disaster Loan assistance program (the “EIDL Loan”). The principal amount was $25,000, with proceeds used for working capital.

The EIDL Loan matures in August 2050, bears interest at 3.75% per year, with accrued interest payable monthly beginning in March 2023, and principal payments were due beginning in September 2024.

The carrying amount of the EIDL Loan was $24,087 and $24,636 as of March 31, 2026 and 2025, respectively. Interest expense on the EIDL Loan was $915 and $804 for the fiscal years ended March 31, 2026 and 2025, respectively.

Future Maturities of Notes Payable

Future maturities of notes payable are as follows as of March 31: