NOTE 5 – CONVERTIBLE DEBENTURES, NOTES AND OTHER DEBT

As of June 30, 2026, and December 31, 2025, special purchase agreements (“SPAs”) with convertible debentures and notes, net of debt discount and including accrued interest, if any, consist of the following amounts:

SCHEDULE OF CONVERTIBLE DEBENTURES AND NOTES, NET OF DISCOUNT 

Convertible Debentures

As of June 30, 2026, the Company had a derivative liability of approximately $337,200 and recorded a change in fair value of approximately $12,800 on the Convertible Debentures issued in 2019 to our CEO and a bridge investor. As of December 31, 2025, the Company had a derivative liability of approximately $350,000 and recorded a change in fair value of approximately $353,600 during the year ended December 31, 2025, on the Convertible Debentures issued in 2019 to our CEO and a bridge investor.

Bridge Financings

Notes with Officer and Bridge Investor

In April 2019, the Company entered into a Securities Purchase Agreement (the “Bridge SPA”) with our CEO and the Bridge Investor with a commitment to purchase convertible notes in the aggregate of $400,000. For more information on the Bridge SPA, refer to our 2024 Annual Report on Form 10-K filed with the SEC on April 15, 2025. In April 2019, pursuant to the Bridge SPA the Company entered into Convertible Note Tranche #1 (“Tranche #1”) with the Bridge Investor. For more information on Tranche #1, refer to our 2025 Annual Report on Form 10-K filed with the SEC on April 15, 2026. In August 2019, pursuant to the Bridge SPA the Company entered into Convertible Note Tranche #2 (“Tranche #2”) with the Bridge Investor. For more information on Tranche #2, refer to 2025 Annual Report on Form 10-K filed with the SEC on April 15, 2026.

Fall 2019 Debt Financing

In December 2019, the Company closed its Fall 2019 Debt Financing, raising an additional $500,000 bringing the gross proceeds of all debt financings under the Fall 2019 Debt Financing to $1,000,000. The Company entered into those certain Note Purchase Agreements (the “Fall 2019 Note Purchase Agreements”) with certain accredited investors and the officers of the Company for the sale of convertible promissory notes (the “Fall 2019 Notes”). The Company completed the initial closing under the Fall 2019 Note Purchase Agreements in November 2019. The Company issued Fall 2019 Notes in the principal amount of $250,000 to each of Dr. Vuong Trieu, the Company’s Chief Executive Officer, and Stephen Boesch, in exchange for gross proceeds of $500,000. In connection with the second and final closing of the Fall 2019 Debt Financing, the Company issued Fall 2019 Notes to additional investors including $250,000 to Dr. Sanjay Jha, through his family trust, the former CEO of Motorola and COO/President of Qualcomm. The Company also offset certain amounts due to Dr. Vuong Trieu, the Company’s Chief Executive Officer, Chulho Park, the Company’s then Chief Technology Officer, and Amit Shah, the Company’s Chief Financial Officer, all related parties as Officers of the Company, and converted such amounts due into the Fall 2019 Notes. $35,000 due to Dr. Vuong Trieu, $27,000 due to Chulho Park and $20,000 due to Amit Shah were converted into convertible debt under the Fall 2019 Notes. The Company also issued a total of the Fall 2019 Notes of $168,000 to two accredited investors.

All the Fall 2019 Notes provided for interest at the rate of 5% per annum and are unsecured. For more information on the Fall 2019 Debt Financing, refer to our 2025 Annual Report on Form 10-K filed with the SEC on April 15, 2026. There was no activity during the six months ended June 30, 2026 and 2025. The total unamortized principal amount of the Fall 2019 Notes was $850,000 as of June 30, 2026, and December 31, 2025. Further, the Company recorded interest expense of $10,625 and $21,250 on these Fall 2019 Notes for the three and six months ended June 30, 2026, and 2025, respectively. The total amount outstanding under the Fall 2019 Notes, net of discounts for both periods, respectively.

Forever Prosperity (Formerly GMP) Notes

In June 2020, the Company secured $2 million in debt financing, evidenced by a one-year convertible note (the “GMP Note”) from GMP, to conduct a clinical trial evaluating OT-101 against COVID-19 bearing 2% annual interest, and was personally guaranteed by Dr. Vuong Trieu, the Chief Executive Officer of the Company. In September 2021, the Company secured a further $1.5 million in debt financing, evidenced by a one-year convertible note (the “GMP Note 2”) from GMP, to fund the same clinical trial evaluating OT-101 against COVID- 19 bearing 2% annual interest. In October 2021, the Company entered into an Unsecured Convertible Note Purchase Agreement (the “October Purchase Agreement”) with GMP, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $0.5 million. Further, in January 2022, the Company entered into an Unsecured Convertible Note Purchase Agreement (the “January Purchase Agreement”) with GMP, pursuant to which the Company issued a convertible promissory note in the aggregate principal amount of $0.5 million. Cumulatively, these four Notes are referred to as the “GMP Notes”. The GMP Notes carry an interest rate of 2% per annum and mature on the earlier of (a) the one- year anniversary of the date of the Purchase Agreement, or (b) the acceleration of the maturity by GMP upon occurrence of an Event of Default (as defined below). All Notes contain a voluntary conversion mechanism whereby GMP may convert the outstanding principal and accrued interest under the terms of all the GMP Notes into shares of Common Stock (the “Conversion Shares”), at the consolidated closing bid price of the Company’s Common Stock on the applicable OTC Market as of the date the Company receives a Notice of Conversion from GMP. Prepayment of the GMP Notes may be made at any time by payment of the outstanding principal amount plus accrued and unpaid interest. As of June 30, 2026, the GMP Notes are in default, however Forever Prosperity has not called for the repayment of the debt. The total principal outstanding on all the GMP notes, inclusive of accrued interest, was approximately $5.0 million as of June 30, 2026, and approximately $4.9 million as of December 31, 2025. During the three and six months ended June 30, 2026, and 2025, respectively, the Company incurred approximately $22,000 and $44,600 of interest expense, respectively, on all the 4 notes. For a more detailed discussion on the Forever Prosperity Notes, refer to our 2025 Annual Report on Form 10-K filed with the SEC on April 15, 2026.

August 2021 Notes

In August 2021, the Company entered into Note Purchase Agreements with Autotelic - a related party, our CFO – a related party, and certain accredited investors (the “August 2021 investors”), whereby the Company issued four convertible notes in the aggregate principal amount of $698,500 convertible into shares of common stock of the Company for net proceeds of approximately $691,000. The convertible notes carry a five (5%) percent coupon and mature one year from issuance. The majority of the August 2021 investors have the right, but not the obligation, not more than five days following the maturity date, to convert all, but not less than all, the outstanding and unpaid principal plus accrued interest into the Company’s common stock, at a conversion price of $0.18. The August 2021 Note Holders has waived the default in the maturity of the August 2021 Notes and as such there is no event of default and also agreed to extend the date of maturity of the August 2021 Notes to December 31, 2026. The Company determined that the economic characteristics and risks of the embedded conversion option are not clearly and closely related to the economic characteristics and risks of the debt host instrument. Further, the Company determined that the embedded conversion feature meets the definition of a derivative but met the scope exception to the derivative accounting required under ASC 815 for certain contracts involving a reporting entity’s own equity.

The August 2021 convertible notes, inclusive of accrued interest, consist of the following amounts:

  SCHEDULE OF CONVERTIBLE NOTES, NET OF DISCOUNT 

During the three and six months ended June 30, 2026 and 2025, respectively, the Company recognized approximately $8,700 and approximately $17,500 of interest expense on the August 2021 convertible notes, of which approximately $4,000 and approximately $8,100 are attributable to related parties. At June 30, 2026, and December 31, 2025, accrued interest on these convertible notes totaled approximately $0.2 million.

March 2022 Financing

In March 2022, the Company entered into a Securities Purchase Agreement with Fourth Man, pursuant to which the Company issued convertible promissory note in the aggregate principal amount of $0.25 million, convertible into shares of common stock of the Company. The convertible notes carry a twelve (12%) percent coupon and a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. As of December 31, 2023, this note was in default and Fourth Man has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s Common Stock at an initial conversion price established at a fixed rate of $0.10, and subsequently corrected to $0.07 based on the terms of the Securities Purchase Agreement and Fourth Man Note. The Company granted a total number of 1,250,000 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.20 up to five years after issuance. The Placement agent was also granted a total of 125,000 warrants convertible into an equivalent number of the Company Common Stock at a strike price of $0.20 up to five years after issuance, as part of a finder’s fee agreement.

During the year ended December 31, 2025, the Company converted approximately $150,000 in principal and approximately $54,100 in accrued interest and legal fees into 2,991,270 shares of common stock. The note includes a default amount calculated at 125% of the unpaid principal and accrued interest. As the Company failed to repay the note at the original maturity date, the Company has recorded an estimated default penalty of approximately $70,000. In April 2026, the Company issued 300,000 shares to Fourth Man in exchange for a one-time waiver of their right to adjustment of conversion price of their March 2022 note.

The Company recognized approximately $2,500 and $5,000 of interest during the three and six months ended June 30, 2026. Similarly, the Company recognized approximately $8,200 and $15,400 of interest during the three and six months ended June 30, 2025.

May 2022 Mast Financing

In May 2022, the Company entered into a securities purchase agreement with Mast Hill, whereby the Company issued one convertible note in the aggregate principal amount of $605,000 convertible into shares of common stock of the Company (“May 2022 Mast Note”). The convertible notes carry a twelve (12%) percent coupon and a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. Investor has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s common stock at a conversion price established at a fixed rate of $0.10. The note is secured against the assets of the Company, excluding any assets assigned to the JV. The Company granted a total number of 3,025,000 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.20 up to five years after issuance. The Placement agent was also granted a total amount of 302,500 as part of a finder’s fee agreement. Portion of the proceeds were be used to retire some of the November/December 2021 notes.

During the year ended December 31, 2025, the Company converted approximately $272,000 in accrued interest and legal fees into 3,860,000 shares of common stock. The May 2022 Mast Note had been extended through May 27, 2025 at a cost of approximately $82,000, and which is included in the amount outstanding and payable to Mast as of December 31, 2025. Mast Hill further extended the May 2022 Mast Note to December 31, 2026 in August 2025.

In June 2026, Mast Hill fully converted the balance of their note of approximately $847,000, including principal, accrued interest, default penalty and legal fees, into 11,877,507 common shares of the Company.

The Company the original debt discount, deferred financing costs, fair value allocated to the warrants during the three and six months ended June 30, 2026, respectively.

July 2025 Mast Financing

In July of 2025, the Company entered into a securities purchase agreement with Mast Hill, whereby the Company issued a secured convertible note in the aggregate principal amount of $560,000 convertible into shares of Common Stock of the Company (“July 2025 Mast Note”). The July 2025 Mast Note carries a twelve (12%) percent coupon and a default coupon of 18% and mature at the earliest of one year from issuance or upon event of default. Mast Hill has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s Common Stock at a conversion price established at a fixed rate of $0.07. The July 2025 Mast Note is secured against the assets of the Company, excluding any assets assigned to the JV. In connection with the July 2025 Mast Note, the Company granted a total number of 2,000,000 warrants convertible into an equivalent number of the Company Common Stock at a strike price of $0.15 up to five years after issuance. The Company also issued 2,250,000 of the Company’s common stock as commitment shares to Mast. Mast has agreed to extend the July 2025 Mast Note through the end of January 2027. The July 2025 Mast Note, and the May 2022 Note were securitized against all the assets of the Company, excluding the 45% ownership of the Company in the JV, however, Mast Hill fully converted their May 2022 Note.

The July 2025 Mast Note, net of debt discount, consists of the following amounts:

 SCHEDULE OF NET OF DEBT DISCOUNT  

The Company recognized approximately $14,000 and $28,000 of accrued interest during the three and six months ended June 30, 2026. It recognized $0 of accrued interest during the same period in 2025. The Company recognized approximately $51,000 and $102,000 of interest expense attributable to the amortization of the debt discount from the original debt discount, deferred financing costs and fair value allocated to the warrants and the commitment shares during the three and six months ended June 30, 2026, as opposed to $0 during the same period in 2025.

January 2026 Mast Financing

In January of 2026, the Company entered into a securities purchase agreement with Mast, whereby the Company issued one convertible note in the aggregate principal amount of $398,333 convertible into shares of common stock of the Company (“2026 Mast Note”). The convertible notes carry a ten (10%) percent coupon and a default coupon of 18% and mature at the earliest of one year from issuance or upon event of default. Mast has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s common stock at a conversion price established at a fixed rate of $0.07. The note is secured against the assets of the Company, excluding any assets assigned to the JV. The Company granted a total number of 1,422,613 warrants convertible into an equivalent number of the Company common shares at a strike price of $0.15 up to five years after issuance. The Company also issued 1,600,446 of the Company’s common stock as commitment shares to Mast. The 2026 Mast Note was securitized against all the assets of the Company, excluding the 45% ownership of the Company in the JV.

The Company recognized approximately $7,300 and $17,000 of accrued interest during the three and six months ended June 30, 2026, respectively. There was no similar expense during the same periods in 2025. The Company recognized approximately $32,900 and $77,700 of interest expense attributable to the amortization of the debt discount from the original debt discount, deferred financing costs and fair value allocated to the warrants and the commitment shares during the three and six months ended June 30, 2026.

Pacific Pier June 2026 Financing

On June 23, 2026, the Company entered into the 2026 Pacific Pier SPA with Pacific Pier, whereby the Company issued the 2026 Pacific Pier Note in the aggregate principal amount of $178,410 convertible into shares of common stock of the Company. The convertible notes carry a twelve (12%) percent coupon and a default coupon of 16% and mature at the earliest of one year from issuance or upon event of default. Pacific Pier has the right at any time following issuance date to convert all or any part of the outstanding and unpaid amount of the note into the Company’s common stock at a conversion price established at the lesser of a fixed rate of $0.06 or 85% of the lowest traded price of the Common Stock on the Principal Market on any Trading Day during the ten (10) Trading Days prior to the respective Conversion Date. The Company also issued 500,000 of the Company’s common stock as commitment shares to Pacific Pier.

The Company recognized approximately $410 of accrued interest during the three and six months ended June 30, 2026. There was no similar expense during the same periods in 2025. The Company recognized approximately $1,000 of interest expense attributable to the amortization of the debt discount from the original debt discount, deferred financing costs and fair value allocated to the warrants and the commitment shares during the three and six months ended June 30, 2026.

On August 3, 2026, the Company and Pacific Pier entered into a new note with the exact same terms as the 2026 Pacific Pier SPA and 2026 Pacific Pier Note Refer to our subsequent event disclosure in note 16.

Other short-term advances

Other short-term advances consist of the following amounts obtained from various employees and related parties:

SCHEDULE OF SHORT-TERM LOANS 

As of January 1, 2025, approximately $2 million was outstanding and payable to Autotelic. During the year ended December 31, 2025 Autotelic Inc. provided additional short-term funding of approximately $1.0 million to the Company. During the six months ended June 30, 2026 Autotelic Inc. provided additional short-term funding of $75,000 to the Company. As such, approximately $3.1 million was outstanding and payable to Autotelic at June 30, 2026.

As of January 1, 2025, approximately $76,000 was outstanding and payable to the Company’s CFO. During the year ended December 31, 2025, the CFO provided additional short-term funding of $10,000. As such, approximately $86,000 was outstanding and payable to the Company’s CFO at June 30, 2026.

In December 2023, the Company received $50,000 from the Company’s CEO. In December 2025, the amount due from PPM-2 payable to the CEO of $125,000 was converted into a short-term loan. As such, $175,000 was outstanding to the Company’s CEO at June 30, 2026. As of June 30, 2026, approximately $210,000 was outstanding as short-term advances from certain bridge investors.