v3.26.1
Convertible Notes and Notes Payable
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
Convertible Notes and Notes Payable

Note 6 – Convertible Notes and Notes Payable

Convertible Notes

In January and February 2026, the Company issued Convertible Notes in an aggregate principal amount of $40.0 million (the “Convertible Notes”). The Convertible Notes were scheduled to mature two years from their respective issuance dates unless earlier converted or repaid. The Convertible Notes bore no interest during the first six months following issuance and thereafter provided for payment-in-kind (“PIK”) interest at a rate of 7.0% per annum. In connection with the initial public offering, any accrued PIK interest was contractually waived immediately prior to conversion. The Convertible Notes provided for conversion upon the occurrence of specified events, including a qualified financing, non-qualified financing, change of control, or initial public offering.

The Company elected the fair value option under ASC 825 for the Convertible Notes in order to account for the Convertible Notes as a single unit of account, which reflects the combined effect of the debt host and the embedded features within the overall fair value measurement. Accordingly, the Convertible Notes were initially recorded at fair value and subsequently remeasured at fair value at each reporting date through the date of conversion, with changes in fair value recognized in the statement of operations within “Change in fair value of convertible notes payable.” No portion of the change in fair value was attributed to instrument-specific credit risk. Because the Convertible Notes were accounted for under the fair value option, no separate interest expense was recognized.

Prior to conversion, the Convertible Notes are presented as a separate line item on the balance sheet titled “Convertible notes payable”. At issuance, the Company determined that the transaction price represented the best evidence of fair value and recorded the Convertible Notes at the proceeds received. Immediately prior to the conversion in May 2026, the estimated fair value was $44.9 million. The estimated fair value reflected the $15.00 per share IPO price, adjusted for a 10.3% discount for lack of marketability associated with the 180-day contractual restriction applicable to the shares issued upon conversion. See Note 4 – Fair Value Measurements for the discussion on the methodology and assumptions used in assessing the fair value of the Convertible Notes.

Immediately prior to the completion of the Company’s IPO in May 2026, all Convertible Notes were converted into an aggregate of 3,333,324 shares of common stock in accordance with their contractual terms. Following the conversion, no Convertible Notes remained outstanding as of June 30, 2026.

Notes

On December 29, 2023, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Horizon Technology Finance Corporation. On June 1, 2024, Horizon Technology Finance Corporation assigned all of its right, title and interest in and to the loans outstanding under the Loan and Security Agreement and related warrants to Horizon Funding II, LLC, its wholly-owned subsidiary (together with Horizon Technology Finance Corporation, “Horizon”). The Loan and Security Agreement provides for term loans of up to an aggregate principal amount of $30.0 million, available in four equal tranches of $7.5 million. Each tranche comprises two equal loans of $3,750,000. As of June 30, 2026, the Company had $7.5 million in principal outstanding under the Loan and Security Agreement (the “Notes”).

Borrowings under the Loan and Security Agreement accrue interest at an annual rate equal to the greater of (i) the Wall Street Journal (or any successor thereto) prime rate (subject to a floor of 8.50%) plus 3.75% and (ii) 12.25%. The Company is required to make monthly payments of interest through January 1, 2028, followed by amortizing principal and interest payments through the maturity date of January 1, 2029. The unpaid balance of principal and accrued interest is due at maturity. The borrowings are secured by substantially all of the Company’s assets, excluding intellectual property.

In connection with the Company’s draw down of the first tranche under the Loan and Security Agreement, the Company issued warrants to purchase such number of securities representing an aggregate of $262,500 to the lender. The warrants are exercisable at the election of the holder for (i) shares of Series E-2 redeemable convertible preferred stock at an exercise price of $2.5443 per share or, (ii) shares of Series F redeemable convertible preferred stock at an exercise price of $2.6317 per share, and expire ten years from the date of issuance. The warrants allow for settlement in shares and are transferable at the holder’s discretion. The value of the warrants is capped at $2.5443 per share, a total of $262,500, but the number of shares is not limited. Immediately prior to the completion of the IPO, the warrants automatically converted into warrants to purchase 29,620 shares of common stock with an average exercise price of $8.8618 per share. As of June 30, 2026, these warrants remain outstanding.

As of June 30, 2026 and December 31, 2025, the carrying value of the borrowings under the Loan and Security Agreement was $7.3 million and $7.1 million, net of unamortized debt discount and deferred financing costs. The Company amortizes deferred financing costs associated with the Notes to interest expense over the term of the Notes. The amortization of debt discount was not material for each of the three months ended June 30, 2026 and 2025 and was $0.1 million and not material for the six months ended June 30, 2026 and 2025, respectively. The amortization of deferred financing costs was immaterial for each of the three months ended June 30, 2026 and 2025 and each of the six months ended June 30, 2026 and 2025.

There were no additional borrowings, repayments, or material modifications regarding the Loan and Security Agreement during the six months ended June 30, 2026. Total interest expense was $0.2 million for each of the three months ended June 30, 2026 and 2025 and was $0.5 million for each of the six months ended June 30, 2026 and 2025, respectively.