Convertible Notes

3 Months Ended

Mar. 31, 2025

Convertible Notes

Convertible Notes

Note 7 – Convertible Notes

The components of convertible notes as of March 31, 2025 and December 31, 2024, were as follows:

				Effective			Stated
	Principal			Interest			Interest			March 31,			December 31,
Payment date	Amount		Maturity date	Rate			Rate			2025			2024
July 15, 2024	$	795,000	July 15, 2025		390	%		10	%	$	795,000		$	795,000
August 15, 2024	$	326,000	August 15, 2025		398	%		10	%		326,000			326,000
November 15, 2024	$	100,000	November 15, 2025		511	%		10	%		100,000			100,000
December 15, 2024	$	75,000	December 15, 2025		815	%		10	%		75,000			75,000
February 7, 2025	$	1,500,000	February 7, 2026		416	%		10	%		1,500,000			-
February 15, 2025	$	575,000	February 15, 2026		511	%		10	%		575,000			-
Total Convertible notes										$	3,371,000		$	1,296,000
Less: Unamortized debt discount											(2,829,095	)		(1,099,923	)
											541,905			196,077
Less: Current portion											(541,905	)		(196,077	)
Long -term portion										$	-		$	-

On July 15, 2024 and August 15, 2024, the Company entered into seventeen (17) convertible notes ($1,121,000) and warrants (1,401,250 shares of common stock). The convertible notes have a term of twelve (12) months, at an interest rate of 10% per annum and warrants are with a term of five (5) years, at exercise price of $0.50 per share. The outstanding principal amount of convertible notes and unpaid interest is convertible at conversion price of the lesser of (i) $0.40 or (ii) a 30% discount to the price of shares issued in connection with a qualified financing. In November and December, the Company entered into three (3) convertible notes ($175,000) and warrants (218,750 shares of common stock). The Company paid 8% financing fee of $89,680, accrued fee of $14,000 and recorded financing fee as debt discount.

In February 2025, the Company entered into eleven (11) convertible notes ($2,075,000) and warrants (2,593,750 shares of common stock). The convertible notes have a term of twelve (12) months, at an interest rate of 10% per annum and warrants are with a term of five (5) years, at exercise price of $0.50 per share. The outstanding principal amount of convertible notes and unpaid interest is convertible at conversion price of the lesser of (i) $0.40 or (ii) a 30% discount to the price of shares issued in connection with a qualified financing. The Company paid 8% financing fee of $166,000 recorded financing fee as debt discount.

During the three months ended March 31, 2025, the Company recognized the debt discount of $2,075,000 (Original Issued Discounts of discount of $166,000, warrants of $882,000 and derivative liability of $1,027,000).

During the three months ended March 31, 2025 and 2024, the Company recognized interest expenses of $60,258 and $135 and amortization of debt discount of $345,828 and $0, respectively. As of March 31, 2025 and December 31, 2024, the Company recorded accrued interest of $110,981 and $50,723, respectively.

The Company determined that the conversion feature met the definition of a liability in accordance with ASC Topic No. 815-40, Derivatives and Hedging - Contracts in Entity's Own Stock and therefore bifurcated the embedded conversion option once the note becomes convertible and accounted for it as a derivative liability. The fair value of the conversion feature was recorded as a debt discount and “day 1” derivative loss for the excess amount of debt discount and amortized to interest expense over the term of the note.