8. CONVERTIBLE DEBT

10% Senior Unsecured Convertible Debenture

On May 17, 2021, the Company issued 10% senior unsecured convertible debentures with an aggregate principal amount of $1.1 million. The debentures matured on May 17, 2024 and remain outstanding. The principal and accrued interest are convertible, at the holder’s option, into shares of common stock at a conversion price of $0.50 per share, subject to adjustment in certain events. Interest accrues at a rate of 10% per annum, compounded quarterly, and is payable in cash or shares of common stock at the Company’s option. Upon obtaining approval to list or quote the Company’s common stock on a national exchange or market, the Company may require the debentures to convert into shares of common stock immediately prior to such uplisting; however, if the Company conducts a financing in connection with the uplisting, the holder may elect to exchange the debentures for the securities issued in that financing.

If a Change of Control (as defined in the Convertible Debenture Certificate) occurs prior to repayment, the Company must repay all outstanding principal and accrued interest plus a premium equal to 3% of the outstanding principal, unless the holder elects to convert the debentures into shares of common stock at the Conversion Price immediately prior to the effective date of the Change of Control.

As of June 30, 2026 and December 31, 2025, the outstanding principal balance was $1.1 million. Accrued interest totaled $206 thousand and $104 thousand as of June 30, 2026 and December 31, 2025, respectively. Following the maturity date, the debentures bear interest at a default rate of 18.0% per annum. The debentures are currently in default and are classified as “Short-term convertible debt in default” on the unaudited condensed consolidated balance sheets.

Convertible Promissory Notes

The following table summarizes convertible promissory notes outstanding as of June 30, 2026 and December 31, 2025:

1800 Diagonal Lending LLC Notes

During 2025 and the six months ended June 30, 2026, the Company entered into multiple securities purchase agreements with 1800 Diagonal Lending LLC (“Diagonal Lending”) and issued a series of contingently convertible promissory notes (the “Diagonal Notes”).

On April 1, 2025 and May 1, 2025, the Company issued notes with principal balances of $150 thousand and $121 thousand, respectively. These notes matured on January 30, 2026 and February 28, 2026, respectively, and were repaid in accordance with their terms.

On October 3, 2025, the Company issued an additional note with a principal balance of $123 thousand and an original issue discount of $16 thousand, resulting in net proceeds of $107 thousand. The note includes a one-time interest charge of 12% applied on the issuance date, resulting in total amounts due of $138 thousand, and matures on July 30, 2026. The note is payable in five scheduled installments, with the first payment of $69 thousand due March 30, 2026, followed by four equal monthly payments of $17 thousand through the maturity date. The Company has the right to accelerate or prepay the note in full at any time without penalty. The note is contingently convertible into shares of common stock only upon an event of default, at a conversion price equal to 65% of the lowest trading price of the Company's common stock during the ten trading days prior to conversion, subject to a 4.99% beneficial ownership limitation.

On January 8, 2026, the Company issued a note with a principal balance of $158 thousand and an original issue discount of $21 thousand, resulting in net proceeds of $137 thousand. The note includes a one-time interest charge of 12% applied on the issuance date, resulting in total amounts due of $176 thousand, and matures on November 15, 2026. The note is payable in five scheduled installments, with the first payment of $88 thousand due July 15, 2026, followed by four equal monthly payments of $22 thousand through the maturity date. The Company has the right to accelerate or prepay the note in full at any time without penalty. The note is contingently convertible into shares of common stock only upon an event of default, at a conversion price equal to 65% of the lowest trading price of the Company's common stock during the ten trading days prior to conversion, subject to a 4.99% beneficial ownership limitation.

The Diagonal Notes contain conversion features that become exercisable upon the occurrence of an event of default and provide for settlement at a variable conversion price based on market conditions. The Company evaluated these features and determined that they meet the definition of derivative instruments and are not clearly and closely related to the host debt. Accordingly, the conversion features were bifurcated and accounted for as derivative liabilities. The derivative liabilities are initially recorded at fair value and remeasured at each reporting date, with changes in fair value recognized in earnings (see Note 11 for additional information on fair value measurements).

The Diagonal Notes contain customary covenants, including restrictions on the disposition of significant assets. Upon an event of default, amounts outstanding under the Diagonal Notes become immediately due and payable at 150% of the then-outstanding balance, including accrued and unpaid interest. In addition, upon an event of default, the holder may elect to convert all or any portion of the outstanding balance into shares of common stock at the variable conversion price described above.

As of June 30, 2026, the aggregate outstanding principal balance of the Diagonal Notes was $174 thousand, with accrued interest of $15 thousand. Unamortized debt discounts and issuance costs totaled approximately $21 thousand. As of December 31, 2025, the aggregate outstanding principal balance was $175 thousand, with accrued interest of $7 thousand and unamortized debt discounts and issuance costs of approximately $33 thousand. The Diagonal Notes that remain outstanding are included in “Short-term convertible notes, net of discounts” on the unaudited condensed consolidated balance sheets.

GS Capital Partners, LLC Convertible Note

On December 30, 2025, the Company issued an unsecured promissory note to GS Capital Partners, LLC (“GS Capital”) with a principal balance of $69 thousand and an original issue discount of $6 thousand, resulting in net proceeds of approximately $63 thousand. The note includes a one-time guaranteed interest charge of 12% applied on the issuance date and added to the principal balance, resulting in total amounts due of $77 thousand, and matures on December 30, 2026. The outstanding principal is payable in six monthly installments of approximately $13 thousand each, commencing on the 181st day following the issuance date and continuing monthly thereafter, with all remaining principal and interest due at maturity. The Company has the right to prepay the note in whole or in part at any time. Upon an event of default, amounts outstanding become immediately due and payable at 150% of the then-outstanding balance, and default interest accrues at 24% per annum.

In connection with the issuance of the GS Capital note on December 30, 2025, the Company issued warrants to purchase 20,000 shares of common stock. The warrants are exercisable at a price equal to the closing price of the Company’s common stock on the issuance date ($0.54 per share) and expire on December 31, 2027. The warrants are exercisable at any time following issuance and do not include a cashless exercise feature.

The Company allocated the proceeds from the issuance of the note and warrants between the debt and the warrant based on their relative fair values. The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected term of 2.0 years, stock price of $0.54, exercise price of $0.54, volatility of 186.5%, risk-free interest rate of 3.5%, and no expected dividends. The estimated fair value per warrant was $0.44. Based on this allocation, the Company recorded a debt discount of approximately $9 thousand related to the warrant, which is being amortized to interest expense over the term of the note using the effective interest method.

The note contains a conversion feature that becomes exercisable upon an event of default and provides for settlement at a variable conversion price equal to 65% of the lowest trading price of the Company's common stock during the fifteen trading days prior to conversion. The Company evaluated this feature and determined that it meets the definition of a derivative instrument and is not clearly and closely related to the host debt. Accordingly, the conversion feature was bifurcated and accounted for as a derivative liability, initially recorded at fair value and remeasured at each reporting date, with changes in fair value recognized in earnings (see Note 11 for additional information on fair value measurements).

The GS Capital note contains customary covenants, including restrictions on asset dispositions, stock repurchases, and certain lending activities, as well as a cross-default provision and a most favored nations clause that adjusts the conversion price and other economic terms on a ratchet basis if the Company offers more favorable terms to another party.

As of June 30, 2026, the outstanding principal balance of the GS Capital note was $56 thousand, with accrued interest of $6 thousand. Unamortized debt discounts and issuance costs totaled approximately $11 thousand. As of December 31, 2025, the outstanding principal balance was $69 thousand, with accrued interest nil. Unamortized debt discounts and issuance costs totaled approximately $27 thousand.

Labrys Fund II Convertible Note

On August 27, 2025, the Company issued a convertible promissory note to Labrys Fund II, L.P. (“Labrys”) with a principal balance of $108 thousand and an original issue discount of $10 thousand, resulting in net proceeds of $98 thousand. The note bears total interest of $11 thousand and matures on August 27, 2026. The note is unsecured and may not be prepaid except as provided in its terms.

On June 5, 2026, the Company issued a second convertible promissory note (the “Second Labrys Note” and, together with the first Labrys note, the “Labrys Notes”) to Labrys with a principal balance of $108 thousand and an original issue discount of $10 thousand, resulting in net proceeds of $98 thousand. The Second Labrys Note bears total interest of $11 thousand and matures on June 5, 2027. The note is unsecured, contains the same conversion terms described below, and may not be prepaid except as provided in its terms. Amortization payment of $59 thousand is due on December 5, 2026, followed by five monthly payments of $10 thousand each from January 2027 through May 2027, with any remaining outstanding amount due at maturity.

Each of the Labrys Notes contains a conversion feature that becomes exercisable upon an event of default or missed payment and provides for settlement at a variable conversion price equal to 75% of the average of the two lowest closing prices of the Company’s common stock during the ten trading days preceding conversion, subject to customary adjustments.

The Company evaluated the embedded conversion feature in each of the Labrys Notes and determined that it meets the definition of a derivative instrument and is not clearly and closely related to the host debt. Accordingly, the conversion features were bifurcated and accounted for as derivative liabilities, initially recorded at fair value as a debt discount and remeasured at each reporting date, with changes in fair value recognized in earnings.

As of June 30, 2026, the aggregate outstanding principal balance of the Labrys Notes was $127 thousand, with accrued interest of $2 thousand. Unamortized debt discounts and issuance costs totaled approximately $27 thousand. As of December 31, 2025, only the First Labrys Note was outstanding, with a principal balance of $108 thousand with accrued interest of $6 thousand and unamortized debt discounts and issuance costs of approximately $16 thousand; the Second Labrys Note had not yet been issued.

The Labrys Notes are included in “Short-term convertible notes, net of discounts” on the unaudited condensed consolidated balance sheets.

Auctus Convertible Note

On December 17, 2019, the Company issued a convertible promissory note to Auctus Fund, LLC (“Auctus”). The note provided for variable conversion prices based on a discount to market and bears default interest upon an event of default.

On September 1, 2022, the Company entered into an Exchange Agreement with Auctus pursuant to which certain outstanding debt and equity instruments were restructured. Following the exchange, the remaining balance was payable in installments. During 2024, Auctus agreed that payments would be applied first to principal. The note remains in default and continues to accrue interest.

As of June 30, 2026 and December 31, 2025, the outstanding principal balance of the convertible note was $20 thousand. Accrued interest totaled $160 thousand and $144 thousand as of June 30, 2026 and December 31, 2025, respectively.

The note is included in “Short-term convertible debt in default” on the unaudited condensed consolidated balance sheets.

Other Convertible Promissory Notes

On May 2, 2025, the Company issued a promissory note with a principal balance of $75 thousand to an unaffiliated third party. The note accrued interest at a rate of 12.0% per annum and matured on May 2, 2026. During the three months ended March 31, 2026, the Company entered into an exchange agreement with the holder of the note, pursuant to which the holder agreed to convert the outstanding principal balance of $75 thousand and accrued interest of $8 thousand into 414,082 shares of the Company’s common stock at a conversion price of $0.20 per share.

In connection with the exchange, the Company issued warrants to purchase 300,000 shares of common stock as an inducement to convert the note. The issuance of these warrants represented additional consideration to the holder and resulted in the recognition of an inducement charge of approximately $78 thousand during the six months ended June 30, 2026, which is presented as “Inducement charges” in the condensed consolidated statements of operations.

As a result of the conversion, the note was fully extinguished during the six months ended June 30, 2026.