Convertible Debt |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Convertible Debt [Abstract] | |
| CONVERTIBLE DEBT | NOTE 4 — CONVERTIBLE DEBT
Bridge Financing
On March 4, 2026, pursuant to a securities purchase agreement (the “Bridge SPA”), the Company issued to certain accredited investors in a private placement transaction (i) 10.0% original issue discount unsecured convertible promissory notes in an aggregate principal amount of $2,200,000 (the “Bridge Convertible Notes”), accruing interest at 4.0% per annum and maturing on March 4, 2027, and (ii) warrants to purchase up to 1,666,667 shares of common stock at an initial exercise price of $1.40 per share, subject to adjustment as provided therein, and exercisable for a period of five years from the date of issuance (the “Bridge Warrants” and such private placement transaction, the “Bridge Financing”). The Bridge Convertible Notes were sold at a 10% original issue discount, for aggregate gross cash proceeds of $2,000,000, before deducting placement agent fees and other offering expenses.
The Bridge Convertible Notes were convertible into shares of the Company’s common stock or other of its securities under certain circumstances. Upon the consummation of a “Qualified Offering,” defined as a registered public offering or registered direct offering resulting in at least $2.5 million in gross proceeds from new money investments, the outstanding principal, together with all accrued and unpaid interest, were to automatically convert into the securities sold in such offering at the offering price. Additionally, prior to any such Qualified Offering or repayment of the Bridge Convertible Notes, holders could elect to convert the Bridge Notes, in whole or in part, into shares of the Company’s common stock at a conversion price equal to 90% of the average daily volume-weighted average price of the Company’s common stock during the 10 trading days immediately preceding the holder’s conversion notice, subject to adjustment. The Bridge Convertible Notes also contained anti-dilution provisions tied to dilutive issuances and certain variable-rate transactions.
The Company evaluated the embedded conversion features under ASC 815-15. The voluntary conversion option was determined to meet the own-equity scope exception in ASC 815-40-15, as its terms allowed for variability to inputs that were indexed to the Company’s own equity. The mandatory conversion, however, is an embedded conversion feature that requires settlement into the securities sold in a future qualified offering, which could consist of units of common stock and warrants or other securities and, as a result, did not qualify for the own-equity scope exception in ASC 815-40-15. The Company determined the fair value of the associated embedded conversion feature related to the mandatory conversion feature is immaterial and, therefore, did not record it separately as a derivative liability.
Proceeds from the Bridge Financing were allocated between the Bridge Convertible Notes and the accompanying Bridge Warrants on a relative fair value basis. Of the $2,000,000 in initial proceeds, $567,402 was allocated to the Bridge Warrants (recorded as additional paid-in capital), with the remaining amount of $1,432,598 allocated to the Bridge Convertible Notes. The resulting debt discount on the Bridge Convertible Notes is being accreted to face value through interest expense using the effective interest method over the contractual term of the Bridge Convertible Notes. For the three months ended March 31, 2026, the Company recognized $6,372 of contractual interest expense on the Bridge Convertible Notes and $68,972 of non-cash interest expense related to the amortization of the debt discount. The Bridge Warrants were determined to be indexed to the Company’s own stock and to meet the equity-classification conditions in ASC 815-40-25. Although the Bridge Warrants contain a full-ratchet down-round adjustment and a Qualified Offering reset provision, both adjustments operate only to reduce the exercise price (i.e., are conditional and downward-only) and therefore qualify for the down-round carve-out in ASC 815. Accordingly, the Bridge Warrants do not preclude equity classification. If a down-round trigger occurs in a future period, the incremental value delivered to the warrant holders will be recognized as a deemed dividend to common stockholders pursuant to ASC 260.
On April 2, 2026, upon consummation of the 2026 Registered Direct Offering (as defined below), the Bridge Convertible Notes, together with all accrued and unpaid interest thereon, automatically converted into an aggregate of 1,576,311 shares of the Company’s common stock and warrants to purchase up to 1,576,311 shares of the Company’s common stock (See Note 10). |