CONVERTIBLE DEBENTURES AND RELATED DERIVATIVE INSTRUMENTS |
6 Months Ended |
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Jun. 30, 2026 | |
| Debt Disclosure [Abstract] | |
| CONVERTIBLE DEBENTURES AND RELATED DERIVATIVE INSTRUMENTS | NOTE 22 – CONVERTIBLE DEBENTURES AND RELATED DERIVATIVE INSTRUMENTS
On November 4, 2025 and December 17, 2025, the Company issued two tranches of senior secured convertible debentures to YA II PN, Ltd. (“Yorkville”) (collectively, the “Convertible Debentures”) with aggregate principal of $50,000 (each tranche with principal of $). Each debenture was issued at a purchase price of 96% of principal, bore interest at 4.0% per annum (increasing to 18.0% upon an event of default), and had a contractual maturity 24 months from issuance (November 4, 2027 and December 17, 2027, respectively). The Convertible Debentures were secured by first-priority liens on substantially all assets of the Company and were guaranteed by certain subsidiaries. Upon settlement in February 2026, all related security interests and liens were released.
Conversion Features
Yorkville could convert all or any portion of the outstanding principal and accrued interest into shares of the Company’s common stock at a conversion price equal to the lower of (i) a fixed price of $6.016 per share, subject to a one-time downward-only reset following registration effectiveness, and (ii) 97% of the lowest daily volume-weighted average price (“VWAP”) during the three trading days immediately preceding conversion, subject to a $ per share floor price, in each case subject to customary anti-dilution adjustments. Conversions were subject to a beneficial ownership limitation (generally 4.99%) and an exchange cap tied to Nasdaq rules, unless stockholder approval was obtained or the limitation was otherwise waived pursuant to the debenture terms. If fully converted at the $ floor price, the $50,000 principal amount of the Convertible Debentures would have been convertible into a maximum of shares of the Company’s common stock, exclusive of any shares issuable for accrued interest or premiums. The Company did not register any shares for issuance under the Convertible Debentures and elected to utilize its optional cash settlement provisions in February 2026.
Embedded Derivative Liability — Conversion Option
The Company determined that the holder’s optional conversion feature required bifurcation as an embedded derivative under ASC 815, Derivatives and Hedging, because (i) the economic characteristics of the conversion feature were not clearly and closely related to the host debt instrument and (ii) the conversion feature did not qualify for equity classification due to its variable conversion pricing mechanics, including VWAP-based pricing, floor price provisions, and reset features. The embedded conversion option was accounted for separately as a derivative liability measured at fair value, with changes in fair value recognized in earnings each reporting period. At issuance, the Company allocated proceeds between the host debt and the embedded derivative based on relative fair value, with the derivative recorded as a liability and a corresponding amount recorded as a debt discount on the host debenture. This debt discount was amortized to interest expense using the effective interest method. The Company does not designate any derivative instruments as hedging instruments for accounting purposes and does not apply hedge accounting.
The embedded derivative liability was measured at fair value on a recurring basis using significant unobservable inputs (Level 3), estimated using a Monte Carlo simulation within a “with-and-without” framework that captured the instrument’s variable conversion pricing, floor price, amortization, and prepayment features. During the six months ended June 30, 2026, the Company recognized a gain of $497 from the change in the fair value of the embedded derivative liability prior to its derecognition. Upon settlement of the Convertible Debentures on February 6, 2026, the Company derecognized the remaining embedded derivative liability of $1,203, resulting in a $443 gain on derecognition that is included as a component of, and is presented net within, the $3,057 loss on extinguishment of the Convertible Debentures described under Settlement below. For the Level 3 fair value rollforward and the significant unobservable inputs used, see Note 14 — Fair Value Measurements.
Settlement
On February 6, 2026, Yorkville converted $15,000 of principal into shares of the Company’s common stock at a conversion price of $4.00 per share. No accrued interest was converted. The Company subsequently paid approximately $38,903 in cash to settle the remaining obligations under the Convertible Debentures, consisting of $35,000 of principal, a $3,500 prepayment premium, and approximately $403 of accrued interest. Of the accrued interest paid upon settlement, approximately $200 related to interest accrued as of December 31, 2025 and approximately $203 was recognized as contractual interest expense during the six months ended June 30, 2026. The Company recognized a loss on extinguishment of the Convertible Debentures of $3,057. Upon settlement, the Convertible Debentures were satisfied and terminated, and all related security interests and liens were released. See Note 2 — Liquidity and Note 16 — Stockholders’ Equity for additional information regarding the February 2026 conversion and settlement of the Convertible Debentures.
Debt Carrying Amount and Interest Expense
On December 29, 2025, management committed to a plan to settle the Convertible Debentures in early 2026, which constituted a change in the estimated life of the instruments. The Company prospectively recalculated the effective interest rates based on the revised expected settlement date of February 6, 2026, which resulted in effective interest rates that substantially exceeded the 4.0% stated coupon rate. For the six months ended June 30, 2026, the Company recognized total interest expense of approximately $12,182 related to the Convertible Debentures, consisting of approximately $203 of contractual interest and approximately $11,979 of non-cash interest expense from the amortization of debt discounts and issuance costs. As of June 30, 2026, the Convertible Debentures had been fully extinguished and derecognized in connection with the February 2026 settlement described above. Accordingly, no carrying amount related to the Convertible Debentures, including any unamortized original issue discount, debt issuance costs, or bifurcation-related discounts, remained outstanding as of June 30, 2026.
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