Note 6 - Convertible Notes and Warrants

Convertible notes payable consisted of the following as of June 30, 2026:

Labrys Fund II, L.P.

On August 5, 2025, the Company issued an unsecured convertible promissory note to Labrys Fund II, L.P. in the principal amount of $275,000 for cash proceeds of $250,000, reflecting an original issue discount of $25,000. The note bears interest at 10% per annum and had a stated maturity date of August 5, 2026. In connection with the financing, the Company also issued Labrys a warrant to purchase 45,833 shares of common stock at an initial exercise price of $6.00 per share.

The Company did not make the $151,250 amortization payment due on February 5, 2026. The failure constituted an Event of Default and triggered the holder’s acceleration and default-conversion rights. The Company made no scheduled cash amortization payments through June 30, 2026. Scheduled payments in arrears as of June 30, 2026 aggregated $252,083.32, and the outstanding principal remained $275,000.

On February 6, 2026, the holder converted $9,970.52 of accrued interest and a $1,750 conversion fee, totaling $11,720.52, into 2,800 shares at $4.1859 per share. On April 13, 2026, the holder converted $8,330 of accrued interest and a $1,750 conversion fee, totaling $10,080, into 6,000 shares at $1.68 per share. Neither conversion reduced principal.

Under the terms of the note, principal or interest not paid when due bears default interest at the lesser of 22% per annum or the maximum rate permitted by law, calculated on the basis of a 365-day year and the actual number of days elapsed.

During preparation of the financial statements for the quarter ended June 30, 2026, the Company recognized approximately $13,110 of additional default interest under the Labrys note. The adjustment was recognized in interest expense during the second quarter of 2026. Total accrued interest payable was $19,522 as of June 30, 2026. The adjustment did not reduce the outstanding principal balance of the Labrys note.

The note permits the holder, following an Event of Default, to claim a contractual default amount equal to 150% of outstanding principal and accrued interest, including applicable default interest, together with collection costs. No written waiver, amendment, extension or forbearance agreement had been entered into as of June 30, 2026. See Note 9 for subsequent developments concerning a temporary forbearance arrangement reached with the holder after June 30, 2026.

Monroe Street Capital Partners, LP and Crom Structured Opportunities Fund I, LP

On March 6 and March 9, 2026, the Company issued unsecured convertible promissory notes in the principal amount of $110,000 each to Monroe Street Capital Partners, LP and Crom Structured Opportunities Fund I, LP, respectively, for aggregate cash proceeds of $200,000. Each note reflects a $10,000 original issue discount and includes a one-time $11,000 interest charge.

The Monroe note matures on March 6, 2027, and the Crom note matures on March 9, 2027. No scheduled principal or interest payment was due under either note as of June 30, 2026, and no amount under either note had been converted.

In connection with the notes, the Company issued each investor a warrant to purchase 18,333 shares of common stock at an exercise price of $6.00 per share.

The potential common shares issuable under the notes and warrants were excluded from diluted loss-per-share calculations because their effect would have been antidilutive.