NOTE 8 – NOTES PAYABLE

On September 30, 2024, the Company entered into a credit agreement (the "Credit Agreement") with RMC Credit Facility, LLC ("RMC"). Pursuant to the Credit Agreement, the Company received an advance in the principal amount of $6.0 million, which advance is evidenced by a promissory note (the "Note"). The Note matures on September 30, 2027 (the "Maturity Date"), and interest accrues at a rate of 12% per annum and is payable monthly in arrears. All outstanding principal and interest will be due on the Maturity Date. The Credit Agreement is collateralized by the Company's Durango real estate property and the related inventory and property, plant and equipment located on that

property, as well as the Company's accounts receivable and cash accounts. RMC is a special purpose investment entity affiliated with Steven L. Craig, one of the members of the Company’s board of directors.

The Credit Agreement contains customary events of default, including nonpayment of principal and interest when due, failure to comply with covenants, and a change of control of the Company, as well as customary affirmative and negative covenants, including, without limitation, certain reporting obligations and certain limitations on liens, encumbrances, and indebtedness. The Credit Agreement also limits capital expenditures to $3.5 million per year and contains two financial covenants measured quarterly: a maximum ratio of total liabilities to total net worth and a minimum current ratio. The Company incurred $0.1 million of loan origination fees, included as a debt discount and reduction of the notes payable on the balance sheet. The unamortized debt discount is $22 thousand as of August 31, 2026.

On August 28, 2025, the Company entered into a first amendment to the Credit Agreement. RMC agreed to make an additional advance to the Company in the principal amount of $0.6 million. There was no change to other terms of the agreement. The additional advance of $.6 million was repaid on December 31, 2025.

The Company was not in compliance with the covenants as of August 31, 2026, providing for a maximum ratio of total liabilities to tangible net worth of 2.0 to 1.0, which was computed as 8.96 to 1.0, and a minimum ratio of current assets to current liabilities of 1.25 to 1.0, which was computed as .52 to 1.0. The Company has not received a waiver from RMC through the quarter ended August 31, 2026, but is in compliance with all other aspects of the debt agreement. The debt has been classified as a current liability at August 31, 2026.

On August 28, 2025, the Company entered into a credit agreement (the “RMCF2 Credit Agreement”) with RMCF2 Credit LLC (“RMCF2”), a special purpose investment entity affiliated with Jeffrey R. Geygan, the Company’s former interim CEO and one of the members of the board of directors.

Pursuant to the RMCF2 Credit Agreement, RMCF2 agreed to make an advance to the Company in the principal amount of $1.2 million, which advance is evidenced by a promissory note (the “RMCF2 Note”). The RMCF2 Note matures on September 30, 2027, and interest accrues at a rate of 12% per annum and is payable monthly in arrears. All outstanding principal and interest will be due on the maturity date. The RMCF2 Credit Agreement is collateralized by the Company’s Durango real estate property and the related inventory and property, plant and equipment located on the property, as well as the Company’s account receivable and cash accounts. Of the $1.2 million advanced, $.6 million was repaid on December 31, 2025.

The RMCF2 Credit Agreement contains customary events of default, including nonpayment of principal and interest when due, failure to comply with covenants, and a change of control of the Company, as well as customary affirmative and negative covenants, including, without limitation, certain reporting obligations and certain limitations on liens, encumbrances, and indebtedness. The RMCF2 Credit Agreement also limits capital expenditures to $3.5 million per year and contains two financial covenants measured quarterly: a maximum ratio of total liabilities to total net worth and a minimum current ratio.

The Company was not in compliance with the covenants as of August 31, 2026, providing for a maximum ratio of total liabilities to tangible net worth of 2.0 to 1.0, which was computed as 8.96 to 1.0, and a minimum ratio of current assets to current liabilities of 1.25 to 1.0, which was computed as .52 to 1.0. The Company has not received a waiver from RMCF2 through the quarter ended August 31, 2026, but is in compliance with all other aspects of the debt agreement. The debt has been classified as a current liability at August 31, 2026.

As of August 31, 2026, the Company had $6.0 million outstanding on the Credit Agreement and $0.6 million outstanding on the RMCF2 Credit Agreement. Interest on the outstanding amounts was paid through August 31, 2026. The Credit Agreement and the RMCF2 Credit Agreement were repaid subsequent to August 31, 2026 (see Note 16).

In June 2026, the Company entered into secured loan agreements with a total principal balance of approximately $0.3 million, maturing through July 2031. The notes bear interest at fixed rates of 6.25% and 10.27% per annum and are secured by equipment acquired. Under the terms of the agreements, the Company is required to make 19 monthly payments of approximately $17 thousand and 60 monthly payments of approximately $1 thousand. As of August 31, 2026, the outstanding principal balance was approximately $0.3 million.