v3.26.1
Convertible Debt
3 Months Ended
Mar. 31, 2026
Convertible Debt [Abstract]  
Convertible Debt
Note 10 – Convertible Debt
 
From November 2025 through March 2026, the Company issued unsecured convertible promissory notes (“Convertible Notes”) to investors in the principal amount of $2,766,316 and $414,641 as of March 31, 2026 and December 31, 2025, respectively. The Convertible Notes bear interest at a rate of 9% per annum and mature on the earlier of (i) 24 months from issuance or (ii) a change of control. The Convertible Notes may not be prepaid without the consent of the holder.
 Of the convertible notes, $1,822,415 was issued to related parties.
 
The Convertible Notes are convertible, at the holder’s option or automatically upon certain events, into shares of the Company’s common stock. Upon a qualified financing, the outstanding principal and accrued interest automatically convert at a price equal to 80% of the price paid by new investors. Upon a change of control, the holder may elect to receive either repayment equal to two times the outstanding balance or conversion based on an implied valuation of $30.0 million and the Company’s fully diluted capitalization as of immediately prior to the closing of the change of control transaction. If the Notes remain outstanding at maturity and no conversion event has occurred, the outstanding balance automatically converts based on the same $30.0 million valuation framework.
 
In connection with the issuance of the Notes, the Company also issued warrants to purchase shares of common stock with an exercise price equal to the greater of $10.00 or the volume-weighted average trading price, exercisable following the Company’s listing on Nasdaq and expiring 180 days thereafter. Issuance of shares under the Note and Warrant is subject to a 19.99% exchange cap absent stockholder approval.
 
The Company evaluated the Notes and Warrants in accordance with applicable accounting guidance and concluded that the embedded conversion feature was required to be bifurcated and held at fair value, and the warrants qualified for liability treatment due to failing indexation guidance. Accordingly, the features of the Notes and the Warrants are recorded as liabilities at fair value, with changes in fair value recognized in earnings until conversion, settlement, or expiration. See Note 3.


The Company recorded discounts from the derivative and warrant liabilities totaling $1,120,527 and $37,346 for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively. See Notes 3 and 8 for valuation of derivative and warrant liabilities. As of March 31, 2026 and December 31, 2025, the net carrying value of the debt was $
1,731,710
and $
378,725
with remaining debt discount of $
1,034,606
and $
35,916
and accrued interest of $
55,370
and $
4,551
, respectively. Interest expense from accretion of the discount during the three months ended March 31, 2026 and March 31, 2025 was $
120,760
and $
0
, respectively.
 Accrued interest from the related party was $32,432.