House of Doge Inc. Debt Disclosure

NOTE 7 — DEBT

 

Convertible Debt

 

The Company issued convertible debt during 2022 through May of 2024 under its initial round of convertible debt. The balance of convertible debt as of December 31, 2024 was $5,722,511 in outstanding principal and no remaining unamortized debt issuance costs and debt discount. As of December 31, 2024, accrued interest for the notes totaled $888,894.

 

During 2024, the Company issued convertible debt in the form of original issue discount convertible promissory notes. These notes provide investors with a 20% discount on their investment amount. To determine the principal amount of the notes, the investment amount is divided by 0.80, reflecting that 20% original issue discount. Concurrent with the issue and sale of the notes, each holder was entitled to receive a number of shares of the Company’s Common Stock, par value $0.0001 per share equal to: (i) in the case of a holder that is a Lead Investor, the quotient resulting when 20% of the Holder’s purchase price is divided by a price per share equal to the Valuation Cap divided by the Company Capitalization, (ii) In the case of all other holders, the quotient resulting when 5% of the Holder’s purchase price is divided by a price per share equal to the Valuation Cap divided by the Company Capitalization. The purchase price means the product of the principal amount of the note multiplied by 0.80. The Valuation Cap is set at $20,000,000 and the Company Capitalization means the sum of all equity securities (on an as-converted basis) issued and outstanding, assuming exercise or conversion of all outstanding vested and unvested options, warrants and other convertible securities, but excluding the notes and all equity securities reserved and available for future grant under any equity incentive or similar plan of the Company.

 

During the year ended December 31, 2024, the Company extended the maturity date of the debt and incurred an additional $997,253 in principal due to extension fees. During the same period, the Company also raised a total of $158,424 in additional operating capital through the issuance of additional original issue discount convertible promissory notes, all of which carry the same terms as all other issued convertible debt. The issuance of these notes resulted in an additional debt discount totaling $39,606 for a total principal amount of $198,030. In addition, note holders were entitled to 2,302 shares of Common Stock and with a share fair market value between $2.42 and $3.46 for a total additional debt discount and share payable of $6,819 during the year ended December 31, 2024. The Company recorded $46,410 in amortization of debt discount to interest expense on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024. The Company also incurred an additional $525,774 in accrued interest during the year ended December 31, 2024.

 

In connection with the completion of the IPO on March 7, 2025, which was deemed a qualifying financing event, the Company converted the total balance due to all holders of the original issue discount convertible promissory notes. The actual date of conversion of the notes was completed on March 6, 2025. The total amount that was converted was $6,611,405, which was the total principal of $5,722,511 and accrued interest of $888,894 as of December 31, 2024. These were converted into a total of 1,912,176 shares of the Company’s Common Stock. An additional accrual of interest through the date of the IPO, March 7, 2025, was recorded as of March 7, 2025 for $103,101 and this balance is included as a share payable since it was convertible to shares of Common Stock totaling 29,660 as of the date of IPO. In April of 2025, 29,305 of these shares were issued, representing an increase of $101,867 for an updated total converted amount of $6,713,272 for the year ended December 31, 2025. The remaining 355 shares are pending to be issued and the balance of the accrued interest for the shares that were not yet issued, $1,234, is recorded as a share payable balance until issued.

Notes Payable

 

In June of 2024, the Company received a loan in the amount of $12,198 which was payable in the foreign currency of Great British Pounds. This loan had no maturity date or interest rate assigned to the loan. It was also unsecured and there were no assets pledged on the loan. This loan was revalued at December 31, 2024 and had a principal balance of $12,900. During the year ended December 31, 2025, a gain on foreign currency exchange was recognized for $424 on the revaluation of the loan. This loan was repaid in March of 2025 as part of a confidential release and final agreement, detailed below.

 

During August and September of 2024, the Company raised $280,000 in short-term loans that are expected to be repaid within a year, although a maturity date is not specified. These loans have a 100% interest fee that is due at the date of repayment and an additional 100% fee in shares of the Company’s Common Stock issued at the current fair market value, which was $1.41 at the dates of the loans. In September of 2024, the Company issued 198,454 shares of Common Stock in full payment of the $280,000 amount that was payable in shares of the Company. In the same period, the Company repaid $25,000 of the short-term loans along with the corresponding $25,000 interest fee. These loans resulted in a total interest expense of $560,000 that was recognized during the year ended December 31, 2024. A total principal balance of $255,000 and accrued interest of $255,000 remained outstanding as of December 31, 2024. The Company repaid $175,000 of the principal amount along with $175,000 of the accrued interest amount as part of a confidential release and final agreement, detailed below. The remaining $80,000 in principal and $80,000 in interest, was repaid in April of 2025, as detailed below, in connection with a loan repayment agreement that was entered into with a shareholder of the Company on April 2, 2025.

 

In November of 2024, the Company raised $30,000 from a short-term loan which carried a 100% interest fee. In addition, the Company requested from the underwriter that they unlock 24,500 shares of common stock currently owned by the lender to be available as freely floating, publicly tradable shares. A total principal balance of $30,000 and accrued interest of $30,000 remained outstanding as of December 31, 2024. The noteholder agreed to be repaid a total of $29,223 for the principal amount and $29,223 for the accrued interest on the loan. This resulted in a gain on debt extinguishment of $1,554. The final payment was made on April 1, 2025.

 

The Company entered into a loan agreement with one of its shareholders on February 5, 2025 for an amount totaling $9,314 and agreed to pay an interest fee of 200% of the principal loan and an additional 100% in common stock once the Company became a public company. In addition, this shareholder made an additional loan of $6,186 to the Company on February 10, 2025. The additional loan was not subject to a loan agreement and did not carry any written terms. The Company became a public company on March 6, 2025. On April 2, 2025, the shareholder and the Company agreed on repayment terms for those two loans and a pre-existing loan from August of 2024 (see above) that was owed to this shareholder together with all accrued interest. The total repayment was $206,617 and it included $95,500 in principal and $111,117 in interest. The total principal amount includes the $15,500 loans from February 2025 and the remaining $80,000 in principal and $80,000 in interest from a loan which was made to the Company during August of 2024. The final payment was made in April of 2025.

Confidential Release and Final Agreement

 

From January through March of 2025, the Company borrowed money from shareholders of the Company to pay for expenses in connection with the IPO. Total proceeds of $86,150 were received by the Company and these borrowed funds did not have a loan agreement or loan terms. These shareholders also had notes payable made to the Company during 2024, which are part of the notes payable disclosed in Note 6 totaling $187,900 in principal as of December 31, 2024.

 

In March of 2025, the Company entered into a confidential release and final agreement to settle all loan amounts and interest payable to these shareholders with a total payment of $650,000. The agreement also supersedes all prior loan agreements and settles any future claims for any reason and no longer requires the payment of any shares of equity. The total loans that were paid had a principal amount of $273,626 and accrued interest of $175,000. The Company recognized an additional $201,374 in interest expense. Payment of the settlement amount was made on March 31, 2025.

 

Convertible Debt - December 2024

 

In December of 2024, the Company raised $25,000 from a short-term convertible promissory note which is unrelated to the previously issued convertible debt through May of 2024 and carries different terms. This note has a 30% original issue discount that constitutes the interest due on the loan and was added to the principal balance, a payment in equity kicker shares of the Company’s common stock having a combined value equaling 30% of the principal amount and a maturity date of February 15, 2025. The number of the shares subject to the equity kicker were calculated based on the Company’s anticipated price per share at the IPO, which was at $4. The original issue discount and the equity kicker shares had values of $7,500 each for a total discount on debt of $15,000. During 2024, the Company recognized $4,219 in amortization of debt discount on the consolidated statements of operations and comprehensive loss. The issuance of this loan resulted in an additional 1,875 shares of common stock becoming due and were not issued as of December 31, 2024. As such, it resulted in an increase of $7,500 to the shares payable balance during the year ended December 31, 2024. A total principal balance of $32,500 and unamortized debt discount of $10,781 was outstanding as of December 31, 2024. The Company amortized the remaining debt discount amount of $10,781 to interest expense during the year ended December 31, 2025.

 

Loan repayment options included the proceeds of the Company’s IPO, which occurred on March 6, 2025 and was the earliest of all other options. The lender had the option to convert the debt into shares of the Company’s common stock but, instead, the repayment of the loan principal of $25,000 and accrued interest of $7,500 was completed in March of 2025. The 1,875 shares were issued in April of 2025, subsequent to the maturity date of February 15, 2025, and were no longer included as a shares payable as of December 31, 2025.

 

In March of 2025, the Company raised an additional $150,000 from two short-term promissory notes which have a 30% original issue discount that constitutes the interest due on the loan and was added to the principal balance, a payment in equity kicker shares of the Company’s common stock having a combined value equaling 30% of the principal amount and a maturity date of April 10, 2025. The number of the shares subject to the equity kicker were calculated based on the Company’s anticipated price per share at the IPO, which was at $4. The original issue discount and the equity kicker shares had values of $45,000 each for a total discount on debt of $90,000. The issuance of this loan resulted in an additional 11,250 shares of common stock becoming due. As such, it resulted in an increase of $45,000 to the shares payable balance during 2025. The Company repaid the total loan principal of $150,000 and accrued interest of $45,000 in March of 2025. The shares in connection with the share payable amount of $45,000 were issued in April of 2025 and were no longer included as a shares payable as of December 31, 2025. The Company amortized the $90,000 debt discount amount to interest expense during the year ended December 31, 2025.

Yorkville Facility

 

Yorkville Purchase Agreement

 

On December 4, 2025, the Company, House of Doge and Yorkville entered into the Yorkville Purchase Agreement, whereby the Company has the right, but not the obligation, to sell to Yorkville, and Yorkville is obligated to purchase from the Company, up to $100,000,000 in the Company’s Common Stock, or the lesser of (x) $100,000,000 in aggregate gross purchase price of newly issued shares of Common Stock (“Equity Line Securities”) and (y) 3,957,838 shares of Common Stock (“Yorkville Exchange Cap”), provided that the Yorkville Exchange Cap shall not apply to any shares sold to Yorkville at or above the Base Price. Sales of shares of the Company’s Common Stock to Yorkville under the Yorkville Purchase Agreement, and the timing of any such sales, will be determined by the Company from time to time in its sole discretion and will depend on a variety of factors, including, among other things, market conditions, the trading price of the Company’s Common Stock, and determinations by the Company about the use of proceeds of such Common Stock sales. The net proceeds from any such sales under the Yorkville Purchase Agreement will depend on the frequency with, and the price at which the shares of the Company’s Common Stock are sold to Yorkville.

 

Upon the initial satisfaction of the conditions to Yorkville’s obligation to purchase shares of the Company’s Common Stock set forth under the Yorkville Purchase Agreement (the “Commencement”), including that a registration statement registering the resale by Yorkville of the shares of the Company’s Common Stock under the Securities Act, purchased pursuant to the Yorkville Purchase Agreement (the “Resale Registration Statement”) is declared effective by the SEC and a final prospectus relating thereto is filed with the SEC, the Company will have the right, but not the obligation, from time to time, at its sole discretion and on the terms and subject to the limitations contained in the Yorkville Purchase Agreement, until no later than the first day of the month following the 36-month anniversary of the Commencement Date (as defined in the Purchase Agreement), to direct Yorkville to purchase up to a specified maximum amount of the Company’s Common Stock as set forth in the Yorkville Purchase Agreement by delivering written notice to Yorkville prior to the commencement of trading on any trading day. The purchase price of the Company’s Common Stock that the Company elects to sell to Yorkville pursuant to the Yorkville Purchase Agreement will be 97% of the volume weighted average price (the “VWAP”) of the Company’s Common Stock during the applicable purchase date on which the Company has timely delivered a written notice to Yorkville, directing it to purchase its Common Stock under the Yorkville Purchase Agreement.

 

A commitment fee of $1,000,000 was earned by Yorkville upon the closing of the Yorkville Purchase Agreement and is payable in cash with 10% of each purchase price paid by Yorkville of Common Stock being withheld as repayment for the fee. In the event that the Yorkville Purchase Agreement is terminated prior to full repayment of the commitment fee, the unpaid balance of the commitment fee will immediately become payable. The Company has recognized a deferred offering cost and commitment fee payable of $1,000,000 in the consolidated balance sheets as of December 31, 2025 and this balance will be reclassified from a deferred offering cost and recognized as an offering cost as Yorkville purchases the Company’s Common Stock and repayment of the commitment fee is made.

 

The Resale Registration Statement was declared effective by the SEC on January 16, 2026.

 

The Yorkville Purchase Agreement was determined to be a freestanding financial instrument which did not meet the criteria to be accounted for as a derivative instrument and meets the criteria under ASC 815-40, “Derivatives and Hedging —Contracts In Entity’s Own Equity” (“ASC 815-40”) to be recognized within equity upon the sale of the Company’s Common Stock in accordance with the terms of the agreement. As of December 31, 2025, the conditions to Yorkville’s obligation to purchase shares of the Company’s Common Stock have not been met and no shares have been sold under the Yorkville Purchase Agreement.

 

Yorkville Convertible Note

 

Concurrently with the Yorkville Purchase Agreement, the Company and House of Doge, jointly and severally, authorized the issuance of the Yorkville Convertible Note to Yorkville, in the aggregate original principal amount of up to $11.0 million, pursuant to which Yorkville agreed to advance the aggregate principal amount to the Company in two advances (each an “Advance”). In respect of each Advance, Yorkville will pay a purchase price equal to 90% of the principal amount of such Advance. The first Advance under the Yorkville Convertible Note in the original principal amount of $3,850,000 was issued on December 4, 2025, and the second Advance in the original principal amount of $7,150,000 will be issued upon the satisfaction of the conditions set forth in the Yorkville Convertible Note.

 

The Yorkville Convertible Note is convertible into shares of the Company’s Common Stock in certain circumstances in accordance with the terms of the Yorkville Convertible Note at a conversion price equal to 95% of the lowest daily VWAP of the Company’s Common Stock during the five consecutive trading days immediately preceding the relevant conversion date, subject to adjustment pursuant to the terms of the Yorkville Convertible Note. The Company received net proceeds of $3,365,000, after the deduction of transaction related expenses, from the closing of the first Advance pursuant to the Yorkville Convertible Note, with the resulting net proceeds being delivered to House of Doge at the direction of the Company and House of Doge. This amount is classified as advances to a related party on the Company’s consolidated balance sheet as of December 31, 2025.

 

Consistent with certain applicable Nasdaq rules, the Company may not issue to Yorkville more than 3,957,838 Equity Line Securities under the Yorkville Purchase Agreement or the Yorkville Convertible Note, which number of shares is equal to 19.99% of the shares of the Company’s Common Stock issued and outstanding immediately prior to the execution of the Yorkville Purchase Agreement, unless the Company obtains stockholder approval to issue shares of its Equity Line Securities in excess of such limit in accordance with applicable rules of Nasdaq.

Moreover, the Company may not issue or sell any Equity Line Securities to Yorkville that, when aggregated with all other shares of the Company’s Common Stock then beneficially owned by Yorkville and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in Yorkville beneficially owning more than 4.99% of the issued and outstanding shares of the Company’s Common Stock.

 

The Company has elected to account for this convertible debt instrument with the FVO in accordance with ASC 825, “Financial Instruments”. The Company elected the FVO for the Yorkville Convertible Note due to the complexity of its embedded features, including conversion options and other terms that could otherwise require bifurcation and separate accounting under ASC 815, Derivatives and Hedging. By electing the FVO, the Company accounts for the instrument in its entirety at fair value, which simplifies the accounting and provides more transparent and relevant financial reporting by reflecting the economic characteristics of the instrument as a whole. As such, the Yorkville Convertible Note is required to be measured at fair value at the date of issuance, December 4, 2025, and at subsequent reporting periods.

 

The fair value of the Yorkville Convertible Note as of December 4, 2025 and December 31, 2025 was $3,727,014 and $3,771,845, respectively. During the year ended December 31, 2025, the Company recorded a loss of $44,831 related to the change in fair value of the Yorkville Convertible Note liability. For each valuation, the Company used the probability-weighted expected return model (“PWERM”). Please refer to Note 10.

 

Yorkville Warrant

 

Concurrently with the execution of the Yorkville Purchase Agreement and the issuance of the Yorkville Convertible Note, on December 4, 2025, the Company issued to Yorkville a warrant (the “Yorkville Warrant”) to purchase up to 10,173,881 shares of the Company’s Common Stock with an exercise price equal to the lower of (i) $1.50 per share, or (ii) 130% of the average closing price of the Company’s Common Stock as reported by Nasdaq for the five trading days ending on the 10th trading day following the closing of the Merger. The Yorkville Warrant was exercisable immediately upon issuance and expires three years from the date of issuance.

 

The exercise price and number of shares of the Company’s Common Stock issuable upon exercise of the Yorkville Warrant is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Company’s Common Stock and the exercise price. Subject to limited exceptions, Yorkville may not exercise any portion of the Yorkville Warrant to the extent that Yorkville would beneficially own more than 4.99% (or, at the election of the holder prior to the date of issuance, 9.99%) of the outstanding shares of the Company’s Common Stock after exercise. In the event of certain fundamental transactions, the holder of the Yorkville Warrant will have the right to receive the Black Scholes Value (as defined in the Yorkville Warrant) of the Yorkville Warrant calculated pursuant to a formula set forth in the Yorkville Warrant, payable in cash. None of the Yorkville Warrants have been exercised as of December 31, 2025.

 

The Yorkville Warrant is required to be measured at fair value pursuant to ASC 815, “Derivatives and Hedging” at the date of issuance, December 4, 2025, and at subsequent reporting periods. The fair value of the Yorkville Warrant as of December 4, 2025 and December 31, 2025 was $5,341,589 and $3,987,046, respectively. The Company used a Monte Carlo simulation model to determine the Yorkville Warrant’s fair value at issuance and the end of the reporting period, December 31, 2025. During the year ended December 31, 2025, the Company recorded a gain of $1,354,543 related to the change in fair value of the Yorkville Warrant. Please refer to Note 10.

 

At issuance, the aggregate fair value of the Yorkville Convertible Note and the Yorkville Warrant was $9,068,603, which exceeded the proceeds received from the first Advance under the Yorkville Convertible Note by $5,218,603. In accordance with ASC 825, ASC 815 and ASC 820, the Company recorded the Yorkville Convertible Note and Yorkville Warrant at their respective fair values at the issuance date. Because the aggregate fair value of these financial instruments exceeded the proceeds received and no other separately identifiable assets or economic benefits were identified that would be recognized under U.S. GAAP, the Company recognized the excess of the fair value of the instruments over the proceeds received as a loss in earnings at issuance.

 

The estimated fair values of the Yorkville Convertible Note and Yorkville Warrant reflect the prices that would be received to transfer the instruments in an orderly transaction between market participants at the measurement date and incorporate significant assumptions regarding expected volatility of the Company’s common stock, the probability and timing of conversion or exercise, and other market-based inputs. These assumptions resulted in an aggregate estimated fair value of the instruments that exceeded the proceeds received from the initial Advance.

 

The Company entered into the Yorkville financing to obtain access to capital and additional liquidity to support its operations and strategic initiatives. Management believes that this financing structure provided the Company with access to capital that may not otherwise have been available on acceptable terms given the Company’s stage of development, capital requirements and market conditions. The Yorkville financing also provides the Company with potential future access to additional capital through the Yorkville Purchase Agreement equity facility.

The Company believes the transaction was negotiated with an unrelated third-party investor and was conducted on an arm’s-length basis. Management evaluated whether any additional rights, services or other economic benefits were obtained in connection with the transaction that would qualify for recognition as separate assets under U.S. GAAP and determined that none met the criteria for separate recognition. As a result, the excess of the fair value of the financial instruments over the proceeds received was recognized as a loss at issuance.

 

During the year ended December 31, 2025, the Company recognized (i) a loss of $5,218,603 related to the initial recognition of the excess of the fair value of the instruments over the proceeds received, (ii) a loss of $44,831 related to the change in fair value of the Yorkville Convertible Note and (iii) a gain of $1,354,543 related to the change in fair value of the Yorkville Warrant, resulting in a net loss of $3,908,891 related to the Yorkville financing instruments during the year ended December 31, 2025.

 

Subsequent to initial recognition, these liability-classified instruments are remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.