NOTE 9 – ROYALTY AGREEMENT LIABILITIES AND REVENUE SHARING AGREEMENTS

Royalty Agreement Liabilities

In November and December 2023, the Company issued 15 promissory note royalty agreements to investors for a total of $417,500. During the fiscal year ended December 31, 2024, the Company issued 3 additional promissory note royalty agreements to investors for an additional $130,000. During the fiscal year ended December 31, 2025, the Company had one note payable for $75,000 convert to a royalty agreement for a total of $622,500. These agreements require the Company to pay up to $50 per unit sold in royalties to these investors based on their investment amounts. The units sold royalty obligation shall commence upon the 500th unit that is produced and sold and continue for 6 (six) calendar years from the anniversary date of the receipt of the first royalty payment. On February 28, 2025, the Company produced and sold the 500th unit relating to these royalty agreements. As of March 1, 2025, the Company entered the royalty period, which will continue until March 31, 2031. Since the Company began selling its new line of products in mid-2024, sales are increasing at a rapid rate. It is difficult to estimate the number of units that will be sold during the six-year royalty period. The royalty agreements have a “buy-out” feature, in which the Company can buy-out the remaining term of the agreements for 200% of the investment amount. The Company determined that this 200% “buy-out” price is the most appropriate method to use for the estimated future payments of royalties. In accordance with ASC 835-30, the Company recognizes an effective interest rate of 50% on the royalties paid based on an estimated future payment of royalties. During the year ended December 31, 2025, the Company sold 723 units and reported $45,007 in royalties to be paid. Of the $45,007 in royalties payable accrued in 2025, the Company recognized a reduction of the royalties liabilities of $22,503 and interest expense of $22,504. During the six months ended June 30, 2026, the Company sold 1,138 units and reported $70,841 in royalties to be paid. Of the $70,841 in royalties payable accrued during the six months ended June 30, 2026, the Company recognized a reduction of the royalties liabilities of $35,421 and interest expense of $35,420. The royalty liabilities payable is comprised of the following at June 30, 2026 and December 31, 2025:

As of December 31, 2025, the Company had paid $15,698 of these royalties and had accrued $29,309 in royalties payable. As of June 30, 2026, the Company paid $76,960 in royalties and had accrued $70,841 in royalties payable. The royalties payable is comprised of the following at June 30, 2026 and December 31, 2025:

Revenue Sharing Agreements

From April 2026 through June 2026, the Company entered into 12 stock subscription and revenue sharing agreements with individuals for $882,500 in cash. These agreements require the Company issue shares of common stock at $0.10 per share for the investment amounts and to pay $2 per unit sold for every $25,000 invested in revenue sharing to these purchasers. The revenue sharing payment obligation began retroactively on April 1, 2026 and continues for 4 (four) calendar years. The Company reports on the units sold and pays the revenue sharing payments on a quarterly basis. The Company recognizes these revenue sharing payments as a decrease in net revenue. The revenue sharing agreements have a “buyback” feature, in which, in the event the purchaser receives 100% of their investment back from receipt of revenue sharing payments, the Company shall have the right to buy back the shares of common stock received and the purchaser’s interest in the revenue sharing program for 100% of the purchaser’s investment made in the stock subscription and revenue sharing agreements. During the three months ended June 30, 2026, the Company sold 373 units and reported $26,334 in revenue sharing to be paid. The revenue sharing payable is comprised of the following at June 30, 2026 and December 31, 2025: