Convertible Note and SEPA |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Convertible Note and SEPA | |
| Convertible Note and SEPA | (9) Convertible Note and SEPA On April 6, 2026, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership, (“Yorkville”) pursuant to which it has the right (the “SEPA Option”) to sell to Yorkville up to $14 million of shares of Common Stock, subject to certain limitations and conditions set forth in the SEPA, from time to time during the term of the SEPA (the “Commitment Amount”). Sales of Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Stock to Yorkville under the SEPA. Upon satisfaction of the conditions to Yorkville’s purchase obligations set forth in the SEPA, the Company may, at its sole discretion, direct Yorkville to purchase specified amounts of Common Stock. The purchase price per share for each Advance is set at 97% of the lowest daily volume weighted average price (“VWAP”) during the consecutive trading days beginning on the date upon which an Advance Notice is delivered. Actual sales of Common Stock to Yorkville under the SEPA will depend on a variety of factors including some to be determined by the Company, in its sole discretion, from time to time, which may include, among other things, market conditions, the trading price of the Company’s Common Stock and the Company’s determinations as to appropriate sources of funding for its business and operations. The SEPA Option was evaluated and determined to be a freestanding financial instrument which met the criteria to be accounted for as a derivative instrument. As of June 30, 2026, the Company determined the fair value of the SEPA Option was insignificant. In connection with the SEPA, Yorkville also agreed to advance up to $6.0 million to the Company, less certain amounts as described below, to be paid in two tranches (each, a “Pre-Paid Advance” and, together, the “Pre-Paid Advances”), in exchange for issuance by the Company to Yorkville of convertible promissory notes (each, a “Convertible Note” and, together, the “Convertible Notes”). Pursuant to the Convertible Notes and the SEPA, Yorkville may convert all or any portion of the outstanding principal amount, accrued but unpaid interest, and other amounts outstanding under the Convertible Notes into shares of Common Stock, at any time and from time to time during the term of the Convertible Notes. The first Pre-Paid Advance was disbursed to the Company on April 16, 2026. In exchange for the first Pre-Paid Advance, the Company issued to Yorkville a Convertible Note in the principal amount of $1.0 million (the “First Convertible Note”), sold with a purchase price discount of 5.0% (or $50,000). The First Convertible Note is convertible into Common Stock at the lower of (i) $10.71 per share and (ii) 95% of the lowest daily VWAP during the consecutive trading days immediately preceding the conversion date, but in no event lower than the “Floor Price” of $1.72 per share (the “First Convertible Note Conversion Price”). After accounting for the purchase price discount, the Company received gross proceeds of $950,000 from the sale of the First Convertible Note. As of June 30, 2026, Yorkville had converted $300,000 principal amount of the First Convertible Note plus accrued interest. The Company has elected to record the First Convertible Note at fair value at the date of issuance and in subsequent reporting periods. The estimated fair value of the First Convertible Note represents a Level 3 measurement. due to the use of significant unobservable inputs. Because of the short amount of time between the issuance of the First Convertible Note and the date of the balance sheet in this Quarterly Report on Form 10-Q, there was no increase or decrease in the fair value of the First Convertible Note between those dates. The fair value of the First Convertible Note will be remeasured at each balance sheet date of future reporting periods.
(9) Convertible Note and SEPA (continued) The second tranche of the Pre-Paid Advance was disbursed to the Company on July 22, 2026, in exchange for the issuance to Yorkville of a Convertible Note in the principal amount of $5.0 million (the “Second Convertible Note”). The Second Convertible Note was issued with a purchase price discount of 5.0% (or $250,000) and is convertible into Common Stock at the lower of (i) a price equal to 115% of the VWAP on the day prior to the issuance of the Second Convertible Note and (ii) 95% of the lowest daily VWAP during the consecutive trading days immediately preceding the conversion date, but in no event lower than the Floor Price (the “Second Convertible Note Conversion Price,” and together with the First Convertible Note Conversion Price, the “Conversion Price”). After accounting for the purchase price discount, the Company received gross proceeds of $4,750,000 pursuant to the Second Convertible Note. Interest on the outstanding balances of the Convertible Notes accrues at an annual rate of 5.0%, subject to an increase to 18% upon an event of default as described in the Convertible Notes. The maturity date of each Convertible Note is 18 months from the date upon which the Convertible Note was issued. The applicable maturity date of each Convertible Note may be extended by the Company, at its option, for a period of six months on two occasions by providing written notice to Yorkville. On the applicable maturity date, any portion of the outstanding principal amount and accrued but unpaid interest that remains outstanding on such Convertible Note will automatically be converted into Common Stock at the then applicable Conversion Price, provided that if any Equity Condition (as defined in the Form of Promissory Note ) is not satisfied, the applicable maturity date will automatically be extended until all Equity Conditions have been satisfied. |