v3.26.3
Convertible Notes Payable
6 Months Ended
Jun. 30, 2026
Convertible Notes Payable [Abstract]  
Convertible Notes Payable

Note 7 – Convertible Notes Payable

 

During August 2025, the Company issued convertible promissory notes (“August 2025 Convertible Notes”) in the total principal amount of $283,000, for total cash proceeds of $275,000. The August 2025 Convertible Notes bear interest at 10% per annum and had a maturity date of May 30, 2026 (“Maturity Date”). Any amount of principal or interest which is not paid when due shall bear interest at the rate of 22% per annum. In addition, the August 2025 Convertible Notes are convertible into the Company’s common stock beginning six (6) months after issuance at a conversion price equal to 65% multiplied by the Market Price. Market Price means the average of the three (3) lowest trading prices of the common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date. The August 2025 Convertible Notes may be prepaid by the Company at 120% beginning on the date of issuance until ninety (90) days following the issuance date and 125% beginning on the ninety first (91st) days following the issuance date and ending one hundred eighty (180) days following the issuance date.

 

Holders of the August 2025 Convertible Notes shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of the August 2025 Convertible Notes and ending on the later of: (i) the Maturity Date, or (ii) the date of payment of the Default Amount (as defined in the Article III of the note agreement), each in respect of the remaining outstanding amount to convert all or any part of the outstanding and unpaid amount of the August 2025 Convertible Notes into fully paid and nonassessable shares of common stock, as such common stock exists on the issue date, or any shares of capital stock or other securities of the Company into which such common stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”).

 

During the period the conversion right exists, the Company will reserve from its authorized and unissued common stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of common stock upon the full conversion of the August 2025 Convertible Notes. The Company is required at all times to have authorized and reserved four times the number of shares that is actually issuable upon full conversion of the August 2025 Convertible Notes (based on the conversion price in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased (and/or decreased) from time to time in accordance with the Company’s obligations hereunder and the then current Conversion Price. The Company has reserved 37,027,748 shares of common stock of the Company for issuance upon conversion of the August 2025 Convertible Notes as of June 30, 2026.

 

During the three months ended June 30, 2026, the Company made a $70,000 payment to a holder of August 2025 Convertible Notes.

 

During September 2025, the Company issued convertible promissory notes (“September Convertible Note A”) in the principal amount of $150,000, for total cash proceeds of $130,000. The September Convertible Note A bears interest at 6% per annum and had a maturity date of September 15, 2026. In addition, the Notes are convertible into the Company’s common stock beginning six (6) months after issuance at a conversion price equal to 65% multiplied by the Market Price. Market Price means the average of the three (3) lowest trading prices of the common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date. The September Convertible Note A may be prepaid by the Company at 110% beginning on the date of issuance until 29 days following the issuance date; at 115% from 30 to 59 days following the issuance date; at 125% from 60-89 days following the issuance date; 130% from 90-119 days following the issuance date; 135% from 120-149 days from the issuance date; and 140% from 150-180 days following the issuance date. The Company has reserved 69,897,047 shares of common stock of the Company for issuance upon conversion of the September 2025 Convertible Note A as of June 30, 2026.

 

During September 2025, the Company issued a convertible promissory note (“September Convertible Note B”) in the principal amount of $165,000, for total cash proceeds of $146,500. The September Convertible Note B bears interest at 10% per annum and had a maturity date of September 8, 2026. Any principal or interest which is not paid when due shall bear interest at the rate of the lesser of (i) 22% per annum and (ii) the maximum amount permitted by law from the due date thereof until the same is paid. In addition, the September Convertible Note B is convertible into the Company’s common stock beginning six (6) months after issuance at a conversion price equal to 65% multiplied by the Market Price. Market Price means the average of the three (3) lowest trading prices of the common stock during the fifteen (15) trading day period ending on the latest complete trading day prior to the conversion date. The September Convertible Note B may be prepaid by the Company at 97% beginning on the date of issuance until ninety (90) days following the issuance date; 98% from 91-150 days following the issuance date; and 99% from 151-180 days following the issuance date. The Company has reserved 167,538,462 shares of common stock of the Company for issuance upon conversion of the September 2025 Convertible Note B as of June 30, 2026.

 

During November and December 2025, the Company entered into several convertible promissory bridge notes (“Convertible Bridge Notes”) totaling $325,000. The principal and interest (at 17% per annum) will be due and payable in full on the close of a qualified financing event or twelve months from the date of execution, whichever comes first; a qualified financing event shall mean a registered public offering of the Company’s common stock resulting in an uplisting of such stock to the NASDAQ, NYSE, or another national securities exchange at a per-share offering price of not less than $4.00. Each holder of a Convertible Bridge Note also received shares of common stock equal to the principal amount of the note payable divided by $0.25 upon issuance of the respective Convertible Bridge Note. During the year ended December 31, 2025, there were 1,300,000 shares of common stock issued with the Convertible Bridge Notes at a value of approximately $105,000.

 

The common shares issued contain certain time restrictions on when they can be sold by the recipient, thus requiring the share price to be discounted in the fair value calculation (See Note 5). The common stock issued and issuable is subject to resale restrictions under Rule 144 of the Securities Act of 1933. At the time the convertible notes were issued, the Company did not have a sufficient number of authorized shares of common stock to settle the obligation to issue certain shares. Accordingly, the obligation to issue common stock was classified as a liability and measured at fair value. There was no material change in fair value between the issuance date and December 31, 2025. The Company amended its certificate of incorporation to authorize additional shares in January 2026. Upon effectiveness of the amendment, the obligation was reclassified to equity at fair value in January 2026, with a fair value of approximately $121,000. The 1,300,000 shares of common stock were issued in January 2026.

 

During March 2026, the holder of September Convertible Note A converted approximately $30,000 of principal and approximately $1,000 of accrued interest into 1,653,447 shares of common stock. The Company also issued 160,439 shares of common stock for approximately $8,000 of fees incurred.

 

During March 2026, the holder of September Convertible Note B converted approximately $12,000 of accrued interest into 449,602 shares of common stock. The Company also issued 135,398 shares of common stock to the holder of September Convertible Note B for approximately $4,000 of fees incurred.

 

During the three months ended June 30, 2026, the holder of September Convertible Note A converted approximately $85,000 of principal and approximately $3,000 of accrued interest into 40,659,249 shares of common stock. The Company also issued 9,559,980 shares of common stock for approximately $30,000 of fees incurred.

 

During the three months ended June 30, 2026, the holder of September Convertible Note B converted approximately $10,000 of principal and approximately $5,000 of accrued interest into 4,514,860 shares of common stock. The Company also issued 1,877,140 shares of common stock for approximately $9,000 of fees incurred.

 

On December 1, 2025, the Company entered into a Securities Purchase Agreement (the “Promissory Note Purchase Agreement”) with an accredited investor (the “Investor”), pursuant to which the Company sold the Investor an unsecured original issue discount promissory note in the principal amount of $75,000 (the “2025 Promissory Note”) for which the Company received net proceeds of $59,000, as a $6,000 interest prepayment was deducted from the initial cash receipt. The 2025 Promissory Note carries an interest rate of 10%, which shall be applied to the principal on the issuance date of the 2025 Promissory Note, and is payable on the maturity date of December 1, 2026. The 2025 Promissory Note is convertible into common stock of the Company at any time after the 180th daily anniversary of the 2025 Promissory Note or at any time following an event of default. The conversion price shall be $0.06 per share (the “Fixed Price”), however, if six months after the date of issuance the Company’s common stock trades below $0.06 for more than 5 consecutive trading days, then the Fixed Price shall be lowered to the lowest traded price during the default period. In the event that the Company’s common stock trades below such adjusted price per share for more than five consecutive trading days, then the Fixed Price shall be eliminated and the conversion price shall reset to the lowest traded price throughout the period of default and shall be re-adjusted every 21 days that the 2025 Promissory Note remains in default.

 

The 2025 Promissory Note provides for standard and customary events of default such as failing to timely make payments under the 2025 Promissory Note when due, the failure of the Company to timely comply with the Securities Exchange Act of 1934 reporting requirements and the failure to maintain a listing on the Over-the-Counter (“OTC”) Markets. The 2025 Promissory Note also contains customary covenants. At no time may the 2025 Promissory Note be converted into shares of the Company’s common stock if such conversion would result in the Investor, or its affiliates owning an aggregate of more than 9.99% of the then outstanding shares of the Company’s common stock.

 

The Promissory Note Purchase Agreement requires that during the period while any outstanding balance is owed, the Company will reserve from its authorized and unissued common stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of common stock upon the full conversion of the 2025 Promissory Note. The Company is required at all times to have authorized and reserved two times the number of shares that is actually issuable upon full conversion of the Note (based on the conversion price of the 2025 Promissory Note in effect from time to time) initially 5,000,000 shares (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Company’s obligations pursuant to the Promissory Note Purchase Agreement. The Company has reserved 5,000,000 shares of common stock of the Company for issuance upon conversion of the 2025 Promissory Note.

 

On February 2, 2026, the Company entered into a convertible promissory bridge note (“Q1 2026 Convertible Bridge Note”) totaling $25,000. The principal and interest (at 17% per annum) will be due and payable in full on the close of a qualified financing event or twelve months from the date of execution, whichever comes first; a qualified financing event shall mean a registered public offering of the Company’s common stock resulting in an uplisting of such stock to the NASDAQ, NYSE, or another national securities exchange at a per-share offering price of not less than $4.00. The holder of a Convertible Bridge Note also received 100,000 shares of common stock, which was equal to the principal amount of the note payable divided by $0.25 upon issuance of the respective Q1 2026 Convertible Bridge Note. At the issuance of the convertible promissory bridge note, the 100,000 shares of common stock had a fair value of approximately $10,500 and the convertible note had a fair value of approximately $14,500.

 

On April 28 2026, the Company issued a convertible promissory note (“Q2 2026 Convertible Note”) in the principal amount of $130,000, for total cash proceeds of $117,000. This promissory note bears interest at 6% per annum and has a maturity date of April 28, 2027. In addition, this note is convertible into the Company’s common stock beginning six (6) months after issuance at a conversion price equal to 65% of the lowest trading price of the common stock as reported on the OTC Markets on which the Company’s shares are then traded or any exchange upon which the Common Stock may be traded in the future, for the fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company. This promissory note may be prepaid by the Company at 110% beginning on the date of issuance until 29 days following the issuance date; at 115% from 30 to 59 days following the issuance date; at 125% from 60-89 days following the issuance date; 130% from 90-119 days following the issuance date; 135% from 120-149 days from the issuance date; and 140% from 150-180 days following the issuance date. As of the date of issuance, the Company has reserved 70,921,986 shares of common stock of the Company for issuance upon conversion of this promissory note.

 

During the three months ended June 30, 2026, the holder of Q2 2026 Convertible Note converted approximately $18,000 of principal into 8,500,000 shares of common stock.

 

On December 1, 2025 the Investor also entered into the Standby Equity Purchase Agreement (“SEPA”) with the Company; see Note 12.

 

The Company elected to utilize the FVO to account for the convertible notes payable. The change in fair value of the convertible notes payable at each balance sheet date, if any, is recorded in the accompanying statement of operations and comprehensive loss. See Note 5 for the fair value methodology used to fair value the convertible notes payable.

 

At June 30, 2026 and December 31, 2025, the fair value of the convertible promissory notes was approximately $514,000 and $780,000, respectively, which reflects a decrease of approximately $332,000 and $164,000 in fair value for the three and six months ended June 30, 2026, respectively. This change in fair value is included in earnings.

 

The convertible notes do not contain any embedded derivatives that require separate accounting, as these notes are measured at fair value under the FVO.