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Notes Payable

12 Months Ended

Dec. 31, 2025

Note 9 –Notes Payable

As of December 31, 2025 and 2024, notes payable and convertible notes payable consisted of the following:


		December 31, 2025									December 31, 2024
		Notes Payable			Debt Discount			Net			Notes Payable			Debt Discount			Net
Avenue - Note payable		$	8,339,366		$	(543,230)		$	7,796,136		$	5,740,402		$	(527,870)		$	5,212,532
Avenue - Convertible note payable			—			—			—			5,000,000			(263,930)			4,736,070
		$	8,339,366		$	(543,230)		$	7,796,136		$	10,740,402		$	(791,800)		$	9,948,602

On November 22, 2022, the Company entered into a Loan and Security Agreement (the “Avenue Loan Agreement”) with Avenue Venture Opportunities Fund, L.P., (“Avenue 1”), and Avenue Venture Opportunities Fund, L.P. II, (“Avenue 2”, and together with Avenue, the “Lender”), for an aggregate principal amount of up to $15,000,000 (the “Avenue Loan”). The initial tranche of the Avenue Loan was $10,000,000, consisting of $4,000,000 from Avenue and $6,000,000 from Avenue 2. Up to $5,000,000 of the principal amount outstanding may be converted at the option of the Lender into shares of the Company’s common stock at a conversion price of $171.84 per share, subject to typical anti-dilution adjustments. The Avenue Loan bears interest at an annual rate equal to the greater of (a) 7.0% and (b) the prime rate as reported in The Wall Street Journal plus 4.45%. The Avenue Loan maturity date was November 1, 2025, but was extended to July 1, 2028 (see below for further discussion). The Company was able to and did request an additional $5,000,000 of gross funding between April 1, 2023 and July 31, 2023, subject to agreed-upon conditions (see below for further discussion). The Company must also make an incremental final payment equal to 4.25% of the aggregate funding, amounting to a premium of $425,000 on the initial tranche. The Company was required to make monthly interest-only payments during the first twelve months of the Avenue Loan, which was increased to up to eighteen months upon the achievement of specified performance milestones. Following the interest-only period, the Company is required to make equal monthly payments of principal and interest until the maturity date, plus interest. The Company could opt to prepay the Avenue Loan, subject to certain prepayment fees depending on the prepayment date, however no such prepayments have occurred.

On May 22, 2023, pursuant to the Avenue Loan Agreement, the Company received an additional tranche of non-convertible debt funding in the amount of $5,000,000. The Company paid approximately $126,000 of origination and legal fees in connection with this debt

funding. The additional funding is subject to the same interest and maturity date as the initial tranche. The additional funding triggered the extension of the interest-only payment period from the original 12 months to 18 months (through May 2024) for the entire outstanding balance due under the Avenue Loan Agreement (initial and additional tranches). Following the interest-only period, the Company was required to make equal monthly payments of principal until the maturity date, plus interest. The Company must also make a final payment equal to 4.25% of the additional tranche, amounting to a premium of $212,500 on the additional tranche. The total final payment on the aggregate borrowing is $637,500. As noted above, the Company could opt to prepay the Avenue Loan, subject to certain prepayment fees depending on the prepayment date, however no such prepayments have occurred.

In June 2024, the Company began making principal payments related to the Avenue Loan in the amount of $833,333 per month plus interest.

On November 22, 2024, the Company entered into an amendment of the Avenue Loan (the “First Amendment”), whereby the Lender agreed to defer principal and interest payments on the amounts outstanding until March 2025. In connection with the First Amendment, the Company issued an aggregate of 23,771 shares of its common stock to the Lender. The price per share was based on the Company’s five trading-day volume-weighted average price (VWAP) preceding the date of the First Amendment of approximately $8.42 per share. The shares had a fair value of approximately $200,000 on the issuance date, which value was accounted for as a component of debt discount.

On February 21, 2025, the Company entered into a Second Amendment (the “Second Amendment”) to Supplement the Avenue Loan Agreement whereby Avenue agreed to defer principal and interest payments on amounts outstanding until the end of September 2025. Deferred interest continued to accrue on the outstanding principal amount at the interest rate stated in the original Avenue Loan Agreement.

Under the Second Amendment, the Company agreed to use a portion of the proceeds from its at-the-market offering (see Note 13 – Stockholders’ Equity (Deficit), At-The-Market Offering) to pay down the outstanding principal amount under the Avenue Loan Agreement as follows: a) until the Company raised $3.0 million of aggregate proceeds, 65% of the proceeds would be remitted to the Lenders as a payment in respect of the outstanding principal amount and any accrued interest, and b) after the Company raised $3.0 million of aggregate proceeds, 75% of the proceeds would be remitted to the Lenders as a payment in respect of the outstanding principal amount and any accrued interest. In connection with the Second Amendment, the Company paid the Lenders $1.7 million in net proceeds, of which $1.4 million was applied to principal and $0.3 million was applied to interest, received from the at - the - market offering for the period from February 21, 2025 to June 17, 2025, which was equivalent to 65% of the proceeds raised less a negotiated adjustment of $0.3 million. This requirement was eliminated in conjunction with the Fourth Amendment to Supplement to the Avenue Loan Agreement (the “Fourth Amendment”) executed on June 17, 2025 (see below for discussion of the Fourth Amendment).

Pursuant to the Second Amendment, at any time on or after April 1, 2025, the Lenders also had the right, at their discretion, but not the obligation, to convert an aggregate amount of up to $10.0 million of the aggregate principal amount under the Avenue Loan Agreement into shares of the Company’s common stock, at a conversion price equal to $1.68 per share. During the year ended December 31, 2025, Avenue converted principal of $680,098 (less $39,762 of debt discount) into 404,820 shares of common stock. The conversion feature was eliminated in conjunction with the Fourth Amendment executed on June 17, 2025.

The Second Amendment of the Avenue Loan was accounted for as an extinguishment, due to the addition of the substantive conversion option. Accordingly, the $10.3 million modification date carrying value of the pre - modification Avenue Loan was derecognized and the $10.2 million modification date fair value of the post - modification Avenue Loan was recognized, resulting in the recording of a $0.1 million extinguishment gain. The post - modification Avenue Loan was valued using a Monte Carlo simulation model using the following key assumptions: (a) discount rate of 70.0%; (b) volatility of 130.0%; and (c) risk - free rate of 4.2%.

On May 30, 2025, the Company entered into the Third Amendment to Supplement to the Avenue Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the conversion rights provided to the Lenders under the Second Amendment were revised to restrict the Lenders from exercising such conversion right if doing so would cause the Lenders and their affiliates to beneficially own more than 9.99% of the Company’s outstanding shares of common stock immediately after the conversion. The Lenders had the ability to increase or decrease the beneficial ownership limitation up to a maximum of 19.99% of the Company’s outstanding shares of common stock with a written notice to the Company and provided that such an increase in the beneficial ownership limitation would not have been effective until 61^st day following the written notice. Additionally, the Third Amendment provided that if a significant corporate event occurred (such as a merger, asset sale, or stock recapitalization) while the conversion option remained in effect, the Lenders would have retained the right to convert the loan as if the conversion had occurred immediately prior to such event. The Company determined that the Third Amendment should be accounted for as a modification and continuation of the existing indebtedness. The conversion feature was eliminated in conjunction with the Fourth Amendment executed on June 17, 2025.

On June 17, 2025, the Company entered into the Fourth Amendment which, among other things, extended the maturity date of the loans to July 1, 2028; provided for an interest - only period from July 1, 2025 until January 31, 2027; reduced the interest rate from 12.0% to 8.0% (payable half in cash and half in kind); eliminated the option to convert an aggregate amount of up to $10.0 million of the loans outstanding into shares of common stock; eliminated the final payment of $637,500; and provided the Company with the option to prepay the debt owed under the Avenue Loan Agreement.

In connection with the Fourth Amendment, the Company issued to the Lenders warrants (the “Lender Warrants”) to purchase an aggregate of 350,000 shares of common stock. The Lender Warrants are exercisable immediately and may be exercised for five years from the initial issuance date at an exercise price of $4.00 per share. The Lender Warrants, if still outstanding at the expiration date, will be automatically exercised on a cashless basis. The Company determined that the Lender Warrants should be equity classified and valued the Lender Warrants at $858,270 using the Black - Scholes option pricing model using the following inputs (common stock market price of $2.97; volatility of 124%; dividend rate of 0.00% and risk - free rate of 3.99)%.

The Company determined that the Fourth Amendment should be accounted for as a troubled debt restructuring. Because the remaining undiscounted cash flows of the Avenue Loan exceed the June 17, 2025 carrying value, no gain was recognized and a new effective interest rate was established based on the new carrying value of the Avenue Loan and the amended cash flows. Finally, the $858,270 value of the Lender Warrants was capitalized as additional debt discount and will be amortized over the new term of the Avenue Loan, using the effective interest method.

The Avenue Loan requires the Company to make and maintain representations and warranties and other agreements that are customary in loan agreements of this type. The Avenue Loan is secured by all of the Company’s assets, including intellectual property. The Avenue Loan also contains customary events of default, including non-payment of principal or interest, violations of covenants, bankruptcy and material judgments. Upon the occurrence of an event of default, all interest and principal immediately become due and payable. In addition, Avenue will have the right to exercise any other right or remedy provided by applicable law.

During the years ended December 31, 2025 and 2024, the Company recorded interest expense relating to the Avenue Loan of $1,557,788 (which includes $655,997 of amortization of debt discount) and $2,468,863 (which includes $759,049 of amortization of debt discount), respectively. During the year ended December 31, 2025, interest expense in the amount of $379,998 was added to the principal balance outstanding.

BankDirect Capital Finance Loan

On February 24, 2024, the Company issued a note payable in the amount of $505,050 for the purchase of a directors and officers’ liability insurance policy (the “2024 D&O Loan”). The note accrued interest at a rate of 8.15% per year and matured on October 24, 2024. The 2024 D&O Loan was payable in eight monthly payments of $65,076 consisting of principal and interest. The note payable was repaid in full during the year ended December 31, 2024. Interest expense was $15,568 for the year ended December 31, 2024.