NOTE 8 – PRIVATE PLACEMENT -3 (“PPM-3”) AND JH DARBIE FUNDING

In December 2025, the Company entered into a series of subscription agreements with certain accredited investors pursuant to the JH Darbie Financing, whereby the Company issued and converted a total of 87 Units from the previous PPM-2, into the current subscription agreements under the PPM-3, which resulted in conversion of approximately $2.2 million of the PPM-2 to PPM-3 the Company did not receive any cash proceeds through the December 2025 conversions, with each Unit consisting of:

In December 2025, in a series of three tranches, the Company converted the debt of forty-seven (47) accredited investors from PPM-2 (See Note 7 above) into the current subscription agreements under the PPM-3, which resulted in conversion of $2,175,000 of old debt into new debt to the Company. The Company did not receive any cash proceeds through the conversions. JH Darbie and the Company are parties to a May 2024 placement agent agreement (“Agreement”) pursuant to which JH Darbie had the right to sell a minimum of 10 Units and a maximum of 200 Units on a best-efforts basis. Initial placement agent fees of $25,000 were paid to JH Darbie in June 2024. Subsequently, the Company paid JH Darbie an amount of $326,250 for processing the three tranches of the Financing. Based on the placement agent agreement, JH Darbie was entitled to a non-refundable $25,000 fee to start the due diligence process and 2% due diligence fees and 13% commissions on all subsequent conversions or new funding. In addition, the Company is to provide warrant coverage equal to 10 % of all of the units sold to JH Darbie. As the Company converted an aggregate of 87 units, JH Darbie was entitled to earn a total of 2,175,000 warrants. A total of 2 investors holding 7 units under the PPM-2 opted not to participate in the PPM-3 and approximately $0.2 million of notes were converted into short-term loan to the Company. Subsequently, one of the investors was repaid his loan of $50,000, including accrued interest, before the filing of this Report.

In connection with the consummation of the PPM-3 financing, the Company entered into Registration Rights Agreements granting certain registration rights with respect to the shares of the Company’s Common Stock issued in connection with the financing, as well as the shares of the Company’s Common Stock issuable upon exercise of the Warrants. The issuance of the Units is exempt from the registration requirements of the Securities Act, in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as provided in Rule 506 of Regulation D promulgated thereunder. The shares of common stock and warrants and any shares of common stock issuable upon exercise of the warrants, have not been registered under the Securities Act or any other applicable securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.

The December 2025 JH Darbie Financing, net of debt discounts, consists of the following amounts:

 SCHEDULE OF DEBT RECORDED UNDER THE SUBSCRIPTION AGREEMENT

The Company incurred approximately $0.3 million of issuance costs, consisting of incremental costs related to the issuance of the various instruments bundled in the offering.

Concurrently with the sale of the Units, JH Darbie was granted a total of 2,175,000 stock warrants, exercisable over a two-year period.

The terms of convertible notes are summarized as follows:

Management 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 resulted in a loss from debt extinguishment of approximately $1.2M, which is presented in other expense in the condensed consolidated statements of operations for the year ended December 31, 2025.

The estimated volume weighted grant date fair value of approximately $0.053 per share associated with the warrants to purchase up to 21,750,000 shares of common stock issued in this offering, or a total of approximately $1.2M, was recorded to additional paid-in capital. All warrants sold in this offering have 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 an initial debt discount of approximately $511,600 for the year ended December 31, 2025. The Company recognized amortization expense related to the debt discount and debt issuance costs of approximately $121,500 and $0 for the six months ended June 30, 2026 and 2025, respectively, which is included in interest expense in the statements of operations. During the three and six months ended June 30, 2026, the Company incurred approximately $64,000 and $129,000 of interest expense related to the convertible notes. There was no similar expense during the same period in 2025.