DEBT |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Debt Disclosure [Abstract] | |
| DEBT | NOTE 5. DEBT
Loan Agreement
In June 2024, the Company entered into a Loan Agreement (the “Loan Agreement”) with The Patel Family, LLP (the “Patel Family”), a related party of the Company, providing for an unsecured line of credit facility (the “Facility”) for term loans of up to an initial total of $36,000,000. As of December 31, 2025, the Company had drawn $4,400,000 from the Facility, with maturity dates ranging from July 2028 to June 2029. The Company drew $2,000,000 during the first quarter of 2026, with a maturity date ranging from February to March 2030. As of March 31, 2026, the outstanding balance on the Loan Agreement was $6,400,000. As of March 31, 2026, $14,000,000 remained available for future financing.
The Loan Agreement includes a purchase option whereby the Patel Family has the option to purchase up to $ of shares of common stock at a purchase price equal to % of the Trailing VWAP per share (the “$ million Purchase Option”). The $ million Purchase Option only becomes exercisable once Trailing VWAP reaches $ per share. The $14 million Purchase Option was determined to be a freestanding derivative liability under ASC 815 and is carried at fair value, with changes in fair value recorded to change in fair value of written call option derivatives liabilities within the unaudited consolidated statements of operations and unaudited consolidated statements of cash flows.
The Loan Agreement also includes a purchase option (the “Additional Amount Purchase Option”) that is identical to the $ million Purchase Option, except that the option is exercisable for an amount up to the then-remaining undrawn term loan amount under the Loan Agreement at the time Trailing VWAP reaches $ per share. The Additional Amount Purchase Option was determined to be an embedded derivative within the written loan commitment that requires bifurcation under ASC 815, and thus is carried at fair value with changes in fair value recorded to change in fair value of written call option derivatives liabilities within the unaudited consolidated statements of operations and unaudited consolidated statements of cash flows.
The $14 million Purchase Option and the Additional Amount Purchase Option are recorded to written call option derivative liabilities within the unaudited consolidated balance sheet and have a fair value of $0 as of March 31, 2026 and December 31, 2025, respectively.
The Loan Agreement is a written loan commitment that is not eligible for the fair value option under ASC 825, Financial Instruments. However, management elected the fair value option for all draws under this commitment, and therefore has expensed all issuance costs associated with the Loan Agreement, which are comprised of the fair value of the shares of common stock issued to the Patel Family as well as the issuance date fair value of the $14 million Purchase Option and Additional Amount Purchase Option.
Notes Payable
As a result of the Merger, the Company assumed notes payable held by Polar Multi-Strategy Master Fund (“Polar”) for which the proceeds were to be used for working capital purposes by Semper Paratus with an outstanding balance of $1,651,000 on the Closing Date and which remain outstanding at March 31, 2026. The notes payable do not accrue interest. The outstanding balance of the notes was required to be repaid in full within five business days of the Merger, and the Company is therefore in default of its obligations at March 31, 2026. The notes’ default provisions do not require the Company to transfer any shares or pay any amounts to Polar.
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