Debt |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | Note 7 — Debt
On November 4, 2025 (the “Closing Date”), the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”), with Avenue Capital Management II, L.P., as administrative agent and collateral agent (the “Agent”) and Avenue Venture Opportunities Fund II, L.P., as a lender ("Avenue", or the "Lender"). Also on November 4, 2025, the Company entered into a Supplement to the Loan and Security Agreement (the “Supplement” and together with the Loan and Security Agreement, the “Loan Agreement”) with the Agent and the Lender. The Loan Agreement provides for committed term loans in an aggregate principal amount of up to $17.5 million with (a) $12.5 million funded on the Closing Date (“Tranche 1”) and (b) up to $5.0 million to be funded at any time at the discretion of the Company between November 4, 2026 and May 4, 2027, so long as no default or event of default has occurred and is continuing. Upon the mutual agreement of the Company and the Lender, the Lender may make additional term loans of up to an additional $10.0 million (the “Discretionary Tranche 3” and collectively with Tranche 1 and Tranche 2, the “Loans”), to be funded between January 1, 2027 and December 31, 2027, as the Company and the Lenders may mutually agree. The Loans bear interest at an annual rate equal to the sum of 4.75% and the prime rate as reported in The Wall Street Journal, subject to a prime floor equal to The Wall Street Journal prime rate on Closing Date. The maturity date of the Loans is June 1, 2029 (the “Maturity Date”). The Company is making interest only payments on the Loans until the 18-month anniversary of the Closing Date, subject to a 6-month extension if the funding of Tranche 2 has occurred. The Loan principal is repayable in equal monthly installments from the end of interest only period to the Maturity Date. The Company may, at its option at any time, prepay the Loans in their entirety by paying the then outstanding principal balance and all accrued and unpaid interest on the Loans, subject to a prepayment fee equal to (i) 3.0% of the principal amount outstanding if the prepayment occurs on or prior to the first anniversary following the Closing Date, (ii) 2.0% of the principal amount outstanding if the prepayment occurs after the first anniversary following the Closing Date, but on or prior to the second anniversary following the Closing Date, and (iii) 1.0% of the principal amount outstanding if the prepayment occurs after the second anniversary following the Closing Date. A final payment fee of 3.25% of the principal amount of the Loans (subject to certain reductions), is also due upon the Maturity Date or earlier date of prepayment of the Loans. The Loan is secured by a lien upon and security interest in all of the Company’s assets, including intellectual property, in which the Agent is granted senior secured lien. Pursuant to the Loan Agreement, the Company is subject to certain financial covenants requiring the Company to (i) maintain at all times $2.5 million in unrestricted cash, (ii) achieve at least 75% of its trailing three-month projected revenue and (iii) achieve cash burn for the trailing six months of no more than the greater of 150% of its projected cash burn, or $2.0 million, with which the Company was in compliance as of the issuance date of these financial statements. Pursuant to the Loan Agreement, the Lender also has the right to convert up to $3.0 million of the outstanding principal of Tranche 1 and up to $1.0 million of the outstanding principal of Tranche 2 into shares of Company common stock (the “Conversion Securities”) at a price per share equal to 120% of the exercise price of the warrant at any time while the Loans are outstanding, subject to certain terms and conditions, including ownership limitations. The conversion feature and other terms in the Loan Agreement were bifurcated from the debt at inception and are being recorded as a compound derivative liability which is being recorded at fair value. At inception, the Company recorded a derivative liability of approximately $1,514,400. At June 30, 2026, the derivative liability was determined to have a fair value of approximately $1,882,500. Losses of approximately $790,800 and $232,600 were recorded to change in fair value of derivative liability in other expense (income), net for the three and six months ended June 30, 2026, respectively. At December 31, 2025, the derivative liability was determined to have a fair value of approximately $1,649,900. The Company recorded approximately $821,100 in debt issuance costs during the year ended December 31, 2025 in conjunction with entering into the Loan Agreement, which includes a commitment fee as well as banking and legal fees. The Company capitalized the portion of debt issuance costs allocated to the debt and is amortizing them into interest expense using the interest rate method, which approximates straight-line amortization over the term of the Loan Agreement. The debt issuance costs that were allocated to the warrant and the compound derivative liability of approximately $151,200 were charged to interest expense at inception of the Loan Agreement. As of June 30, 2026, the balance of debt issuance costs was approximately $542,300, which is included in debt discount on the consolidated balance sheet. The Company amortized $47,800 and $95,600 of debt issuance costs, including those amortized from the issuance of the credit facility, to interest expense during the three and six months ended June 30, 2026. As of December 31, 2025, the balance of debt issuance costs was approximately $638,000, which is included in debt discount on the consolidated balance sheet. The Company amortized $226,300 of debt issuance costs, including those amortized from the issuance of the credit facility, to interest expense during the year ended December 31, 2025.
Concurrent with the closing of the Loan Agreement, the Company repaid $4,000,000 to Silicon Valley Bank, representing all amounts outstanding under its credit facility. In addition, the Company paid pre-payment and other fees and wrote-off unamortized debt issuance costs associated with terminating the credit facility, which resulted in the recording of approximately $186,400 to interest expense during the year ended December 31, 2025.
Including the aforementioned amounts, the Company recorded interest expense of approximately $639,000 and $1,271,100 under its debt facilities during the three and six months ended June 30, 2026, respectively.
Long-term debt as of June 30, 2026 and December 31, 2025 are as follows;
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