Note 5. Convertible Notes

February 2025 Securities Purchase Agreement

On February 17, 2025, the Company entered into a Securities Purchase Agreement (“Securities Purchase Agreement”) with Cobra Alternative Capital Strategies, LLC, an entity controlled by the Company’s former Director of Investor Relations, Lance Friedman, whose services were provided through a consulting agreement with Blackstone Capital Advisors, Inc. that was terminated effective February 17, 2025, and Target Capital X LLC (collectively, the “Investors”). Under the Securities Purchase Agreement, the Company issued 20% original issue discount senior secured convertible debentures (“February 2025 Convertible Debentures,”) in an aggregate principal amount of $3,750,000 which included a 20% OID. The conversion price per share of each Debenture is equal to 92.5% of the lowest daily VWAP (as defined in the Debentures), provided that no conversion may be at a price per share less than the floor price of $4.00 per share. At the close of the Reverse Recapitalization, 1,755 of commitment fee shares, after giving effects to the Reverse Splits (see Note 1. Description of Organization and Business), was due to the Investors under these agreements were transferred by Affiliates to the Investors.

The Company analyzed the Securities Purchase Agreement under ASC 480 and ASC 815 and concluded that bifurcation of a single derivative that comprises all of the fair value of the conversion feature(s) (i.e., derivative instrument(s)) is not necessary. As a result, all debt proceeds received have been recorded using the fair value method of accounting under ASC 825, Fair Value Measurement (“ASC 825”). Pursuant to ASC 825, the Company recorded the fair value of the subscription liability on the unaudited condensed consolidated balance sheet using the fair value method. The initial fair value of the subscription liability at issuance was estimated using a Monte Carlo Model. In August and September 2025, the Company repaid a total of $3,032,645 of the February 2025 Convertible Debentures. For the three and six months ended June 30, 2026, the change in fair value was $0 and $211,443, respectively. For the three and six months ended June 30, 2025, the change in fair value was $187,500 and $274,038, respectively, and is included the in the change in fair value of derivative liabilities and convertible notes on the unaudited condensed consolidated statements of operations.

In January 2026, the remaining balance of $943,801 was converted into 974 shares of Series A Convertible Preferred Stock. At June 30, 2026 and December 31, 2025, the fair value of $0 and $1,146,236, respectively, of the Securities Purchase Agreement is included in convertible notes on the accompanying unaudited condensed consolidated balance sheets.

August 2025 Securities Purchase Agreement

On August 19, 2025, the Company entered into a Securities Purchase Agreement (the “August Securities Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which the Company sold to the Purchasers certain notes in an aggregate principal amount of $9,687,500 for a subscription price of $7,750,000 (the “August 2025 Notes”) with a maturity date of February 19, 2026. The August 2025 Notes have a 20% OID of $1,937,500 which is included in the aggregate principal amount of $9,687,500 and do not bear an interest rate except for instances of default. Of the $7,750,000 total funding (before transaction expenses and debt repayments) under the Securities Purchase Agreement, $4,500,000 was funded on August 19, 2025 (the “first Tranche”), $1,000,000 was funded on September 22, 2025 (the “Second Tranche”), and the balance of $2,250,000 (the “Third Tranche”) was funded on September 30, 2025. The August 2025 Notes are convertible into up to an aggregate of 122,648 shares of common stock after giving effects to the Reverse Splits (see Note 1. Description of Organization and Business) (the “Conversion Shares”) subject to certain conditions.

During the year ended December 31, 2025, a total value of $9,523,683 of convertible notes were converted into 73,998 shares of common stock of the Company after giving effects to the Reverse Splits (see Note 1. Description of Organization and Business). The remaining debt of $163,817 was converted into 1,625 shares of common stock in January 2026 after giving effects to the Reverse Splits (see Note 1. Description of Organization and Business). At June 30, 2026, and December 31, 2025, the balance of the August 2025 Notes, net of unamortized debt discount was $0 and $144,240, respectively, and is included in convertible notes on the unaudited condensed consolidated balance sheets.

January 2026 Securities Purchase Agreement

On January 26, 2026, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors (the “Purchasers”), pursuant to which the Company sold to the Purchasers certain debentures in an aggregate principal amount of $2,173,913 for a subscription price of $2,000,000 (the “Debentures”) with a maturity date of April 23, 2026. The Notes have an 8% original issue discount and did bear any annual interest. The Debentures are due the sooner of (i) 90 days, or (ii) upon the Company’s receipt of gross proceeds of at least $8,000,000 in any equity or debt financing. The Company had the option to prepay this Debenture(s) at any time after the Original Issue Date at an amount equal to the Principal Amount. The Company shall provide Holder(s) with ten (10) Business Days’ prior written notice of intention to satisfy the Debentures, whether at maturity, by prepayment, or in default. The Debentures are not convertible. In connection with the financing, the Purchasers received an aggregate of 26,333 shares of the Company’s common stock as incentive shares, after giving effects to the Reverse Splits (see Note 1. Description of Organization and Business). The Debentures were repaid in February 2026. For the three and six months ended June 30, 2026, total amortized debt discounts of $0 and $173,913, respectively, was included in interest expense on the accompanying unaudited condensed consolidated statements of operations.