Convertible Debentures |
6 Months Ended | |||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | ||||||||||||||||||||||||||||||||||||
| Convertible Debentures [Abstract] | ||||||||||||||||||||||||||||||||||||
| CONVERTIBLE DEBENTURES | NOTE 7 – CONVERTIBLE DEBENTURES
On April 15, 2024, we entered into a Securities Purchase Agreement (the “JGB Purchase Agreement”) with each of the Purchasers thereto (the “Purchasers”) and JGB Collateral LLC (“JGB”), a Delaware limited liability company, as collateral agent for the Purchasers (the “Agent”). Pursuant to the terms of the JGB Purchase Agreement, on April 15, 2024, we issued the Senior Secured Convertible Debentures (the “Debentures”) due on April 15, 2027 for a principal sum of $11.8 million, subject to the redemption of $5 million at our election. In accordance with the JGB Purchase Agreement, JGB purchased an aggregate of $6.8 million in principal amount of the Debentures, in exchange for $6.0 million in funding. Effective June 21, 2024, we elected not to redeem up to an aggregate of $5.0 million of the Debentures.
On December 30, 2024, we entered into amendments to the JGB Purchase Agreement (the “Amendment Agreement”) and the Debentures (each, a “Debenture Amendment” and collectively, the “Debenture Amendments”), with the Purchasers, the Agent and the other parties thereto, as applicable, to, among other things, sell Debentures up to an additional aggregate principal amount of $5.4 million, for total proceeds of $5 million (the “Additional Investment”). Pursuant to the terms of the Amendment Agreement and the Debenture Amendments, $2.0 million of the Additional Investment was delivered to us at closing, and the remaining $3.0 million of the Additional Investment was held in escrow pending satisfaction of certain terms and conditions specified in the Amendment Agreement and the Debenture Amendments. On January 17, 2025, we received proceeds of $3.0 million from the Additional Investment that had been held in escrow pending satisfaction of certain terms and conditions specified in the Amendment Agreement and the Debenture Amendments.
Pursuant to the Debenture Amendments, the Debentures bear interest at an annual rate of 14%, require monthly principal payments of $250 thousand beginning in January 2025, and have a maturity date of April 15, 2027. The first $6.8 million is convertible, in whole or in part, at any time after their issuance date at the option of the Purchasers, into shares of our common stock at a conversion price equal to $3.00 per share (the “Conversion Price”), subject to adjustment as set forth in the Debentures. The Conversion Price of the Debentures is subject to anti-dilution protection upon subsequent equity issuances, subject to certain exceptions, provided that the Conversion Price shall not be adjusted to a price less than $2.23 per share, the closing price of our common stock on the Trading Market on the day immediately preceding the Closing Date. The Additional Investment is not subject to any conversion features. The obligations as disclosed above were unchanged. On May 13, 2026, we renegotiated the payment terms of the Debentures.
On May 13, 2026, we entered into a second amendment agreement (the “Second Amendment Agreement”) to the JGB Purchase Agreement with each of the Purchasers and the Agent. The Second Amendment Agreement, among other things, extended the maturity date of the Debentures issued pursuant to the JGB Purchase Agreement by one year to April 15, 2028, revised the amortization schedule set forth in the Debentures and provided for a restructuring payment of $150 thousand payable on March 31, 2027 and an exit payment of $500 thousand payable on April 15, 2028. In connection with the Second Amendment Agreement, Mr. Lamendola granted a second lien mortgage on certain personal real property as additional collateral for the obligations under the Debentures.
Our obligations under the Debentures may be accelerated, at the Purchasers’ election or upon the occurrence of certain customary events of default. The Debentures contain customary representations, warranties and covenants including among other things and subject to certain exceptions, covenants that restrict us from incurring additional indebtedness, creating or permitting liens on assets, amending our charter documents and bylaws, repurchasing or otherwise acquiring more than a de minimis number of our common stock or equivalents thereof, repaying outstanding indebtedness, paying dividends or distributions, assigning or selling certain assets, making or holding any investments, and entering into transactions with affiliates.
The Company evaluated the Second Amendment Agreement under ASC 470-50, “Debt - Modifications and Extinguishments”, and determined that the amended terms were not substantially different from the terms of the existing Debentures. Accordingly, the Second Amendment Agreement was accounted for as a debt modification, and no gain or loss on extinguishment was recognized. The restructuring payment and exit payment were included in the revised contractual cash flows, and the related discounts are being amortized to interest expense using the effective interest method over the remaining term of the Debentures.
As of June 30, 2026, the net carrying amount of the Debentures was $8.1 million, of which $2.0 million was short-term. The loan has unamortized debt premium, issuance costs, restructuring payment, and exit payment of $143 thousand, $110 thousand, $123 thousand and $458 thousand, respectively. The estimated fair value (Level 3) of the convertible debt instrument was $8.1 million as of June 30, 2026. During 2026, we made total principal payments of $800 thousand, while the interest of $591 thousand was paid as it was incurred.
Our future loan payments, which are presented as current portion of convertible debentures, net and convertible debentures, net of current portion on our accompanying unaudited condensed consolidated balance sheet as of June 30, 2026, are as follows:
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