v3.26.1
Debt
 9 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
Debt

Note 10 – Debt

 

ELOC Commitment Note

 

On October 28, 2025, the Company issued a convertible promissory note related to its common stock purchase agreement entered into in July 2025 with an aggregate principal amount of $20.0 million (the “ELOC Commitment Note”). The ELOC Commitment Note bore interest at 5% per annum, payable at maturity, and was scheduled to mature on July 17, 2026, subject to acceleration upon certain events of default, prior to its conversion in full. They were issued at an OID and was secured by substantially all of the Company’s U.S. assets and certain equity interests in its subsidiaries pursuant to a Security and Pledge Agreement.

 

The accredited investor of the ELOC Commitment Note held the option, at its sole discretion and upon timely notice, to convert all or a portion of the unpaid principal and accrued interest into the Company’s common stock at a conversion price equal to the lesser of (i) a 20% discount to the lowest intraday sale price of the common stock on the execution date of the agreement, or (ii) a 20% discount to the lowest intraday sale price of the common stock during the 20 trading days preceding the conversion notice, subject to customary adjustments. The Company evaluated this conversion feature under ASC 815-40 and concluded that it does not meet the criteria for equity classification. Accordingly, this feature was bifurcated and accounted for as a derivative liability under ASC 815. Additionally, because the ELOC Commitment Note was not issued at a substantial premium, no beneficial conversion feature was recorded under ASC 470-20. No cash proceeds were received as the ELOC Commitment Note represented 2% of the $1.0 billion committed capital under the common stock purchase agreement (“ELOC”). The note was issued as consideration for the investor’s capital commitment under the ELOC and, as such, the related amount was recorded as an ELOC commitment cost and reflected as a reduction of additional paid-in capital.

 

During the three months ended June 30, 2026, the accredited investor converted the entire $20.0 million principal balance of the ELOC Commitment Note into 4,156,959 shares of the Company’s common stock. No principal balance remains outstanding.

 

Prior to completion of the final conversion, the Company and the accredited investor agreed that the accredited investor would waive its contractual right to all accrued interest under the ELOC Commitment Note, which agreement was memorialized in a First Amendment to the ELOC Commitment Note executed on June 30, 2026. Management concluded that, because the substance of the waiver was agreed prior to final settlement of the ELOC Commitment Note, it should be accounted for under ASC 470-50 as part of the modification and settlement of the ELOC Commitment Note. The Company derecognized the accrued contractual interest liability and the remaining derivative liability, net of the unamortized debt discount, and recognized a resulting gain on debt modification of approximately $0.5 million within the condensed consolidated statement of operations.

 

During the three months ended June 30, 2026, the Company issued approximately 3.5 million shares of common stock pursuant to drawdowns under the ELOC Purchase Agreement, generating aggregate cash proceeds of $25.3 million.

 

The table below summarizes the components used to determine the initial carrying amount of the ELOC Commitment Note as of October 28, 2025 (in thousands):

  

   Amount 
Principal amount  $20,000 
Less: original issue discount   (5,000)
Add: fair value of derivative liabilities   5,000 
Initial carrying amount of the ELOC Commitment Note at October 28, 2025  $20,000 

 

The carrying amount of the ELOC Commitment Note as of December 31, 2025 is summarized below (in thousands):

 

   Amount 
Initial carrying amount  $20,000 
Add: amortization of debt discount   1,028 
Add: change in fair value of derivative liabilities   — 
Carrying amount of the ELOC Commitment Note at December 31, 2025  $21,028 

 

The carrying amount of the ELOC Commitment Note as of March 31, 2026 is summarized below (in thousands):

 

   Amount 
Initial carrying amount  $21,028 
Add: amortization of debt discount   1,588 
Add: change in fair value of derivative liabilities   — 
Carrying amount of the ELOC Commitment Note at March 31, 2026  $22,616 

 

 

The carrying amount of the ELOC Commitment Note as of June 30, 2026 is summarized below (in thousands):

 

   Amount 
Initial carrying amount  $22,616 
Add: amortization of debt discount   704 
Add: change in fair value of derivative liabilities   (5,000)
Less: conversion of ELOC Commitment Note into common stock   (18,320)
Carrying amount of the ELOC Commitment Note at June 30, 2026  $— 

 

July 2025 convertible notes

 

On July 7, 2025, the Company issued senior secured convertible notes with an aggregate principal amount of $7.65 million (the “July 2025 Notes”). The July 2025 Notes bear interest at 8% per annum, payable quarterly in cash, and mature on July 8, 2027, subject to acceleration upon certain events of default. The July 2025 Notes were issued at an original issue discount and are secured by substantially all of the Company’s U.S. assets, as well as certain equity interests in its subsidiaries, pursuant to a Security and Pledge Agreement.

 

The primary conversion feature within the July 2025 Notes provides the holders the right to convert the principal amount into the Company’s common stock at a fixed conversion price of $37.64 per share, subject to customary anti-dilution adjustments.

 

The Company evaluated this conversion feature under ASC 815-40 and concluded that it meets the criteria for equity classification. Accordingly, the conversion feature was not bifurcated from the host debt instrument and no derivative liability was recognized. In addition, because the July 2025 Notes were not issued at a substantial premium, no beneficial conversion feature was recorded under ASC 470-20.

 

Certain other provisions contained within the July 2025 Notes allow the holder, upon the occurrence of defined triggering events, to convert the debt into common stock at 120 - 125% of the outstanding debt value through maturity. These contingent conversion features do not meet the criteria for equity classification and were therefore bifurcated and accounted for as derivative liabilities under ASC 815.

 

The table below summarizes the components used to determine the initial carrying amount of the July 2025 Notes as of July 7, 2025 (in thousands):

  

   Amount 
Principal amount  $7,650 
Less: original issue discount   (2,118)
Less: issuance costs   (139)
Add: fair value of derivative liabilities   298 
Initial carrying amount of the July 2025 Notes at July 7, 2025  $5,691 

 

The carrying amount of the July 2025 Notes as of September 30, 2025 is summarized below (in thousands):

  

   Amount 
Initial carrying amount  $5,691 
Less: cash payments on convertible debt   (1,526)
Add: amortization of debt discount and issuance costs   287 
Add: change in fair value of derivative liabilities   — 
Carrying amount of the July 2025 Notes at September 30, 2025  $4,452 

 

 

The carrying amount of the July 2025 Notes as of June 30, 2026 is summarized below (in thousands):

 

   Amount 
Initial carrying amount  $4,452 
Less: settlement of July 2025 Notes   (4,452)
Carrying amount of the July 2025 Notes at December 31, 2025  $— 

 

In connection with issuing the July 2025 Notes, the Company executed a Securities Purchase Agreement that also included 355,634 warrants to purchase common stock and a registration rights agreement covering the underlying shares (see Note 13 – Preferred stock, warrants and other equity). A portion of the proceeds was allocated to the warrants based on their relative fair value.

 

After deducting the original issue discount, issuance costs, fair value of warrants, and the fair value of derivative liabilities, the Company received net proceeds of approximately $6.1 million, which have been used for general corporate purposes and working capital.

 

In October 2025, the Company settled its outstanding July 2025 Notes with the note holders through a settlement agreement, under which the notes, along with all accrued interest and related derivative liabilities, were fully settled and extinguished. The related $3.1 million loss on extinguishment of debt was recognized in the three months ended December 31, 2025.