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CONVERTIBLE NOTE
 12 Months Ended
Dec. 31, 2025
Debt Disclosure [Abstract]  
CONVERTIBLE NOTE

Note 11      CONVERTIBLE NOTE

 

On October 31, 2025, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional accredited investor (the “Investor”), pursuant to which the Company may issue and sell, in multiple closings, senior secured convertible notes in an aggregate original principal amount of up to $300,000,000. At the initial closing on November 3, 2025, the Company issued a Senior Secured Convertible Note in the principal amount of $8,000,000 (the “Initial Note”) for a purchase price of $7,280,000, resulting in an original issue discount of $720,000. The Initial Note bears interest at 9.0% per annum, payable monthly in arrears, and matures on November 3, 2027. Upon the occurrence of an Event of Default, the interest rate increases to 18.0% per annum.

 

The Initial Note is secured by a first-priority security interest in substantially all of the Company’s assets purchased or acquired with the proceeds from the sale of the Initial Note, pursuant to a Pledge and Security Agreement and an Account Control Agreement, each dated as of November 3, 2025. The Initial Note ranks senior to all existing and future indebtedness of the Company, subject to certain permitted indebtedness exceptions.

 

The Initial Note is convertible at any time at the option of the holder into shares of the Company’s common stock. The conversion price is equal to the lower of: (A) The lower of (i) $2.01, and (ii) the average closing price of the Common Stock for the five trading days immediately preceding the closing; and (B) 93% of the lowest daily volume-weighted average price (“VWAP”) of the Common Stock during the ten trading days immediately preceding the conversion date.

 

The conversion price is subject to a Floor Price and customary adjustments. The holder is restricted from converting the Note if such conversion would result in the holder beneficially owning more than 4.99% of the outstanding Common Stock (the “Beneficial Ownership Limitation”), which may be increased to 9.99% upon 61 days’ prior written notice.

 

The Company elected the fair value option for the convertible note in accordance with ASC 825. Accordingly, the Initial Note is measured at fair value at each reporting date, with changes in fair value recorded in other expense in the Consolidated Statements of Operations and Comprehensive Loss.

 

The fair value of the convertible note is classified as Level 3 within the fair value hierarchy due to the lack of an active market and reliance on unobservable inputs. The fair value is estimated using a discounted cash flow model based on expected future principal and interest payments, adjusted for expected conversions and the Floor Price of the conversion feature. The discount rate is based on management’s estimate of rates for similar debt instruments, adjusted for the Company’s credit risk. Changes in key assumptions, including the discount rate or expected conversion, could materially affect the estimated fair value of the convertible notes.

 

Issuance costs of $643,500 were expensed as incurred during the year ended December 31, 2025.

 

In December 2025, a holder of the Initial Note converted $45,319 into 60,013 shares of the Company’s common stock.

 

       
    December 31,
2025		  
    $  
Balance at beginning of year     –  
Issuance     7,280,000  
Accrued interest     115,275  
Conversion     (45,319 )
Change in fair value     (144,290 ) 
Balance at end of year     7,205,666