Notes Payable - Related Parties |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Notes Payable - Related Parties [Abstract] | |
| NOTES PAYABLE - RELATED PARTIES | NOTE 3 – NOTES PAYABLE – RELATED PARTIES
During February and March 2026, the Company issued short-term promissory notes to existing shareholders and a director in the aggregate principal amount of $125,000. The short-term notes bore interest at a rate of 12% per annum, with principal and all accrued and unpaid interest due and payable on the earlier of (i) five days following the closing of a $7.5 million financing transaction or (ii) June 30, 2026, the contractual maturity date. The Company had the right to prepay the notes without the prior written consent of the noteholders.
As of March 31, 2026, the outstanding principal balance of the short-term notes was $125,000 and accrued interest totaled $1,233.
In addition, during April 2026, the Company issued a short-term promissory note to a director in the principal amount of $43,158. Subsequent to March 31, 2026, all outstanding short-term promissory notes, including accrued interest thereon, were repaid in full following the completion of the Company’s Series C Convertible Preferred Stock financing (see Note 5 - Stockholders’ Equity).
During May 2025, the Company issued convertible promissory notes to existing investors, management, and directors in the aggregate principal amount of $1,250,000. In addition, the Company modified $250,000 of then-outstanding short-term notes payable held by directors, converting them into convertible promissory notes with terms consistent with the newly issued notes. As a result, the total principal amount of convertible notes issued in this bridge financing round was $1,500,000.
The conversion of the short-term notes into convertible notes was accounted for as a debt modification under ASC 470-50-40 (extinguishment vs. modification). This conclusion was based on an analysis of the present value of the revised cash flows, which showed a change of less than 10% compared to the original terms, and therefore did not meet the threshold for substantial modification. Additionally, while the modified notes included a contingent conversion feature, the conversion was deemed not probable as of the modification date, and thus did not represent a substantive change in economic terms. Accordingly, no gain or loss was recognized on the modification. This bridge financing was undertaken in anticipation of a planned direct listing on the Nasdaq Stock Market and was intended to provide interim working capital for the Company’s operations.
The convertible notes bore interest at a rate of 10% per annum and matured on March 31, 2026, unless earlier converted or prepaid. Interest was payable in cash or, at the Company’s election, in-kind through the issuance of shares of the Company’s common stock.
The Company evaluated the terms of the convertible notes under the guidance of ASC 815-15 (Derivatives and Hedging – Embedded Derivatives) and ASC 470-20 (Debt – Debt with Conversion and Other Options). Based on this evaluation, the Company concluded that the embedded features, including the automatic conversion provision and interest payment alternatives, do not require bifurcation as embedded derivatives and the conversion feature qualifies for equity classification under ASC 470-20 and does not result in a beneficial conversion feature. Accordingly, the convertible notes are accounted for as conventional debt instruments and are recorded at amortized cost.
As of March 31, 2026 and December 31, 2025, the outstanding principal balance of the convertible promissory notes was $1,500,000, and accrued interest totaled $137,867 and $100,881, respectively.
The Company recorded interest expense related to notes payable of $38,219 and $1,315 for the three months ended March 31, 2026 and 2025, respectively. Interest expense is included in other income (expense) in the accompanying condensed statements of operations.
Pursuant to the terms of the notes, the outstanding principal and accrued and unpaid interest automatically converted into 205,921 shares of the Company’s common stock at a fixed conversion price of $8.00 per share upon the Company’s successful listing on the Nasdaq Capital Market on April 23, 2026. |