Convertible Notes Payable |
9 Months Ended |
|---|---|
Apr. 30, 2026 | |
| Convertible Notes Payable [Abstract] | |
| CONVERTIBLE NOTES PAYABLE | NOTE 7 - CONVERTIBLE NOTES PAYABLE
As of April 30, 2026, Cornerstone had $610 thousand in principal, and $248 thousand of accrued interest thereon, of Series C Convertible Notes outstanding (the “Series C Convertible Notes”). The Series C Convertible Notes accrue interest at a rate of 3.5% per annum and are due, together with accrued interest, one year (unless amended) from the date of issuance and automatically accelerate upon the sale of Cornerstone in its entirety or the sale or license of substantially all of Cornerstone’s assets or intellectual property. The Series C Convertible Notes (including all accrued and unpaid interest thereon) automatically convert into the same class of securities (including stock warrants) sold in the Cornerstone’s equity financing (i) where Cornerstone receives gross proceeds of at least $10,000,000 from Institutional Investors (a “Qualified Financing”), or (ii) from an underwritten initial public offering (“IPO”). The conversion price of the Series C Convertible Notes upon a Qualified Financing shall be the lesser of (i) 90% of the price per share (or unit) at which the securities in the Qualified Financing are sold, or (ii) $1.25 price per share (or unit) (whichever is less) at the holder’s selection of (i) or (ii), and 90% of the share price per share (or unit) at which securities in an IPO are first sold.
The outstanding Series C Convertible Notes are convertible, at the option of the holders, in certain equity financings consummated by Cornerstone or into equity securities and warrants to purchase equity securities of Cornerstone.
In the event of a liquidation event of Cornerstone prior to the repayment or conversion of the Series C Convertible Notes, the holders are entitled to receive either (a) an amount equal to the outstanding principal and interest due, or (b) the pro rata per share amount of the proceeds of such liquidation the holders would be entitled to had they exercised their conversion right.
Of the Series C Convertible Notes outstanding as of April 30, 2026:
(a) Series C Convertible Notes with an aggregate outstanding principal amount of $608 thousand were not amended in connection with the Cornerstone Restructuring. The interest accrued on these Series C Convertible Notes as of April 30, 2026 is $248 thousand and is recorded in accrued expenses on the consolidated balance sheet. As of April 30, 2026, these Series C Convertible Notes are currently in default as they are beyond the maturity date; and
(b) one outstanding Series C Convertible Note with a principal amount of $2 thousand was amended in the Cornerstone Restructuring to (i) extend the maturity date thereof to May 31, 2028 and (ii) provide that, on conversion thereof, the converting holder will receive shares of Cornerstone Common Stock. The holder of this amended Series C Convertible Note waived such holder’s rights in connection with the Cornerstone Restructuring. In the Cornerstone Acquisition, Rafael recorded all unamended Series C Convertible Notes as noncurrent liabilities at their fair value, which considers the aggregate principal plus accrued interest. The Company accretes the fair value of these Series C Convertible Notes to the value of the principal plus accrued interest thereon as of the date of the Cornerstone Acquisition as interest expense in the consolidated statements of operations and comprehensive loss over the estimated term of these amended Series C Convertible Notes.
During the nine months ended April 30, 2026, the Company entered into settlement agreements with four holders of Series C Convertible Notes. Under these agreements, the Company settled aggregate principal and interest balances of $76 thousand and $28 thousand, respectively, for cash payments totaling approximately $11 thousand and recognized a gain on settlement of convertible notes of $93 thousand, which is included in gain on settlement of accounts payable and convertible notes payable on the consolidated statements of operations and comprehensive loss. During the three and nine months ended April 30, 2026, the Company recorded $5 thousand and $16 thousand, respectively, of interest expense in relation to the Cornerstone Series C Convertible Notes to interest expense on the consolidated statements of operations and comprehensive loss.
During the three and nine months ended April 30, 2025, the Company recorded $6 thousand and $18 thousand, respectively, of interest expense in relation to the Cornerstone Series C Convertible Notes to interest expense on the consolidated statements of operations and comprehensive loss. |