Note 7 - Convertible Debt - Related Party |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Notes to Financial Statements | |
| Debt Disclosure [Text Block] |
7. Convertible Debt – Related Party
Convertible Debt
On April 13, 2026 and on May 8, 2026, the Company entered into loan arrangements with Junli He, the Chairman, Chief Executive Officer, and Director of the Company (the “Lender”), pursuant to which the Lender loaned the Company an aggregate amount of $500,000 as evidenced by Bridge Notes executed by the Company in favor of, and accepted by, the Lender dated April 13, 2026 and May 8, 2026 (each a “Bridge Note”). As of June 30, 2026, the Company accrued $7,000 of interest payable on the Bridge Notes. The Company evaluated the convertible note for derivative liability treatment and has determined that the components of the Bridge Notes did not qualify for derivative accounting treatment as of June 30, 2026.
The Bridge Notes accrue interest at an annual fixed rate of 8%, and the principal amount thereof will be due and payable in full, together with all accrued and unpaid interest thereon, on the earlier to occur of a) the closing date (or later date of capital being provided pertaining to such continued offering that the following threshold is tripped) of the Company’s next capital raise that includes gross proceeds of at least $5,000,000 or b) the applicable maturity date, which is April 13, 2027 and May 8, 2027, respectively. The Bridge Notes provide for optional conversion to equity at the discretion of the Lender. In the event the Company issues equity securities (including instruments or securities convertible into or exchangeable for such equity securities) in a transaction or series of related transactions resulting in aggregate gross proceeds to the Company at least equal to the original principal amount of the applicable Bridge Note, excluding the indebtedness evidenced by such Bridge Note (a “Qualified Financing”), on or before the applicable maturity date, the Lender may elect, by notice to the Company prior to the initial closing of the Qualified Financing (or the closing of any add-on thereto, as applicable), to convert the indebtedness evidenced by such Bridge Note into that number of equity securities of the Company equal to (x) the entire outstanding balance of such Bridge Note, including all principal and accrued and unpaid interest, divided by (y) the price per unit paid by the purchasers of such equity securities in the Qualified Financing. Accordingly, the conversion price is not a fixed price per share and will equal the price per unit paid by investors in the applicable Qualified Financing; the Bridge Notes do not provide for conversion at a discount to, or a premium over, such price.
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