v3.26.1
Debt Obligations
 3 Months Ended
Mar. 31, 2026
Debt Obligations  
Debt Obligations

Note 5 – Debt Obligations

 

Convertible Notes

 

In March 2026, we issued three separate convertible notes and received cash proceeds of $800,000. Two of our non-employee directors purchased $250,000 and $50,000, respectively, of the issued convertible notes.

 

The convertible notes bear interest at 10%, mature three years from the issue date and are convertible into shares of common stock at conversion rate of $5.00 per share. Semi-annual interest payments are required on March 31, and September 30, each year commencing September 30, 2026. The convertible notes include warrant coverage equal to the shares of common stock issuable upon the conversion of the note. Therefore, a total of 160,000 common stock warrants were issued to the convertible note holders of which 60,000 were issued to our non-employee directors. The common stock warrants are exercisable immediately for a period of three years at an exercise price of $7.50 per warrant share.

 

In accordance with ASC 470-20-25-2, we allocated the proceeds received between the convertible notes and the common stock warrants using the relative fair value method. Therefore, $174,767 of the total proceeds was allocated to the warrants and have been presented as a discount against the convertible notes to be amortized into interest expense over the three-year term of the convertible notes and an increase to additional paid in capital. The relative fair value allocation was based on the estimated fair value of warrants issued of $223,631 determined using a Black-Scholes pricing model and the following key assumptions: expected term of three years (based on the contractual term of the warrants), volatility of 114% (company’s volatility over the expected term), risk free rate of 3.49% ( based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term), and a dividend rate of 0.00%.

 

 

During the three months ended March 31, 2026, we recognized $3,636 of amortization related to the debt discount which has been included within interest expense on the condensed consolidated statements of operations. As of March 31, 2026, the unamortized debt discount is $171,130.

 

At March 31, 2026, the total principal balance on the convertible notes is $800,000 and accrued interest is $5,000, which is included within accounts payable and accrued expenses within the condensed consolidated balance sheets.

 

Note Payable

 

During the year ended December 31, 2025, we purchased approximately $48,200 of equipment with a note payable. The note bears interest at 10.75% and requires fixed payments of principal and interest of $1,042 for sixty months. At March 31, 2026 and December 31, 2025, the outstanding principal balance was $41,164 and $43,149, respectively.

 

At March 31, 2026, future principal payments on the note payable for the years ending December 31, will be as follows:

 

2026 (remaining)

 

$6,285

 

2027

 

 

9,204

 

2028

 

 

10,244

 

2029

 

 

11,401

 

Thereafter

 

 

4,030

 

 

 

$41,164

 

Secured Promissory Note

 

On September 30, 2025, the Company executed a $600,000 short-term secured promissory note (the “Short-Term Note”). The Short-Term Note required repayment of $630,000 on the maturity date of January 2, 2026. The Short- Term Note was secured by certain outstanding receivables of the Company. The lender of the Short-Term Note also received a warrant to purchase 10,000 shares of common stock at $11.25 for a period of four years. The Short-Term note was repaid in its entirety upon maturity.

 

Financing Liability

 

During the year ended December 31, 2025, we entered into a financing agreement to finance $265,505 of insurance premiums due on various policies. The financed amount is due in fixed monthly payments of $19,808 for a period of eleven months and bear interest at 9.85%. At March 31, 2026 and December 31, 2025, the balance of $94,388 and $159,342, respectively, remaining on the financing liability has been presented within current liabilities on the accompanying consolidated balance sheets.