CONVERTIBLE NOTES PAYABLE AND ACCRUED INTEREST AT FAIR VALUE |
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Dec. 31, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
| CONVERTIBLE NOTES PAYABLE AND ACCRUED INTEREST AT FAIR VALUE | NOTE 8. CONVERTIBLE NOTES PAYABLE AND ACCRUED INTEREST AT FAIR VALUE
Convertible Notes Payable (Yorkville)
On May 22, 2025, in connection with and pursuant to the terms of the SEPA with Yorkville, (see Note 9 for further details), Yorkville agreed to advance to the Company, in exchange for convertible notes payable, an aggregate principal amount of up to $3,000,000, $500,000 of which was funded at the Closing (the “Yorkville Convertible Note #1”); $500,000 of which was funded on July 2, 2025 (the “Yorkville Convertible Note #2”); and $2,000,000 which was funded on November 4, 2025 (the “Yorkville Convertible Note #3”).
The Company received net proceeds of $460,000 after a non-cash original issue discount of $40,000 during the three months ended June 30, 2025 as a result of Yorkville Convertible Note #1. The Company received additional net proceeds of $460,000 after a non-cash original issue discount of $40,000 during the three months ended September 30, 2025 as a result of Yorkville Convertible Note #2. Lastly, the Company received additional net proceeds of $1,840,000 after a non-cash original issue discount of $160,000 during the three months ended December 31, 2025 as a result of Yorkville Convertible Note #3. The original issuance discounts were expensed in the accompanying statement of operations under loss from original issue discount on convertible notes payable.
Yorkville Convertible Note #1, Yorkville Convertible Note #2, and Yorkville Convertible Note #3 (together the “Yorkville Notes”) have a maturity date of May 22, 2026, and accrue interest at 8% per annum, subject to an increase to 18% per annum upon an event of default. As of December 31, 2025, no events of default have occurred.
The Yorkville Notes are scheduled to be repaid in equal installments beginning in February 2026 and ending in May 2026.
Yorkville, in its sole discretion and provided that there is a balance remaining outstanding under the Convertible Notes, may deliver a notice under the SEPA requiring the issuance and sale of shares of common stock to Yorkville at a purchase price equal to the Conversion Price as determined in accordance with the Convertible Note in consideration of an offset of amounts owed under the Convertible Notes (“Yorkville Advance”). Yorkville, in its sole discretion, may select the amount of any Yorkville Advance, provided that the number of shares issued does not cause Yorkville to exceed the 4.99% ownership limitation, and does not exceed the Exchange Cap or the amount of shares of common stock that are registered. As a result of a Yorkville Advance, the amounts payable under the Convertible Notes will be offset by such amount subject to each Yorkville Advance.
Additionally, Yorkville has the right to convert any portion of the outstanding principal under the Yorkville Notes into shares of Class A common stock at any time, subject to certain limitations. The number of shares issuable upon conversion is equal to the amount of principal to be converted (as specified by Yorkville) divided by the applicable Conversion Price, which may be either:
The Floor Price may be adjusted downward to 20% of the average VWAP over the five trading days prior to the effectiveness of the initial Registration Statement and may be further reduced by the Company via written notice, subject to specific pricing limits.
Yorkville will not have the right to convert any portion of the principal to the extent that, after giving effect to such conversion, Yorkville would beneficially own more than 4.99% of the total number of shares of Class A common stock outstanding immediately after such conversion.
Each Convertible Note provides that the conversion price of each Convertible Note shall be adjusted if the Company issues shares of Class A common stock at a price less than $. In February 2026, we issued shares of Class A common stock to a third-party investor at a price equal to $ per share. As a result, the conversion price of the Convertible Notes was adjusted downward to $3.65 per share.
Additionally, the Company, at its option, shall have the right, but not the obligation, to redeem early a portion or all amounts outstanding under the Yorkville Notes at a redemption amount equal to the outstanding principal balance being repaid or redeemed, plus a 10% prepayment premium, plus all accrued and unpaid interest. Such early redemption may only be exercised if (i) the Company provides Yorkville with no less than ten trading days’ prior written notice, and (ii) on the date such notice is issued, the VWAP of the Class A common stock is less than the Fixed Price.
On November 18, 2025, Yorkville converted $250,000 of principal of Yorkville Convertible Note #3 and accrued interest of $8,767, into shares of Common Stock. On December 2, 2025, Yorkville converted an additional $350,000 of note principal of Yorkville Convertible Note #3 and accrued interest of $12,603, into shares of Common Stock. As of December 31, 2025, the principal amount outstanding under the Yorkville Notes is $2,400,000.
The Company has elected to record the Yorkville Notes at fair value at the date of issuance and in subsequent reporting periods. The fair value of Yorkville Convertible Note #1 as of May 22, 2025, the issuance date, was $500,000. The fair value of Yorkville Convertible Note #2 as of July 2, 2025, the issuance date, was $500,000. The fair value of Yorkville Convertible Note #3 as of October 31, 2025, the issuance date, was $2,000,000.
During the year ended December 31, 2025, the Company recorded a gain of $702,707 related to the change in fair value of the Yorkville Notes. The fair value of the Yorkville Notes as of December 31, 2025 was $1,646,663.
The inputs into the Monte Carlo simulation models used during the year ended December 31, 2025 to value the Yorkville notes were as follows:
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