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

4. Debt

 

The aggregate principal amount of debt outstanding as of June 30, 2026 and December 31, 2025 consisted of the following:

          
   June 30,
2026		   December 31,
2025		 
Senior secured notes  $1,430   $1,273 
Convertible promissory notes, net   3,107    3,133 
Total Debt  $4,537   $4,406 

 

Senior Secured Notes

 

The Senior Secured Notes bear interest at the compound rate of 15% per annum and are convertible at the option of each noteholder at $8.50 per share. The outstanding principal amount of the Senior Secured Notes of $1,000 and all accrued but unpaid interest will be due and payable at the maturity date, December 15, 2026, unless otherwise converted. While any Senior Secured Notes are outstanding, the Company cannot incur additional indebtedness for borrowed funds, except additional Senior Secured Notes, substantially similar notes or other debt instruments that are pari passu with or subordinate to the Senior Secured Notes. As of June 30, 2026, the Senior Secured Notes are potentially convertible into 168,184 shares of the Company’s common stock.

 

As of December 31, 2025, the aggregate principal and accrued interest outstanding under the Senior Secured Notes totaled $1,273. The Company recognized approximately $157 of interest expense for the six months ended June 30, 2026, which is included within interest expense in the condensed consolidated statements of operations and comprehensive income (loss). As of June 30, 2026, the aggregate principal and accrued interest outstanding under the Senior Secured Notes totaled $1,430.

 

Convertible Promissory Notes

 

In June 2025, the Company entered into a securities purchase agreement with accredited investors pursuant to which the Company issued secured convertible promissory notes (the “Convertible Promissory Notes”) and warrants to purchase an aggregate of 37,500,000 shares of the Company’s common stock (the “Warrants”) for aggregate gross proceeds of $3.0 million.

 

The Convertible Promissory Notes bear simple interest at a rate of 10.00% per annum and had an original maturity date in June 2026, unless earlier converted or repaid in accordance with their terms. Interest accrues daily based on a 360-day year and is not payable in cash before maturity unless the Convertible Promissory Notes are repaid before conversion. The conversion price is $0.04 per share, subject to customary anti-dilution adjustments for stock splits, stock dividends, combinations, or recapitalizations.

 

Effective June 1, 2026, the Company and the holders amended the Convertible Promissory Notes to extend the maturity date to June 2027 and replace the provision requiring automatic conversion upon the closing of a qualified financing. Under the amended terms, if (i) the volume-weighted average price of the Company’s common stock on the immediately preceding trading day equals or exceeds $0.60 per share and (ii) the average daily traded value of the Company’s common stock for the five immediately preceding trading days equals or exceeds $1.0 million, the Company may elect to convert all or any portion of the outstanding principal balance into shares of common stock at a conversion price of $0.04 per share, subject to customary adjustments for stock splits, stock dividends, combinations, recapitalizations and similar events. Any accrued and unpaid interest attributable to principal converted pursuant to the amended conversion provision is automatically forgiven upon conversion. If the Company elects to convert the entire $3.0 million outstanding principal balance, the Convertible Promissory Notes would convert into 75,000,000 shares of the Company’s common stock.

 

The Company evaluated the amendment under the debt modification and extinguishment guidance in ASC 470-50. The present value of the cash flows under the amended terms differed from the present value of the remaining cash flows under the original terms by approximately 3.05%. In addition, the change in the fair value of the embedded conversion option was approximately 7.08% of the carrying amount of the Convertible Promissory Notes immediately before the amendment, and the amendment did not add or eliminate a substantive conversion option. Because the applicable changes were less than 10%, the Company accounted for the amendment as a debt modification rather than a debt extinguishment. Accordingly, the Company did not recognize a gain or loss on extinguishment.

 

The amendment increased the fair value of the embedded conversion option by approximately $232,000. The Company recorded the increase as a debt discount, with a corresponding increase to additional paid-in capital. The debt discount, together with the remaining unamortized debt issuance costs associated with the original issuance, is being amortized to interest expense over the remaining term of the amended Convertible Promissory Notes using the effective-interest method. Following the amendment, the revised effective interest rate is approximately 17.70%.

 

The Convertible Promissory Notes may not be prepaid before the maturity date without the written consent of the applicable holder and are secured pursuant to a security agreement entered into concurrently with their original issuance.

 

Upon the occurrence of an event of default and written notice from the applicable holder, or automatically upon the occurrence of certain bankruptcy-related events, the Convertible Promissory Notes become immediately due and payable, together with all accrued and unpaid interest. Events of default include, among other matters, (i) failure to pay principal or interest when due, (ii) breaches of covenants contained in the Convertible Promissory Notes or the securities purchase agreement, (iii) specified bankruptcy or insolvency events and (iv) defaults under other indebtedness exceeding $200,000.

 

In connection with the original issuance of the Convertible Promissory Notes, the Company incurred debt issuance costs of approximately $75,000. The debt issuance costs were recorded as a direct deduction from the carrying amount of the Convertible Promissory Notes. Before the June 2026 amendment, the debt issuance costs were amortized using an original effective interest rate of approximately 12.64%. Following the amendment, the remaining unamortized debt issuance costs are being amortized over the amended remaining term using the revised effective interest rate.

 

The Company accounts for the Convertible Promissory Notes at amortized cost. At issuance, no portion of the proceeds was allocated to the embedded conversion features because the conversion features did not require bifurcation and separate accounting as derivative instruments under ASC 815. The fair value of the Warrants issued in connection with the Convertible Promissory Notes was not material.

 

At December 31, 2025, the carrying amount of the Convertible Promissory Notes and related accrued interest was approximately $3.1 million, net of a valuation discount of $33. At June 30, 2026, the aggregate outstanding principal and accrued interest was approximately $3.1 million, net of the unamortized debt discount of $211 recognized in connection with the amendment and the remaining unamortized debt issuance costs.

 

For the six months ended June 30, 2026, the Company recognized approximately $203 of interest expense, including contractual interest, approximately $33 of amortization of the original debt issuance costs and approximately $19 of amortization of the debt discount recognized in connection with the June 2026 amendment. Interest expense is included within interest expense in the condensed consolidated statements of operations and comprehensive loss.