NOTE 8 – VARIABLE INTEREST ENTITY WITH RELATED PARTY

Investment in Serephon

On May 12, 2026, Greyt Ventures LLC (“Greyt”), a principal shareholder of the Company, Dr. George Shapiro, the Company’s Chief Medical Officer, Mr. Ian Bothwell, the Company’s Chief Executive Officer, and the Company formed Serephon LLC (“Serephon”), a Delaware limited liability company. Serephon intends to act as a management services organization providing non-clinical administrative, operational, advisory, technology, marketing, management, equipment, procurement, and other lawful support services to physician-owned medical practices and other lawful healthcare-adjacent businesses, while not engaging in the practice of medicine. The Board of Directors determined that the Company had no intention of engaging in the clinical services being offered by Serephon other than described below.

In connection with the Serephon business, the Company agreed to supply biologic products to Serephon and/or Serephon’s participating clinics, in exchange for an initial fifty percent (50%) Class A limited liability company membership interest (48 units) in Serephon, with the remaining Class A limited liability company membership interests owned equally by Greyt (16 units), Dr. Shapiro (16 Units) and Mr. Bothwell (16 Units).

Pursuant to Serephon’s governing agreements, in connection with future issuances of equity interests, the Company may be subject to disproportionate dilution until its ownership interest is equal to the ownership interest of each of the other members.

Effective May 12, 2026, Serephon approved annual compensation of $150,000 for each of Ian T. Bothwell, Dr. George Shapiro and Greyt Ventures LLC for services provided to Serephon. Upon Serephon achieving cumulative revenues in excess of $2.5 million, the annual compensation payable to each party will increase to $250,000. Such compensation will accrue until Serephon has sufficient cash flow to make payments, as determined by the Manager. Any accrued and unpaid compensation remains an obligation of Serephon. As of June 30, 2026, aggregate compensation of $53,000 related to these agreements was accrued for services provided during the period.

The Company evaluated its interest in Serephon and its relationships with the other members in accordance with ASC 810, Consolidation, including the related-party provisions thereof. Based upon the structure and purpose of Serephon, the Company’s significant economic interest in Serephon, the relationships among the members, and the Company’s involvement in the activities that most significantly affect Serephon’s economic performance, the Company determined that Serephon is a variable interest entity and that the Company is its primary beneficiary. Accordingly, the Company consolidates Serephon in its consolidated financial statements.

The interests in Serephon not owned by the Company are presented as noncontrolling interests in the Company’s consolidated financial statements. Net income or loss attributable to the noncontrolling interests is separately presented in the consolidated statements of operations. All significant intercompany balances and transactions between the Company and Serephon are eliminated in consolidation.

Serephon’s operations are subject to state-specific laws governing clinic ownership, licensure and the practice of medicine. If applicable regulations require that licensure or structural changes are needed, Serephon may seek clinic licensure, modify its ownership or operating arrangements, or operate as an MSO supporting a physician-owned clinical entity, any of which could impact revenues, increase costs or delay operations.

During the period ended June 30, 2026, Serephon recognized revenues of $431,000 and had a net profit of $72,000, included in the accompanying consolidated statements of operations. As of June 30, 2026, Serephon had total assets of $134,000 and total liabilities of $62,000. The Company has not provided financial support to Serephon that it was not contractually required to provide and has no contractual obligation to provide additional financial support to Serephon.