Convertible Promissory Notes Payable, Related Party |
6 Months Ended | |||
|---|---|---|---|---|
Jun. 30, 2026 | ||||
| Convertible Promissory Notes Payable, Related Party [Abstract] | ||||
| Convertible Promissory Notes Payable, Related Party |
On December 8, 2025, the Company issued unsecured convertible promissory notes to the Company’s Chief Financial Officer (also a director), an entity owned by another director, and an entity owned by a close relative of the Company’s Chief Scientific Officer (also a director), all related parties (“Notes”), for an aggregate principal amount of $750,000 with a stated interest rate of 12% per annum to pursue fundraising and general corporate purposes. In the event of an initial public offering the principal amount of the Notes would automatically convert into shares of the Company’s common stock at a conversion price equal to 90% of the per share price of the Company’s common stock sold in the initial public offering. In the event of a Qualified Financing (as defined in the Notes) the principal amount of the Notes would automatically convert into Conversion Shares (as defined in the Notes) at a conversion price equal to 90% of the per share price of the Conversion Shares issued in such Qualified Financing. In the event of an Optional Financing (as defined in the Notes), subject to the consent of the holders, the principal amount of the Notes would automatically convert into the securities issued in such transaction at 90% of the per-share price (or equivalent) paid by investors in such transaction or, if no such price is readily determinable, at a price per share equal to 90% of the fair market value of the Company’s common stock as reasonably determined in good faith by the Company’s board of directors. The Notes had a maturity of 15 months and if the Company has not closed an equity financing by the date that is 10 months after the issuance date of the Notes, the rate would increase to 18% per annum. Interest under the Notes was payable in cash. The Notes are presented as a current liability on the balance sheet. This classification is based on management’s judgment that the Notes were expected to be converted within one year from the balance sheet date.
Because of the variable nature of the embedded conversion features, the Notes have been accounted for in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”). The Notes were valued using a probability-weighted expected return method (PWERM), which estimates fair value by modeling the expected payoffs under each scenario, discounting each scenario’s payoff to the Valuation Date, and then probability-weighting the present values. The analysis considered four primary scenarios: (i) automatic conversion upon an initial public offering, (ii) automatic conversion upon a Qualified Financing, (iii) an optional conversion upon other financing and (iv) repayment of principal and accrued interest at Maturity in the absence of an initial public offering or financing events, with scenario probabilities based on discussions with management regarding anticipated financing plans and timing. Because the expected payoff under each scenario is fixed at the time of settlement and does not vary with future equity value beyond the conversion event, the instrument exhibits debt-like characteristics; accordingly, expected payoffs were discounted using a rate reflecting the obligor’s credit risk, calculated as the sum of a term-matched risk-free rate and an appropriate credit spread. At June 30, 2026, there was a difference in the aggregate fair value and the aggregate unpaid principal balance of the convertible promissory note payable, related party of $117,700.
Immediately prior to the closing of the IPO, the convertible notes converted into 64,102 shares of the Company’s common stock at a price per share equal to 90% of the public offering price in the IPO. |