v3.26.1
Convertible Notes Payable
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
Convertible Notes Payable

5. Convertible Notes Payable

 

The following summarizes convertible notes payable activity during the six months ended June 30, 2026 and 2025:

  

   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party 
   2021 Financing   2022 Financing   2024 Financing   2025 Financing   Total 
   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party 
Balance as of January 1, 2025  $-   $100,000   $353,000   $1,285,000   $500,000   $715,000   $-   $-   $853,000   $2,100,000 
Notes issued   -    -    -    -    -    -    -    455,000    -    455,000 
Principal converted   -    -    (153,000)   (815,000)   -    -    -    -    (153,000)   (815,000)
Balance as of March 31, 2025 -   100,000   200,000   470,000   500,000   715,000   -   455,000   700,000   1,740,000 
Notes issued   -    -    -    -    -    -    150,000    390,000    150,000    390,000 
Principal converted          -    -    (200,000)   (470,000)   -    -    -    -    (200,000)   (470,000)
Balance as of June 30, 2025  $-   $100,000   $-   $-   $500,000   $715,000   $150,000   $845,000   $650,000   $1,660,000 

 

   2021 Financing   2022 Financing   2024 Financing   2025 Financing   Total 
   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party   Non-Related Party   Related Party 
Balance as of January 1, 2026  $-   $100,000   $-   $-   $-   $-   $870,000   $1,640,000   $870,000   $1,740,000 
Notes issued   -    -    -    -    -    -    110,000    225,000    110,000    225,000 
Principal converted   -    -    -    -    -    -    -    (455,000)   -    (455,000)
Balance as of March 31, 2026  -   100,000   -   -   -   -   980,000   1,410,000   980,000   1,510,000 
Notes issued   -    -    -    -    -    -    1,245,000    115,000    1,245,000    115,000 
Principal converted   -    -    -    -    -    -    (150,000)   (390,000)   (150,000)   (390,000)
Balance as of June 30, 2026  $        -   $100,000   $-   $-   $      -   $-   $2,075,000   $1,135,000   $2,075,000   $1,235,000 

 

The 2021 Notes and 2025 Notes are, together, the “Convertible Notes”. The embedded conversion options associated with the Convertible Notes do not require bifurcation and treatment as a derivative liability.

 

Related party investors in the Company’s convertible notes consist of an officer, an officer/director of the Company and a beneficial owner of more than 10% of the Company’s outstanding equity securities.

 

2025 Financing Note

 

On January 15, 2025, the Board approved a Financing Term Sheet (the “2025 Term Sheet”), which set forth the terms under which the Company will use its best efforts to arrange for financing of a maximum of $10,000,000 (the “2025 Financing”), which amounts will be obtained in several tranches.

 

The 2025 Financing will be in the form of unsecured convertible loans from the investors (the “2025 Note Investors”) and evidenced by convertible promissory notes (individually, a “2025 Note” and collectively, the “2025 Notes”). In addition to customary provisions, the 2025 Notes will contain the following provisions:

 

  (i) The 2025 Notes bear interest at the rate of eight percent (8%) per annum.
     
  (ii) In the event there is a change of control of the Board, the term of the 2025 Notes will be accelerated and all amounts due under the 2025 Notes may be immediately due and payable at the 2025 Note Investors’ option;
     
  (iii) The outstanding principal amount and interest payable under the 2025 Notes may be converted early at the 2025 Note Investors’ option into shares of Series D-1 Preferred Stock at a price per share equal to $2.862. Each share of Series D-1 Preferred Stock is convertible into ten (10) shares of common stock; and
     
  (iv) The outstanding principal amount and interest payable under the 2025 Notes mature twelve (12) months after the issue date of a 2025 Note and automatically convert into shares of the Company’s Series D-1 Preferred Stock at maturity at a price per share equal to $2.862. Each share of Series D-1 Preferred Stock is convertible into ten (10) shares of the Company’s Common Stock.

 

During the three months ended June 30, 2026, the Company received 2025 Notes proceeds in the aggregate amount of $1,360,000, of which $1,245,000 was from non-related parties, $100,000 was from a shareholder considered a related party due to beneficial ownership exceeding 10% of the Company’s outstanding securities, and $15,000 was from an officer and director of the Company. During the three months ended June 30, 2025, the Company received 2025 Notes proceeds in the aggregate amount of $540,000, of which $150,000 was from non-related parties and $390,000 was from an officer and director of the Company.

 

During the six months ended June 30, 2026, the Company received 2025 Notes proceeds in the aggregate amount of $1,695,000, of which $1,355,000 was from non-related parties, $100,000 was from a shareholder considered a related party due to beneficial ownership exceeding 10% of the Company’s outstanding securities, and $240,000 was from an officer and director of the Company. During the six months ended June 30, 2025, the Company received 2025 Notes proceeds in the aggregate amount of $995,000, of which $150,000 was from non-related parties and $845,000 was from an officer and director of the Company.

 

As of June 30, 2026, principal and interest in the amount of $3,210,000 and $100,179, respectively, remains outstanding on the 2025 Notes.

 

See Note 15 for details on conversions of 2025 Notes subsequent to June 30, 2026.

 

 

2021 Financing

 

On September 20, 2022, the Board approved the closure of the 2021 Financing.

 

As of June 30, 2026, principal and interest in the amount of $100,000 and $63,444, respectively, remain outstanding on the 2021 Note. The Company expects to repay the outstanding principal and accrued interest in August 2026.

 

For the three months ended June 30, 2026 and 2025, the Company recorded interest expense of $2,000 in each period related to the 2021 Notes. For the six months ended June 30, 2026 and 2025, the Company recorded interest expense of $4,000 in each period related to the 2021 Notes.

 

Interest Expense on Convertible Notes Payable

 

During the three months and six months ended June 30, 2026, the Company incurred an aggregate of $49,212 and $99,635, respectively, in interest expense on outstanding 2021 and 2025 Notes.

 

During the three months and six months ended June 30, 2025, the Company incurred an aggregate of $49,976 and $108,128, respectively, in interest expense on outstanding 2021, 2022, 2024, and 2025 Notes.

 

As of June 30, 2026 and December 31, 2025, aggregate interest accrued on the Convertible Notes was $163,623 and $143,924, respectively.