NOTE PAYABLE |
9 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Debt Disclosure [Abstract] | |
| NOTE PAYABLE | NOTE 3 – NOTE PAYABLE
On May 13, 2026, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company issued a Secured Promissory Note (the “Note”) in the original principal amount of $3,240,000, which includes an original issue discount of $240,000. The purchase price for the Note was $3,000,000. After deducting a $30,000 transaction expense amount payable to the Investor and other debt issuance costs of $204,070, net proceeds to the Company were $2,765,930. The Note bears interest at 8% per annum, compounding daily, and matures 18 months from issuance (November 13, 2027).
Beginning six months after issuance, the Investor may redeem up to $250,000 of the outstanding balance per month, with each redemption payable within three (3) business days. Additionally, if the Note remains outstanding on the six-month anniversary of the issuance, the Company will incur a one-time monitoring fee equal to the difference between (i) the outstanding balance of the Note divided by 0.85 (as minuend), and (ii) the outstanding balance of the Note (as subtrahend).
The Note includes customary affirmative and negative covenants and events of default, including payment defaults, covenant breaches, and insolvency events. No redemptions, trigger events, covenant breaches, or defaults occurred through June 30, 2026. Upon the occurrence of an event of default, the Holder may, by written notice, declare all unpaid principal, plus all accrued interest and other amounts due under the Note to be immediately due and payable. Further, interest shall accrue on the outstanding balance beginning on the date the event of default occurred at an interest rate equal to fifteen percent (15%) per annum.
The Note contains stock-price linked features, including (i) a limited redemption feature that may accelerate principal repayment upon the Company’s stock meeting specified price thresholds and (ii) a monitoring fee forgiveness feature that may reduce amounts otherwise payable upon sustained low stock price or trading volume conditions. Management determined these features are embedded derivatives that are not clearly and closely related to the debt host and therefore require bifurcation under ASC 815.
At issuance, the embedded derivatives were recorded at fair value, with a corresponding reduction to the carrying amount of the Note. However, the Company determined the fair value of these embedded derivatives was immaterial as of May 13, 2026, and June 30, 2026. The embedded derivative liabilities are remeasured at fair value each reporting period, with changes in fair value recognized in earnings. As of June 30, 2026, the embedded derivatives remained outstanding.
As of June 30, 2026, the principal amount outstanding under the Note was $3,240,000. The unamortized debt discount and issuance costs totaled $439,571, resulting in a net carrying amount of $2,800,429 at an effective interest rate of 18.36%.
For the three months and nine months ended June 30, 2026, the Company recognized $69,968 of interest expense related to the Note (which includes a contractual interest expense of $35,469 and amortization of debt discount of $34,499). The contractual interest expense has been included in accrued interest payable on the condensed consolidated balance sheet.
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