NOTE 7 - PRIVATE PLACEMENT -2 (PPM-2) AND JH DARBIE FUNDING

During the period between July 2023 to January 2024, the Company entered into a series of subscription agreements with forty-six accredited investors, whereby the Company issued and converted a total of 94 Units from a previous offering, which resulted in conversion of $2.35 million of old debt into new debt to the Company (the “PPM-2 Financing”). The Company did not receive any cash proceeds through the PPM-2 Financing. Each of the new units under the PPM-2 Financing consisted of:

In December 2025, the Company converted the debt of forty-seven accredited investors from PPM-2 into the new subscription agreements under the new financing (“PPM-3”- See Note 8 below) in three tranches, which resulted in conversion of approximately $2.2 million of the PPM-2 debt into the PPM-3 debt. Two PPM-2 investors did not participate in the PPM-3 financing and as such, their 7 units for a total of approximately $0.2 million was converted into short term loan to the Company. As of June 30, 2026, PPM 2 financing only consists of the returned and unpaid accrued interest and no principal. The short term loan of one of the investors was repaid, including accrued interest, during the six months ended June 30, 2026.

The PPM2 - JH Darbie Financing, net of debt discounts, consisted of the following amounts:

 SCHEDULE OF FUNDS RECEIVED UNDER THE SUBSCRIPTION AGREEMENT

As of December 31, 2025, the Company reviewed the guidance per ASC 470-60 Troubled debt restructurings and ASC 470-50 Debt- Modifications and Extinguishments and concluded that the terms of the agreements were substantially different and accounted for the transaction as a debt extinguishment. The transaction related to the debt extinguishment during the year ended December 31, 2024 resulted in a loss from debt extinguishment of approximately $88,000, with a corresponding increase to additional paid-in capital. All warrants sold in this offering had an exercise price of $0.12 per share of the Company stock, subject to adjustment, are exercisable immediately and expire two years from the date of issuance. The fair value of the warrants was estimated using a Black Scholes valuation models using the following input values:

SCHEDULE OF FAIR VALUE WARRANTS

The Company recorded approximately $318,000 as an initial debt discount related to the four tranches of PPM 2. The Company recognized amortization expense related to the debt discount and debt issuance costs of approximately $0 and $78,000 for the six months ended June 30, 2026 and 2025, respectively, which is included in interest expense in the statements of operations. During the six months ended years ended June 30, 2026 and 2025, the Company incurred approximately $0 and $176,000 of interest expense related to the convertible notes.