DEBT

12 Months Ended

Oct. 31, 2025

NOTE 7 – DEBT

The table below presents outstanding debt instruments as of October 31, 2025 and 2024:

	October 31, 2025			October 31, 2024

Short Term
2021 Series convertible notes – related party	$	-		$	480,000
2024 Senior secured convertible notes payable		593,750			4,718,750
Total Short-Term Debt		593,750			5,198,750
Long Term
Unsecured 6% note payable – related party	$	767,288		$	767,288
Unsecured 4% note payable – related party		1,221,958			1,221,958
2022 Series convertible notes		200,000			200,000
2023 Series convertible notes – stock settled		405,000			405,000
Discount 2023 Series convertible notes		(37,834	)		(51,886	)
2023 Series B convertible notes – stock settled		1,312,600			1,312,600
Discount 2023 Series B convertible notes		(676,304	)		(805,327	)
2025 Senior secured convertible notes payable		8,187,500			-
Discount 2025 Senior secured convertible notes payable		(2,388,419	)		-
Total Long-Term Debt		8,991,789			3,049,633
Total Debt	$	9,585,539		$	8,248,383

The table below presents the future maturities of outstanding debt obligations as of October 31, 2025:


Fiscal year 2026	$	593,750
Fiscal year 2027		8,387,500
Fiscal year 2028		1,717,600
Fiscal year 2029		-
Fiscal year 2030		1,989,246
Total	$	12,688,096

Unsecured 6% Note Payable - Related Party

Interest expense on this note was $46,037 and $46,163 for the years ended October 31, 2025 and 2024, respectively. Accrued interest on this note was $230,313 and $184,275 as of October 31, 2025 and 2024, respectively. This note is unsecured. The original maturity date of this note was December 31, 2025. As of December 31, 2025, the Company and the related party signed an amendment to this note to extend the maturity date to December 31, 2030. This extension resulted in the reclassification from short term to long term of the debt and related liabilities.

Unsecured 4% Note Payable - Related Party

Interest expense on this note was $48,878 and $49,012 for the years ended October 31, 2025, and 2024, respectively. Accrued interest on this note was $244,526 and $195,648 as of October 31, 2025 and 2024, respectively. This note is unsecured. The original maturity date of this note was December 31, 2025 As of December 31, 2025, the Company and the related party signed an amendment to this note to extend the maturity date to December 31, 2030. This extension resulted in the reclassification from short term to long term of the debt and related liabilities.

2021 Series Convertible Notes - Related Party

The principal balance outstanding on the 2021 Series Convertible notes amounted to $0 and $480,000 as of October 31, 2025 and 2024, respectively. The note matured on July 31, 2024 and is unsecured. During the years ended October 31, 2025 and 2024, the Company recorded $7,259 and $27,875, respectively, in interest expense. As of October 31, 2025 and 2024, accrued, but unpaid, interest on these notes was $0 and $81,679, respectively. On January 8, 2025, the Company and the note holder renegotiated this note to a total due of $225,000, non-interest bearing, with $25,000 paid on January 10, 2025 and four payments of $50,000, payable on or before February 1, March 1, April 1, and May 1, 2025. To record the renegotiation of the agreement, the Company recognized a gain on retirement of debt of $343,938, consisting of a reduction of principal of $255,000 and an elimination of accrued interest of $88,938. This was recorded through the statement of operations because the lender is not restructuring the loan to protect his equity and the lender does not hold a significant investment in the Company. The note was fully repaid on April 30, 2025.

2022 Series Convertible Notes

During June and July, 2022, the Company issued a total of $200,000 in 2022 Series Convertible notes to two unrelated parties. These notes are unsecured, earn interest at a rate of 5% per annum and mature in June and July of 2027. These notes are payable solely in common stock of the Company and are convertible (i) upon the closing of a Qualified Financing of at least $5,000,000, (ii) upon the closing of a change in control, (iii) at the option of the holder of the notes or (iv) at maturity. During the years ended October 31, 2025 and 2024, the Company recorded $10,000 and $10,027 in interest expense on these notes, respectively. As of October 31, 2025 and 2024, the Company had accrued $33,233 and $23,233, respectively, in interest on these notes.

2023 Series Convertible Notes – Stock Settled

On January 6, 2023, the Company sold $405,000 of its 8%, unsecured 2023 Series Convertible Notes - Stock Settled (the “January 2023 Notes”) and common stock purchase warrants (“January 2023 Warrants”) to five investors.

On various dates during March and April 2023, the Company sold $787,600 of its 8%, unsecured 2023 Series B Convertible Notes - Stock Settled (the “March 2023 Notes”) and common stock purchase warrants (“March 2023 Warrants”) to six investors.

On various dates during June and July 2023, the Company sold $525,000 of its 8%, unsecured 2023 Series B Convertible Notes - Stock Settled (the “June 2023 Notes”) and common stock purchase warrants (“June 2023 Warrants”) to three investors.

The sale and purchase were made through a Convertible Note and Warrant Purchase Agreement (“Purchase Agreement”) entered into with each investor. The Company followed the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC 480 “Distinguishing Liabilities from Equity” to account for the stock settled debt and ASC 815 “Derivatives and Hedging” to account for the derivative related to the notes and also to determine the number of warrants to be issued at the time of the issuance of the January 2023 Notes, March 2023 Notes, or the June 2023 Notes.

Each of the January 2023 Notes, March 2023 Notes, and June 2023 Notes bear interest at the rate of eight per cent per annum and are payable solely in shares of the Company’s common stock. Each of the January 2023 Notes, March 2023 Notes, and June 2023 Notes may be converted at any time at the option of the holder and are payable in full at the earliest of (i) the completion of a “Qualified Financing,” as defined below, (ii) a change in control, (iii) in the event of default, or (iv) the maturity date, which is five years from the date of issuance. A Qualified Financing is defined in the Purchase Agreement as any financing completed after the date of issuance of either the January 2023 Notes, March 2023 Notes, or June 2023 Notes involving the sale of the Company’s equity securities primarily for capital raising purposes resulting in gross proceeds to the Company of at least $5 million. Upon completion of a Qualified Financing, each of the January 2023 Notes, March 2023 Notes, and June 2023 Notes is convertible into the securities issued in such financing (the “Qualified Financing Securities”) in an amount determined by dividing (i) the outstanding principal on the January 2023 Notes, March 2023 Notes, or June 2023 Notes plus all accrued interest by (ii) the lessor of (x) the “Discounted Qualified Financing Price” and (y) the “Capped Price.” In the event of a change in control or default, voluntary conversion or upon maturity, each of the January 2023 Notes, March 2023 Notes, and June 2023 Notes is convertible into that number of shares of the Company’s common stock that equals (i) the outstanding principal amount of each of the January 2023 Notes, March 2023 Notes, and June 2023 Notes plus any accrued but unpaid interest, divided by (ii) the Capped Price.

The Discounted Qualified Financing Price is defined as the per share price at which the shares of the Qualified Financing Securities are sold in such Qualified Financing as determined for accounting purposes under GAAP, multiplied by 0.75. The Capped Price is the per share price implied by a fully-diluted (on an as-converted to common stock basis), pre-money valuation of $200,000,000 for the Company.

Each January 2023 Warrant issuable by the Company pursuant to the Purchase Agreement entitles the holder to purchase that number of fully paid and nonassessable shares of the Company’s common stock determined (A) in the case following a Qualified Financing, by dividing (i) the sum of the aggregate outstanding principal amount of the January 2023 Note plus all accrued and unpaid interest thereon at the time of conversion multiplied by 0.25 by (ii) the quotient of the Discounted Qualified Financing Price divided by 0.75, or (B) in connection with a Change of Control, by dividing (i) the sum of the aggregate outstanding principal amount of the January 2023 Note plus all accrued and unpaid interest thereon at the time of the January 2023 Note’s conversion, by (ii) the Capped Price, subject to adjustment as set forth in the January 2023 Warrant. In each case, the January 2023 Warrants are exercisable at a price of $16.25 per share (as adjusted for the July 2023, 1 to 26 reverse stock split) for a period of five years.

Each March 2023 Warrant and June 2023 Warrant issuable by the Company pursuant to the Purchase Agreement entitles the holder to purchase that number of fully paid and nonassessable shares of the Company’s common stock determined (A) in the case following a Qualified Financing, by dividing (i) the sum of the aggregate outstanding principal amount of the March 2023 Note plus all accrued and unpaid interest thereon at the time of conversion by (ii) the quotient of the Discounted Qualified Financing Price divided by 0.75, or (B) in connection with a Change of Control, by dividing (i) the sum of the aggregate outstanding principal amount of the March 2023 Note or June 2023 Note plus all accrued and unpaid interest thereon at the time of the March 2023 Note’s or June 2023 Note’s conversion, by (ii) the Capped Price, subject to adjustment as set forth in the March 2023 Warrant or June 2023 Warrant. In each case, the March 2023 Warrants and June 2023 Warrants are exercisable at a price of $16.25 per share for a period of five years.

Participation Rights. Each of the January 2023 Notes, March 2023 Notes, and June 2023 Notes entitle the holder to purchase in a Qualified Financing an amount of Qualified Financing Securities (as defined above) up to 200% of the aggregate principal amount of either the January 2023 Note, March 2023 Note, or June 2023 Notes, respectively, subscribed for by such holder in this Offering.

The Company contemplated ASC 815-15-25-1 related to the valuation of the embedded conversion feature contained in the January 2023 Notes, March 2023 Notes and June 2023 Notes. The Company determined, per the guidance, the embedded conversion feature did not meet the criteria to be classified as a derivative.

The Company assessed the January 2023 Warrants, March 2023 Warrants, and June 2023 first under ASC 480. Based on the attributes of the January 2023 Warrants, March 2023 Warrants, and June 2023 Warrants, the Company determined that each are outside of the scope of ASC 480 and proceeded to assess each under ASC 815 to determine if any are considered indexed to the Company’s own common stock. Because the inputs which affect the number of shares to be issued upon exercise of the January 2023 Warrants, March 2023 Warrants, and June 2023 Warrants are not the inputs per 815-40-15-7E, none are deemed to be indexed to the Company’s own stock and have been recorded as liabilities under ASC 815 (Note 3) at the fair market value. At issuance, the Company recorded a warrant liability related to the January 2023 Warrants of $73,213, which amount is remeasured at fair market value at the end of each reporting period. The warrant liability of $73,213 resulted in the recognition of a debt discount of $73,213 at issuance of the January 2023 Notes and January 2023 Warrants. Further, at issuance of the March 2023 Warrants, the Company recorded a warrant liability of $568,574, which is remeasured at fair market value at the end of each reporting period. The warrant liability of $568,574 resulted in the recognition of a debt discount of $568,574 at issuance of the March 2023 Notes and March 2023 Warrants. Lastly, at issuance of the June 2023 Warrants, the Company recorded a warrant liability of $354,810, which is remeasured at fair market value at the end of each reporting period. The warrant liability of $354,180 resulted in the recognition of a debt discount of $354,180 at issuance of the June 2023 Notes and June 2023 Warrants.

The $73,213 discount associated with the January 2023 Warrants is accreted over five years utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 is 13.0% and 13.0%, respectively. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $14,052 and $12,400, respectively, and a gain on the fair value of the warrant liability of $4,901 and $54,946, respectively.

The $568,574 discount associated with the March 2023 Warrants is accreted over five years utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 is 44.6% and 44.6%, respectively. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $80,295 and $52,724, respectively, and a gain on the fair value of the warrant liability of $38,127 and $427,408, respectively.

The $354,810 discount associated with the June 2023 Warrants is accreted over five years utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 is 39.5% and 39.5%, respectively. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $48,728 and $33,532, respectively, and a gain on the fair value of the warrant liability of $25,414 and $284,903, respectively.

During the years ended October 31, 2025 and 2024 the Company recorded $32,400 and $32,489, respectively, in interest expense on the January 2023 Notes. During the years ended October 31, 2025 and 2024, the Company recorded $63,008 and $63,181, respectively, in interest expense on the March 2023 Notes. During the years ended October 31, 2025 and 2024, the Company recorded $42,000 and $42,115, respectively, in interest expense on the June 2023 Notes.

As of October 31, 2025 and 2024, the Company had accrued $91,129 and $58,729, respectively, in interest on the January 2023 Notes. As of October 31, 2025 and 2024, the Company had accrued $163,503 and $100,495, respectively, in interest on the March 2023 Notes. As of October 31, 2025 and 2024, the Company had accrued $99,666 and $57,666, respectively, in interest on the June 2023 Notes.

2024 Series Senior Secured Convertible Notes – Stock Settled

On November 16, 2023 and January 10, 2024, the Company entered into securities purchase agreements (the “January Purchase Agreements”) with an accredited investor, pursuant to which the Company issued and sold to the investor, in a private placement, (i) senior secured convertible notes (the “January Series 2024 Notes”) in the principal amount of $2,500,000 and $1,250,000, respectively, for a purchase price of $2,000,000 and $1,000,000, respectively, (reflecting a 20% original issue discount), and warrants to purchase shares of common stock of the Company (the “January Series 2024 Warrants”).

On April 11, 2024, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with an accredited investor, pursuant to which the Company issued and sold to the investor, in a private placement, (i) senior secured convertible notes (the “April Series 2024 Notes”) in the principal amount of $218,750 for a purchase price of $175,000 (reflecting a 20% original issue discount), and warrants to purchase shares of common stock of the Company (the “April Series 2024 Warrants”).

On May 13, 2024, the Company entered into securities purchase agreements (the “May Purchase Agreement”) with accredited investors, pursuant to which the Company issued and sold to the investors, in a private placement, (i) senior secured convertible notes (the “May Series 2024 Notes”) in the principal amount of $375,000 for a purchase price of $300,000 (reflecting a 20% original issue discount), and warrants to purchase shares of common stock of the Company (the “May Series 2024 Warrants”).

On June 21, 2024, the Company entered into a letter agreement (the “Target Extension Agreement”) with Target Capital 16 LLC (“Target”). Pursuant to the Target Extension Agreement, the maturity date of the January Series 2024 Notes of the Company held by Target, in the aggregate original principal amount of $3,750,000, was extended by 60 days, to October 16, 2024 (the “Original Final Maturity Date”), provided that, if the Company (A) will have been diligently pursuing the consummation of a Liquidity Event (as defined in the Notes) through such date (as evidenced by the filing of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended) and (y) will have delivered an extension notice, then the Original Final Maturity Date will be extended to November 16, 2024 (the “Extended Final Maturity Date”), and (B) will have consummated a Liquidity Event on or before the Original Final Maturity Date or Extended Final Maturity Date, then the Extended Final Maturity Date will be extended by 180 days from the date of such consummation.

On July 16, 2024, the Company entered into a second letter agreement (the “Target Consolidation Agreement”) with Target. Pursuant to the Target Consolidation Agreement, in consideration of an additional $300,000 paid by Target to the Company, the outstanding January Series 2024 Notes, each as amended by the Target Extension Agreement, were consolidated, amended and restated into a new note (the “July Series 2024 Notes”) under the Purchase Agreement. The July Series 2024 Note has a subscription amount of $3,300,000, an original issue discount of $825,000, and an original principal amount of $4,125,000, and otherwise has the same material terms as the Outstanding Notes.

The January Series 2024 Notes, April Series 2024 Notes, May Series 2024 Notes, and July Series 2024 Notes are collectively the “Series 2024 Notes.” The January Series 2024 Warrants, April Series 2024 Warrants, and May Series 2024 Warrants are collectively the “Series 2024 Warrants.” No Series 2024 Warrants were issued with the July Series 2024 Notes.

Interest on the Series 2024 Notes will accrue commencing on the earlier of the maturity date or upon an event of default, at the annual rate of 20%, due the first day of each calendar month following such date. The January Series 2024 Notes will mature at the earlier of (i) six months from the issuance date (the “Original Maturity Date”) and (ii) the occurrence of a Liquidity Event (as defined in the January Series 2024 Notes), provided that the Company may extend the maturity date for an additional three months (the “January Extension Period”). The April Series 2024 Notes will mature at the earlier of (i) May 16, 2024 and (ii) the occurrence of a Liquidity Event (as defined in the April Series 2024 Notes), provided that the Company may extend the maturity date for an additional three months (the “April Extension Period”). The May Series 2024 Notes will mature at the earlier of (i) May 16, 2024 and (ii) the occurrence of a Liquidity Event (as defined in the May Series 2024 Notes), provided that the Company may extend the maturity date for an additional three months (the “May Extension Period”). The July Series 2024 Notes will mature on October 16, 2024 (the “Original Final Maturity Date”), provided that, if the Company (A) will have been diligently pursuing the consummation of a Liquidity Event (as defined in the Notes) through such date (as evidenced by the filing of a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended) and (y) will have delivered an extension notice, then the Original Final Maturity Date will be extended to November 16, 2024 (the “Extended Final Maturity Date”), and (B) will have consummated a Liquidity Event on or before the Original Final Maturity Date or Extended Final Maturity Date, then the Extended Final Maturity Date will be extended by 180 days from the date of such consummation. The Series 2024 Notes are secured by all of the Company’s assets pursuant to a security agreement between the Company and the investors. The Series 2024 Notes will be convertible, at the option of the investors, into common stock commencing on the maturity date, at a conversion price equal to the product of (x) the Liquidity Event Price (as defined in the Series 2024 Notes) and (y) 0.70 (or 0.60 if the Company has extended the maturity date), provided however, that if no Liquidity Event has occurred by the maturity date then the conversion price will be the amount obtained by dividing (i) $95,000,000 by (ii) the number of shares of common stock outstanding on such date calculated on a fully-diluted basis. In addition, the Company will have the right to effect conversion of the Series 2024 Notes if, at the time (a) a Liquidity Event has occurred and (b) the underlying shares are registered for resale.

The Series 2024 Warrants will be exercisable into the number the shares of common stock obtained by dividing 100% of the original principal amount of the Series 2024 Notes by (ii) the Liquidity Event Price (as defined in the Series 2024 Notes); provided, however, that if no Liquidity Event has occurred by the maturity date, then such percentage will be 150%. The Series 2024 Warrants will be exercisable for a period of five years and have an exercise price equal to the Liquidity Event Price provided however, that if no Liquidity Event has occurred by the maturity date then the exercise price will be the amount obtained by dividing (i) $95,000,000 by (ii) the number of shares of common stock outstanding on such date calculated on a fully-diluted basis.

The Company followed the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC 480 “Distinguishing Liabilities from Equity” to account for the stock settled debt, ASC 470 “Debt,” and ASC 815 “Derivatives and Hedging” to account for Series 2024 Notes and Series 2024 Warrants.

The Company contemplated ASC 815-15-25-1 related to the valuation of the embedded conversion feature contained in the Series 2024 Notes. The Company determined, per the guidance, the embedded conversion feature did not meet the criteria to be classified as a derivative.

The Company assessed the Series 2024 Warrants first under ASC 480. Based on the attributes of the Series 2024 Warrants, the Company determined that each are outside of the scope of ASC 480 and proceeded to assess each under ASC 815 to determine if any are considered indexed to the Company’s own common stock. Because the inputs which affect the number of shares to be issued upon exercise of the Series 2024 Warrants are not the inputs per 815-40-15-7E, none are deemed to be indexed to the Company’s own stock and have been recorded as liabilities under ASC 815 (Note 3) at the fair market value. Because the scenario under which the Series 2024 Notes are analyzed assumes a Liquidity Event, the scenarios under which to analyze the Series 2024 Warrants should also contain a Liquidity Event. As such, the assumed exercise price is $15.00, and the Company would issue 250,000 shares upon exercise of the January Series 2024 Warrants, 14,583 shares upon exercise of the April Series 2024 Warrants, and 25,000 shares upon exercise of the May Series 2024 Warrants. At issuance, the Company recorded a warrant liability of $2,732,304 related to the January Series 2024 Warrants, $157,733 related to the April Series 2024 Warrants, and $269,752 related to the May Series 2024 Warrants, all of which are remeasured at fair market value at the end of each reporting period. The combination of the original issuance discount of $750,000 and the warrant liability of $2,732,304 resulted in the recognition of a debt discount of $3,482,304 at issuance of the January Series 2024 Notes and January Series 2024 Warrants. Similarly, the combination of the original issuance discount of $43,750 and the warrant liability of $157,733 resulted in the recognition of a debt discount of $201,483 at issuance of the April Series 2024 Notes and April Series 2024 Warrants. Finally, the combination of the original issuance discount of $75,000 and the warrant liability of $269,752 resulted in the recognition of a debt discount of $344,752 at issuance of the May Series 2024 Notes and May Series 2024 Warrants.

The combination of the original issuance discount of $750,000 associated with the collected proceeds compared to the principal value of the January Series 2024 Notes and the $2,732,304 discount associated with the January Series 2024 Warrants results in a net discount of $3,482,304 that is accreted over six months utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024, is 659% and 659%, respectively, for the November issuance and 624% and 624%, respectively, for the January issuance. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $0 and $3,482,304, respectively.

Pursuant to ASC 480, the Company assessed the January Series 2024 Notes and the July Series 2024 Notes comparing the present value of the cash flows of both notes at the January Series 2024 Notes effective interest rate. Because the difference between the present value of the January Series 2024 Notes and July Series 2024 Notes cash flows was greater than 10%, the two sets of notes were deemed to be substantially different and, as such, the extinguishment of January Series 2024 Notes were recorded as a gain in the statement of operations. Immediately prior to the extinguishment, the Company recorded a gain on the fair value of the warrant liability of $1,713,320. On the day of the extinguishment, the Company recorded additional proceeds of $300,000, additional original issuance discount of $75,000, the extinguishment of the original warrant liability of $990,719, and a gain on the transition of $740,724.

The combination of the original issuance discount of $43,750 associated with the collected proceeds compared to the principal value of the April Series 2024 Notes and the $157,733 discount associated with the April Series 2024 Warrants results in a net discount of $201,483 that is accreted through the first day of the April Extension Period utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 is over 5,000%. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $0 and $201,483, respectively, and a gain on the fair value of the warrant liability of $32,765 and $100,640 respectively.

The combination of the original issuance discount of $75,000 associated with the collected proceeds compared to the principal value of the May Series 2024 Notes and the $269,752 discount associated with the May Series 2024 Warrants results in a net discount of $344,752 that is accreted through the first day of the May Extension Period utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 was over 104,000%. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $0 and $344,752, respectively, and a gain on the fair value of the warrant liability of $56,169 and $171,878, respectively.

During the years ended October 31, 2025 and 2024, no interest expense was recorded on the Series 2024 Notes. As of October 31, 2025 and 2024, no accrued interest was recorded on the Series 2024 Notes.

The July Series 2024 Target note was extended to March 31, 2025, with an increase in the principal amount of $245,000 and pre-funded warrants were issued for a value of $990,000 as part of the extension transaction. In accordance with ASC 470, the Company has evaluated the consideration given for the extension of the Target note and has determined that the July Series 2024 Target note was extinguished, based on the conclusion that there was a greater than 10% change in the present value of the cash flows of the new loan, compared to the old loan. The Company has recorded a loss on extinguishment of debt of $1,235,000 and $0 for the years ended October 31, 2025 and 2024, respectively. As of March 3, 2025, the Company had paid the July Series 2024 Target note’s entire balance of $4,370,000. The remaining 2024 Series notes outstanding are in the process of being renegotiated with a longer maturity date.

2025 Series Senior Secured Convertible Notes – Stock Settled

On February 27, 2025, the Company entered into securities purchase agreements (the “February Purchase Agreements”) with an accredited investor, pursuant to which the Company issued and sold to the investor, in a private placement, (i) senior secured convertible notes (the “February Series 2025 Notes”) in the principal amount of $6,250,000, for a purchase price of $5,000,000, (reflecting a 20% original issue discount), and warrants to purchase shares of common stock of the Company (the “February Series 2025 Warrants”).

On April 25, 2025, the Company received an additional $350,000 from the same investor to be included in the February Series 2025 Note (the “April Purchase Agreement”) with an accredited investor, pursuant to which the Company issued and sold to the investor, in a private placement, (i) senior secured convertible notes (the “April Series 2025 Notes”) in the principal amount of $437,500 for a purchase price of $350,000 (reflecting a 20% original issue discount), and warrants to purchase shares of common stock of the Company (the “April Series 2025 Warrants”).

On May 21, 2025, the Company received an additional $325,000 from the same investor to be included in the February Series 2025 Note (the “May Purchase Agreement”) with an accredited investor, pursuant to which the Company issued and sold to the investor, in a private placement, (i) senior secured convertible notes (the “May Series 2025 Notes”) in the principal amount of $406,250 for a purchase price of $325,000 (reflecting a 20% original issue discount), and warrants to purchase shares of common stock of the Company (the “May Series 2025 Warrants”).

On October 27, 2025, the Company received an additional $875,000 from the same investor to be included in the February Series 2025 Note (the “October Purchase Agreement”) with an accredited investor, pursuant to which the Company issued and sold to the investor, in a private placement, (i) senior secured convertible notes (the “October Series 2025 Notes”) in the principal amount of $1,093,750 for a purchase price of $875,000 (reflecting a 20% original issue discount), and warrants to purchase shares of common stock of the Company (the “October Series 2025 Warrants”).

The February Series 2025 Notes, April Series 2025 Notes, May Series 2025 Notes and October Series 2025 Notes are collectively the “Series 2025 Notes.” The February Series 2025 Warrants, April Series 2025 Warrants, May Series 2025 Warrants and October Series 2025 Warrants are collectively the “Series 2025 Warrants.”

Interest on the Series 2025 Notes will accrue commencing on the earlier of the maturity date or upon an event of default, at the annual rate of 20%, due the first day of each calendar month following such date. The Series 2025 Notes will mature at the earlier of (i) February 27, 2026 (the “Original Maturity Date”) and (ii) the occurrence of a Liquidity Event (as defined in the Series 2025 Notes), provided that the Company may extend the maturity date for an additional year (the “Extension Period”). The Series 2025 Notes are secured by all of the Company’s assets pursuant to a security agreement between the Company and the investors. The Series 2025 Notes will be convertible, at the option of the investors, into common stock commencing on the maturity date, at a conversion price equal to the product of (x) the Liquidity Event Price (as defined in the Series 2025 Notes) and (y) 0.70 (or 0.60 if the Company has extended the maturity date), provided however, that if no Liquidity Event has occurred by the maturity date then the conversion price will be the amount obtained by dividing (i) $95,000,000 by (ii) the number of shares of common stock outstanding on such date calculated on a fully-diluted basis. In addition, the Company will have the right to effect conversion of the Series 2025 Notes if, at the time (a) a Liquidity Event has occurred and (b) the underlying shares are registered for resale. In October 2025, the parties amended the note to replace the $95,000,000 valuation, mentioned above, with a valuation resulting from a study by a mutually approved valuation expert.

The Series 2025 Warrants will be exercisable into the number the shares of common stock obtained by dividing 100% of the original principal amount of the Series 2025 Notes by (ii) the Liquidity Event Price (as defined in the Series 2024 Notes); provided, however, that if no Liquidity Event has occurred by the maturity date, then such percentage will be 150%. The Series 2025 Warrants will be exercisable for a period of five years and have an exercise price equal to the Liquidity Event Price provided however, that if no Liquidity Event has occurred by the maturity date then the exercise price will be the amount obtained by dividing (i) $95,000,000 by (ii) the number of shares of common stock outstanding on such date calculated on a fully-diluted basis.

The Company contemplated ASC 815-15-25-1 related to the valuation of the embedded conversion feature contained in the Series 2025 Notes. The Company determined, per the guidance, the embedded conversion feature did not meet the criteria to be classified as a derivative.

The Company assessed the Series 2025 Warrants first under ASC 480. Based on the attributes of the Series 2025 Warrants, the Company determined that each are outside of the scope of ASC 480 and proceeded to assess each under ASC 815 to determine if any are considered indexed to the Company’s own common stock. Because the inputs which affect the number of shares to be issued upon exercise of the Series 2025 Warrants are not the inputs per 815-40-15-7E, none are deemed to be indexed to the Company’s own stock and have been recorded as liabilities under ASC 815 (Note 3) at the fair market value. Because the scenario under which the Series 2025 Notes are analyzed assumes a Liquidity Event, the scenarios under which to analyze the Series 2025 Warrants should also contain a Liquidity Event. As such, the assumed exercise price is $5.50, and the Company would issue 1,136,364 shares upon exercise of the February Series 2025 Warrants, 79,545 shares upon exercise of the April Series 2025 Warrants, 73,864 shares upon exercise of the May Series 2025 Warrants and 390,625 shares upon exercise of the October Series 2025 Warrants. At issuance, the Company recorded a warrant liability of $4,448,036 related to the February Series 2025 Warrants, $312,079 related to the April Series 2025 Warrants, $293,942 related to the May Series 2025 Warrants and $529,019 related to the October Series 2025 Warrants, all of which are remeasured at fair market value at the end of each reporting period. The combination of the original issuance discount of $1,250,000 and the warrant liability of $4,448,036 resulted in the recognition of a debt discount of $5,698,036 at issuance of the February Series 2025 Notes and February Series 2025 Warrants. The combination of the original issuance discount of $87,500 and the warrant liability of $312,079 resulted in the recognition of a debt discount of $399,579 at issuance of the April Series 2025 Notes and April Series 2025 Warrants. The combination of the original issuance discount of $81,250 and the warrant liability of $293,942 resulted in the recognition of a debt discount of $375,192 at issuance of the May Series 2025 Notes and May Series 2025 Warrants. The combination of the original issuance discount of $218,750 and the warrant liability of $529,019 resulted in the recognition of a debt discount of $747,769 at issuance of the October Series 2025 Notes and October Series 2025 Warrants.

The combination of the original issuance discount of $1,250,000 associated with the collected proceeds compared to the principal value of the February Series 2025 Notes and the $4,448,036 discount associated with the February Series 2025 Warrants results in a net discount of $5,698,036 that is accreted over twelve months utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024, is 321% and 0%, respectively, for the February issuance. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $2,239,754 and $0, respectively and a gain on the fair value of the warrant liability of $2,330,783 and $0, respectively.

The combination of the original issuance discount of $87,500 associated with the collected proceeds compared to the principal value of the April Series 2025 Notes and the $312,079 discount associated with the April Series 2025 Warrants results in a net discount of $399,579 that is accreted through the maturity date utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 is 409% and 0%. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $127,376 and $0, respectively, and a gain on the fair value of the warrant liability of $163,871 and $0, respectively.

The combination of the original issuance discount of $81,250 associated with the collected proceeds compared to the principal value of the May Series 2025 Notes and the $289,787 discount associated with the May Series 2025 Warrants results in a net discount of $371,037 that is accreted through the maturity date utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 is 453% and 0%. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $103,301 and $0, respectively, and a gain on the fair value of the warrant liability of $156,321 and $0, respectively.

The combination of the original issuance discount of $218,750 associated with the collected proceeds compared to the principal value of the October Series 2025 Notes and the $726,767 discount associated with the October Series 2025 Warrants results in a net discount of $945,517 that is accreted through the maturity date utilizing the effective interest method. The effective interest rate for the years ended October 31, 2025 and 2024 is 482% and 0%. During the years ended October 31, 2025 and 2024, the Company recorded accretion expense of $18,262 and $0, respectively, and a gain on the fair value of the warrant liability of $998 and $0, respectively.

In association with the October Series 2025 Notes, the lender and the Company amended the original note to include the April, May and October Series and renegotiated the conversion methodology from using a $95,000,000 valuation to an independent valuation completed by a mutual agreeable specialist at the time of conversion. The amendment in the conversion feature did not trigger derivative accounting since the net settlement criteria, per ASC 815, was not met, since shares to be delivered upon conversion are not readily convertible to cash. In accordance with ASC 470, the Company has evaluated the changes to the original note and has determined that the original note was extinguished, based on the conclusion that there was a greater than 10% change in the present value of the cash flows of the new loan, compared to the old loan. As part of the transaction, the Company determined the fair value of the notes and recorded a discount related to the February, April and May Series of $1,542,883, which will be accreted over the period ending February 27, 2026. The Company has recorded a loss on extinguishment of debt of $2,459,493 and $0 for the years ended October 31, 2025 and 2024, respectively.

During the years ended October 31, 2025 and 2024, no interest expense was recorded on the Series 2025 Notes. As of October 31, 2025 and 2024, no accrued interest was recorded on the Series 2025 Notes.

The Company intends to exercise its right to a one year extension of these notes, with the revised maturity date being February 27, 2027. This extension resulted in the reclassification from short term to long term of the debt and related liabilities.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Vitro Biopharma, Inc. 10-K