Convertible Notes Payable |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Convertible Notes Payable [Abstract] | |
| CONVERTIBLE NOTES PAYABLE | NOTE 7—CONVERTIBLE NOTES PAYABLE
Convertible Promissory Notes – Private Placement
On February 19, 2026, all principal and accrued interest in the aggregate amount of $73,857 due under the convertible promissory notes issued in January 2025 was converted into an aggregate of 14,151 shares of common stock. In connection with the conversion, the Company derecognized the related derivative liability of $87,878 associated with the conversion feature to additional paid-in capital, and recognized a loss of $70,378 on the change in fair value of the derivative liability and a gain on extinguishment of debt of $10,198, included in interest expense in the statement of operations prior to conversion.
Convertible Promissory Notes – Equity Crowdfunding
On February 25, 2026, all principal and accrued interest in the aggregate amount of $760,955 due under the convertible promissory notes issued in connection with equity crowdfunding offerings in 2025 was converted into an aggregate of 91,535 shares of common stock. In connection with the conversion, the Company derecognized the related derivative liability of $283,759 associated with the conversion feature to additional paid-in capital, and recognized a loss of $105,444 on the change in fair value of the derivative liability and a loss on extinguishment of debt of $14,434 included in interest expense in the statement of operations prior to conversion. Secured Convertible Promissory Notes
On November 17, 2025, the Company entered into a securities purchase agreement (the “Note Purchase Agreement”) with Streeterville Capital, LLC (“Streeterville”), pursuant to which the Company agreed to offer and sell to Streeterville, in a private placement transaction, secured convertible promissory notes in the aggregate principal amount of up to $570,000 and warrants to purchase a number of shares of common stock equal to $1,000,000 divided by the lower of (i) $8.00 and (ii) the Valuation based Bid Price or Compelling Evidence-based Bid Price, as submitted by the Company and accepted by The Nasdaq Stock Market (“Nasdaq”) in connection with the Company’s direct listing application with Nasdaq and calculated in accordance with Nasdaq Listing Rule IM-5505-1 (the “Nasdaq Price”). On February 19, 2026, the Company’s direct listing was completed with a Nasdaq Price of $11.42.
On November 17, 2025, the Company issued to Streeterville a secured convertible promissory note in the principal amount of $295,000 and a warrant to purchase 62,500 shares of common stock for a total purchase price of $250,000, which, in addition to the original issue discount described below, includes $20,000 to pay Streeterville’s fees.
On February 9, 2026, the Company issued to Streeterville a secured convertible promissory note in the principal amount of $275,000 and a warrant to purchase 62,500 shares of common stock for a total purchase price of $250,000.
These notes carry an original issue discount of $25,000 and accrue interest at a rate of eight percent (8%) per annum with the principal amount and all accrued interest being due and payable six months (6) after issuance. The Company may prepay the notes upon ten (10) trading days’ notice; provided that if such prepayment is made after thirty (30) days following the issuance date, then the Company must pay a prepayment penalty in an amount equal to 110% of the amount being prepaid.
These notes are secured by all of the Company’s assets pursuant to a security agreement and an intellectual property security agreement, each entered into between the parties on November 17, 2025, and contain customary covenants and events of default for a loan of this type. Upon an event of default, the interest rate shall increase to fifteen percent (15%) per annum or the maximum rate permitted under applicable law. In addition, the notes contain certain triggering events that would increase the outstanding balance. Upon the occurrence of a Major Triggering Event (as defined in the notes), the outstanding balance would increase by an amount equal to fifteen percent (15%) of the then outstanding balance, and upon the occurrence of a Minor Triggering Event (as defined in the notes), the outstanding balance would increase by an amount equal to five percent (5%) of the then outstanding balance.
At any time commencing on February 19, 2026 (the first day that the Company’s common stock commenced trading on Nasdaq), Streeterville may, at its election, convert all or any portion of the outstanding balance of the notes into shares of common stock at a conversion price of $6.80. Notwithstanding the foregoing, the notes provide that, on the date on which the Subsequent Registration Statement (as defined in the notes) is declared effective by the SEC, the notes shall automatically be exchanged for a number of shares of series E convertible preferred stock equal to the outstanding balance of the notes divided by $1,000. See also Note 12.
The warrants may be exercised at any time on or after February 19, 2026 and until February 28, 2027 at an exercise price of $8.00 (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions).
In connection with the issuance of the note on November 17, 2025, the Company issued a placement agent warrant to Maxim Partners LLC (“Maxim”) to purchase 2,169 shares of common stock at an exercise price of $8.16 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions), and in connection with the issuance of the note on February 9, 2026, the Company issued a placement agent warrant to Maxim to purchase 2,022 shares of common stock at an exercise price of $8.16 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions). The warrants have a term of five years and were issued as compensation for placement agent services. The placement agent warrants were evaluated separately and determined to be equity-classified instruments, and accordingly, the Company recognized a day-one loss of $16,160, with the fair value recorded in additional paid-in capital as a cost of the financing. In addition, the Company recorded a cash placement fee of $15,000, representing 6% of the proceeds of the offering, which was recorded as a debt discount. The Company recorded detachable warrants as a derivative liability of $347,865, with $235,000 recognized as a debt discount and the fair value exceeded the carrying value resulting in a day-one loss of $119,361. The Company recognized a day-one loss of $186,838 related to the embedded conversion feature, which was determined to meet the criteria for derivative classification and was accounted for as a derivative liability. In aggregate, the Company recognized a total day-one loss of $322,359 which was recognized in the statement of operations. Upon the effectiveness of the Company’s direct listing, the related derivative liabilities were remeasured to fair value and reclassified to additional paid-in capital within stockholders’ equity as the instruments no longer met derivative liability classification criteria.
As of March 31, 2026, the outstanding principal balance of the notes was $570,000, with accrued interest of $11,929. After giving effect to unamortized debt discount of $275,213, the net carrying value of the notes was $306,716. |