NOTE 9 – CONVERTIBLE NOTES PAYABLE AND ACCRUED INTEREST

On March 8, 2024, the Company entered into a convertible promissory note for $150,000. The note accrued interest at a rate of 10% per annum. The principal and accrued interest were due in April 2024. The holder of the note had the option to convert the principal and accrued interest into shares of the Company’s common stock at a conversion rate of $0.70 per share. On April 10, 2024, the company entered into another promissory note for an additional $150,000 whereby the new principal balance was $300,000 with the same terms. On April 29, 2024, the noteholder converted the $300,000 principal balance, along with $1,558 of accrued interest into 430,798 common shares.

From September 1, 2024 through March 31, 2025, the Company borrowed $1,715,000 in convertible promissory notes with conversion terms of the lessor of our stock trading price or $0.50 per share with an interest rate of 10% per annum. On June 10, 2025, the Company entered into a promissory note for $160,000 at a rate of 10% per annum and a maturity date of December 31, 2025. This note included the issuance of 75,000 warrants, with a two-2year term and a strike price of $0.75 per share and had a fair value of $23,649. The Company used the Black-Scholes option pricing model to calculate the warrant fair value, with the following assumptions: no dividend yield, expected volatility of 119.3%, risk free interest rate of 3.72%, and expected option life of 2.0 years. The fair value is required to be recorded as a debt discount and amortized to interest expense over the term of the note. Amortization of the debt discount, included in interest expense, was $2,956 and $23,649 for the three and nine months ended December 31, 2025.

On September 30, 2025, the Company repaid a $25,000 convertible promissory note, dated December 20, 2024, and accrued interest of $2,334.

On September 30, 2025, the Company issued 3,669,806 shares of common stock, with a fair value of $2,018,154, for conversion of all of the remaining convertible notes in the amount of $1,850,000 and accrued interest of $168,154.

The total convertible notes payables (all current liability), including accrued interest, for these convertible notes for the year ended March 31, 2026 is $0, and for the year ended March 31, 2025 is $1,772,021.

Interest expense, including amortization of debt discount, on these convertible notes payable for the years ended March 31, 2026 and 2025 was $113,467 and $57,021, respectively.

June 30, 2025 Amendment to Convertible Notes and Extinguishment Accounting

On June 30, 2025, the Company and the noteholders entered into an amendment to fix the Conversion Price at $0.50 per share, eliminate the variable pricing feature, and change all maturity dates to September 30, 2025. As a result of the amendment, the conversion feature no longer required derivative liability accounting under ASC 815 and instead met the criteria for equity classification under ASC 470-20, Debt with Conversion and Other Options.

The Company evaluated the amendment under ASC 470-50, Modifications and Extinguishments, and concluded that the amendment represented a substantial modification due to the reclassification of the conversion feature from a liability to equity and the resulting change in economic substance. Accordingly, the Company accounted for the amendment as an extinguishment of the existing notes and the issuance of new convertible notes.

The new debt instrument issued upon extinguishment was recorded at its estimated fair value of $1,215,000. The Company recognized a beneficial conversion feature (“BCF”) of $786,908, calculated as the intrinsic value of the fixed conversion option on the commitment date (based on the excess of the Company’s closing stock price of $0.80 over the fixed conversion price of $0.50, multiplied by the number of shares issuable upon conversion). The BCF was recorded as a debt discount with a corresponding increase to additional paid-in capital. The debt discount is being amortized using the effective interest method.

The accounting impact of the amendment is summarized as follows, as of June 30, 2025:

SCHEDULE OF AMENDMENT TO CONVERTIBLE NOTES AND EXTINGUISHMENT ACCOUNTING

As of September 30, 2025, the beneficial conversion feature recorded as debt discount on the convertible notes and related warrants were fully amortized during the period, as the notes matured and were converted on September 30, 2025.

Convertible Notes Issued with Warrants

On February 14, 2025, a total of 250,000 warrants were issued for two Notes totaling $500,000. The warrants have a three-year term with an exercise strike price of $0.90 per share. The warrants were evaluated under ASC 480 and ASC 815 and determined to be equity-classified instruments. The fair value of the warrants at inception was recorded at a discount to the carrying value of the associated notes and is being amortized to interest expense over the term of the notes using the effective interest method. The fair value at issuance was estimated using the binomial option pricing model with the following inputs: closing stock price of $0.74, strike price of $0.90, 3-year term, volatility rate of 113.7%, risk-free rate of 4.26%, and dividend yield of zero. The fair value of the warrants at inception was $98,684 and were being amortized over the thirty-six month term. On September 30, 2025, the convertible notes were converted into common stock and the unamortized remaining balance of the debt discount of $90,219 was fully amortized. Interest expense related to the amortization of the debt discounts associated with warrants was $98,684 and $5,053 for the years ended March 31, 2026 and 2025, respectively.

Fair Value Allocation of Proceeds from Convertible Notes

When convertible notes are issued with warrants, and no derivative liability is present, the proceeds are allocated between the debt and the warrants based on their relative fair values at issuance. When convertible notes are issued with both detachable warrants and embedded derivative liabilities, the proceeds are allocated using a sequential approach: first to the derivative liability at fair value, then to the warrants at fair value, and the residual amount to the debt host. For convertible notes that include only an embedded derivative liability and no warrants, the proceeds are allocated first to the derivative liability at fair value, with the residual amount allocated to the debt host.

Derivative Liabilities – Variable Conversion Features

The Company had $1,215,000 of convertible notes that contained derivative features and evaluated the terms of these convertible notes and determined that certain embedded conversion features were not indexed to the Company’s own stock due to variable conversion price provisions. Accordingly, the embedded conversion features were bifurcated from the host debt instruments and accounted for as derivative liabilities in accordance with ASC 815, Derivatives and Hedging. All of the convertible notes contained derivatives, with similar conversion terms.

The derivative liabilities were measured at fair value on a recurring basis and classified as Level 3 within the fair value hierarchy due to the use of significant unobservable inputs. The initial fair value of the embedded derivatives was recorded as a debt discount with a corresponding derivative liability and was amortized to interest expense over the contractual term of the related notes using the effective interest method.

The fair value of the derivative liabilities was estimated using a binomial option pricing model. The significant assumptions utilized in determining the fair value of the derivative liabilities, based on the weighted-average of the convertible notes, were as follows:

SCHEDULE OF FAIR VALUE OF THE DERIVATIVE LIABILITIES

The following table summarizes activity in the Company’s derivative liabilities:

SCHEDULE OF DERIVATIVE LIABILITIES

For the year ended March 31, 2026, the Company recognized an unrealized gain of $320,404 related to changes in the fair value of derivative liabilities. For the year ended March 31, 2025, the Company recognized an unrealized loss of $106,513 related to changes in the fair value of derivative liabilities.

On September 30, 2025, all outstanding convertible notes containing embedded derivative features were converted into shares of the Company’s common stock. Immediately prior to conversion, the Company remeasured the related derivative liabilities to fair value, resulting in an aggregate derivative liability balance of $768,493. Upon conversion, the derivative liabilities were extinguished and reclassified to additional paid-in capital as part of the equity issuance.

No gain or loss was recognized upon conversion. As a result, the Company had no outstanding derivative liabilities as of March 31, 2026.

Interest expense related to the amortization of debt discounts associated with derivative liabilities was $819,272 and $285,563 for the years ended March 31, 2026 and 2025, respectively.

Fair Value Allocation of Proceeds from Convertible Notes

When convertible notes are issued with warrants, and no derivative liability is present, the proceeds are allocated between the debt and the warrants based on their relative fair values at issuance. When convertible notes are issued with both detachable warrants and embedded derivative liabilities, the proceeds are allocated using a sequential approach: first to the derivative liability at fair value, then to the warrants at fair value, and the residual amount to the debt host. For convertible notes that include only an embedded derivative liability and no warrants, the proceeds are allocated first to the derivative liability at fair value, with the residual amount allocated to the debt host.