8. Long Term Debt, net

2026 Notes and related warrants

The Company issued a total of $70 million of senior secured notes (the “2026 Notes”) with a fixed interest rate of 10% to a group of lenders during 2023. The terms of the 2026 Notes provided that they would mature on December 1, 2026 with interest payable semi-annually in arrears on June 1 and December 1 of each year. The Company had the option to elect, in its sole discretion, to pay up to 50% of the accrued and unpaid interest on the 2026 Notes due with its common stock. Upon the closing of the Private Placement (as defined below), the Company used a portion of the net proceeds from the Private Placement to redeem all of the 2026 Notes, at a redemption price of 101% of the principal amount of the 2026 Notes, plus accrued and unpaid interest. Accordingly, none of the 2026 Notes remain outstanding.

In conjunction with the issuance of 2026 Notes, the Company issued warrants to purchase an aggregate of 25,925,927 shares of the Company’s common stock at an exercise price of $2.16 per share (the “2026 Warrants”) to the 2026 Notes holders. The 2026 Warrants are currently exercisable and expire on July 1, 2027.

2028 Notes and related warrants

In 2025, the Company issued in a private placement (the “Private Placement”), $190 million in aggregate principal amount of its 5.00% Senior Secured Convertible Notes due 2028 (the “2028 Notes”). Interest was payable in cash semi-annually in arrears on June 1 and December 1 of each year at 5% per annum.

The 2028 Notes were convertible by the holders thereof, at any time, in whole or in part, into a number of shares of the Company’s common stock equal to (i) the sum of the then-outstanding principal amount of 2028 Notes to be converted plus all accrued and unpaid interest to the date of the conversion divided by (ii) the then-applicable conversion price. The initial conversion price was set at 79.6178 shares per $1,000 principal (“Initial Conversion Price”) and was subject to adjustment based on standard antidilution provisions. Upon conversion, the Company was required to deliver to the converting holder shares of the Company’s common stock and no alternative settlement methods were permitted.

The 2028 Notes also contained a provision allowing the Company to redeem the 2028 Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of such 2028 Notes, plus accrued and unpaid interest, if the last reported sale price of the Company’s common stock was greater than or equal to 160% of the conversion price for the 2028 Notes for at least 20 trading days during any 30 consecutive trading day period (“Optional Redemption”).

Upon the closing of the Private Placement, the Company used a portion of the net proceeds to redeem all of the 2026 Notes, at a redemption price of 101% of the principal amount of the 2026 Notes, plus accrued and unpaid interest. The Company recognized a $14.4 million loss on the early extinguishment of the 2026 Notes during the year ended December 31, 2025. The loss on extinguishment of the 2026 Notes was determined based on the difference between reacquisition price and the net carrying amount of the 2026 Notes. The terms of the 2026 Warrants were not modified or impacted by the Private Placement and the subsequent redemption of the 2026 Notes.

In conjunction with the issuance of the 2028 Notes, the Company issued an aggregate of 7,800,000 warrants (the “2028 Warrants”) to two lead investors who were non-2026 Notes lenders to purchase shares of the Company’s common stock with exercise prices ranging from $12.56 to $20.00 per share. The aggregate fair value of the 2028 Warrants was $9.0 million on the issuance date and presented as “additional paid-in capital” in the condensed consolidated balance sheets, with an offset entry recorded in other loss, net in the condensed consolidated statements of comprehensive loss. The fair value of the 2028 Warrants was determined using the Black-Scholes option pricing model based on non-observable pricing inputs (e.g., expected volatility) in the market and is categorized accordingly as Level 3 in the fair value hierarchy.

As part of the transactions described within this section, an entity affiliated with Fortress Investment Group LLC ("Fortress"), a 10% or greater stockholder of the Company and one of the lead investors, purchased $50 million in 2028 Notes and received 3,900,000 warrants. Additionally, an entity affiliated with Neil S. Subin, a director of the Company, purchased $6.3 million of the 2028 Notes.

The Company filed a registration statement under the Securities Act of 1933, as amended, registering the resale of the 2028 Warrants, the shares of common stock underlying the 2028 Warrants and the conversion option of the 2028 Notes with the United States Securities and Exchange Commission (“SEC”) on April 25, 2025, which the SEC declared effective on May 2, 2025.

The Company determined that the conversion option embedded within the 2028 Notes required bifurcation as a derivative liability under ASC 815. For the valuation to record the debt and embedded derivative related to the conversion option at fair value, the Company used a binomial lattice valuation model and a “with-and-without” valuation methodology at inception and on subsequent valuation dates. This model incorporates inputs such as the stock price of the Company, risk-free interest rate, the transaction-calibrated debt yield and expected volatility. Certain inputs (e.g., expected volatility) involve unobservable inputs and are classified as level 3 of the fair value hierarchy. See Note 7 – Fair Value. The sensitivity of the fair value calculation to these methods, assumptions, and estimates included could create materially different results under different conditions or using different assumptions. Further, the Company determined that contingent interest features require bifurcation and therefore, bifurcated these embedded derivatives, along with the conversion option, from the debt host as a single, compound derivative liability. The Company determined the likelihood of the occurrence of events requiring payment under the contingent interest features to be remote and therefore, determined their value to be de minimis.

Conversion and Extinguishment of 2028 Notes

On June 15, 2026, the Optional Redemption feature of the 2028 Notes was satisfied. As a result, the Company announced that it elected to redeem all of its 2028 Notes on June 25, 2026 (the “Redemption Date”). All outstanding principal (plus accrued and unpaid interest) of the 2028 Notes was converted by the holders into 15,163,329 shares of the Company’s common stock at the Initial Conversion Price prior to the Redemption Date, therefore no portion of the 2028 Notes were subject to redemption. Immediately prior to the conversion, the Company recorded a mark-to-market loss on the conversion option derivative liability of $28.4 million and $19.3 million for the three and six month periods ended June 30, 2026, respectively, which was recorded within Change in fair value of derivative liability in the Condensed Consolidated Statements of Comprehensive Loss. Upon conversion and derecognition of the 2028 Notes and related liabilities, the Company recognized an extinguishment gain of $21.4 million, which was recorded within Debt extinguishment gain (loss) in the Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2026. The extinguishment gain or loss is calculated as the difference between consideration paid and the net carrying amounts of the 2028 Notes and bifurcated derivative liability after remeasuring the bifurcated conversion option to fair value immediately prior to the conversion. See Note 2 – Summary of Significant Accounting Policies - Long-term debt for details. The terms of the 2028 Warrants were not modified or impacted by the conversion of the 2028 Notes.

During the three and six months ended June 30, 2026, the interest expense related to the 2028 Notes was $528 thousand and $1,153 thousand for the entity affiliated with Fortress, respectively, and $66 thousand and $145 thousand for the entity affiliated with Neil S. Subin, respectively.

During the three and six months ended June 30, 2025, the interest expense related to the 2028 Notes was $625 thousand and $653 thousand, respectively, for the entity affiliated with Fortress, and $79 thousand and $82 thousand, respectively, for the entity affiliated with Neil S. Subin.

As of June 30, 2026, there was no outstanding principal, bifurcated derivative liability, or accrued interest expense related to the 2028 Notes. As of December 31, 2025, the accrued interest expense related to the 2028 Notes was $208 thousand for the entity affiliated with Fortress and $26 thousand for the entity affiliated with Neil S. Subin. The fair value of derivative liability was $115.8 million as of December 31, 2025; the carrying value of the 2028 Notes was $157.8 million as of December 31, 2025, net of unamortized debt discount of $32.2 million. Both were included in long-term debt in the Condensed Consolidated Balance Sheets.

The effective interest rate of the 2028 Notes was 13% through the date of conversion.

The Company recognized interest expense associated with the 2028 Notes as follows for the three and six months ended June 30, 2026 and June 30, 2025 (in thousands).

Debt Covenant Compliance

The obligations of the Company under the 2028 Notes were, subject to certain customary exceptions, secured by substantially all of the assets of the Company and its subsidiaries.

The indenture related to the 2028 Notes contained customary covenants limiting the ability of the Company and its subsidiaries to: (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, capital stock; (iii) make certain investments or other restricted payments; (iv) sell assets; (v) enter into transactions with affiliates; or (vi) merge or consolidate or sell all or substantially all of their assets. These covenants were subject to a number of important and significant limitations, qualifications and exceptions. The Indenture also contained customary events of default.

The Company was in compliance with all of the applicable debt covenants described above through the Redemption date.