Convertible Notes

On April 14, 2026, the Company entered into a Securities Purchase Agreement (as subsequently amended, the "Amended Purchase Agreement"), pursuant to which the Company agreed to issue senior secured convertible notes in an aggregate original principal amount of up to $50.0 million (the "Convertible Notes"), convertible into shares of the Company's Class A common stock (the "Facility"). On June 15, 2026, the Company entered into Amendment No. 1 to the Amended Purchase Agreement (the "First Amendment") to, among other changes, increase the amount of senior secured convertible notes that the Company may issue by $50.0 million, for an aggregate original principal amount of up to $100.0 million.

The Convertible Notes contain customary affirmative and negative covenants, including certain limitations on debt, liens, restricted payments, asset transfers, changes in the business and transactions with affiliates. The Convertible Notes also contain standard and customary events of default.

$3.25 million in aggregate principal amount of Convertible Notes was issued on April 19, 2026. $5.0 million in additional aggregate principal amount of Convertible Notes was issued on June 4, 2026. As of June 30, 2026, an aggregate principal amount of $8.25 million of Convertible Notes had been issued under the Facility. The remaining Convertible Notes, if issued, may be issued in one or more future closings, subject to the terms of the Amended Purchase Agreement.

Unless earlier converted, or redeemed, the Convertible Notes will mature on the second anniversary of the date of issuance (the "Maturity Date"), and we are required to pay, on the Maturity Date, all outstanding principal, accrued and unpaid interest and accrued and unpaid late charges on such principal and interest, if any.

The Convertible Notes bear interest at the rate of 12.0% per annum which (a) commenced accruing on the date of issuance, (b) is computed on the basis of a 360-day year and twelve 30-day months and (c) is payable, subject to the satisfaction of customary equity conditions, in shares of our Class A common stock or, at our option, in cash, in arrears on the first calendar day of each calendar quarter, commencing on the three month anniversary of the issuance date (each an "Interest Date"). If a holder elects to convert or redeem all or any portion of a Convertible Note prior to the Maturity Date, all accrued and unpaid interest on the amount being converted or redeemed will also be payable. The Convertible Notes were issued with a 5% original issue discount. We are required to pay a late charge not in excess of 17% on any amount of principal or other amounts that are not paid when due. The Convertible Notes also contain certain redemption provisions. Upon the occurrence of specified events, including an Event of Default, a Change of Control, certain asset sales and certain subsequent financings, the holders may require the Company to redeem all or a portion of the Convertible Notes for cash at the applicable redemption price, which may include a redemption premium. The redemption premium applicable to certain redemptions, including redemptions upon an Event of Default, is 125%. In addition, the Company may elect to redeem all, but not less than all, of the remaining Conversion Amount at a redemption price equal to 120% of the greater of the Conversion Amount being redeemed and a market-price-based amount.

The Convertible Notes are senior secured obligations of the Company, which are secured by the AI Infrastructure and all of the other assets of the Company and its subsidiaries. Until such date no Convertible Notes remain outstanding, all payments due under the Convertible Notes will be senior to all of our other indebtedness and other indebtedness of any of our subsidiaries.

Each holder of Convertible Notes may convert all, or any part, of the outstanding principal of the Convertible Notes, together with accrued and unpaid interest, any make-whole amount and any late charges thereon, at any time, at such holder's option, into our Class A common stock at the then-applicable "Conversion Price." Conversions and issuance of our Class A common stock pursuant to the Convertible Notes are prohibited if such conversion or issuance would cause the applicable holder (together with its affiliates) to beneficially own in excess of 4.99% of our Class A common stock outstanding immediately after giving effect to such conversion or issuance. The beneficial ownership percentage limitation may be increased to a maximum of 9.99%, at the option of the holder, except that any increase will only be effective upon 61-days' prior written notice to the Company. The maximum beneficial ownership limitation may not be waived or amended and will apply to any successor holder of a Convertible Note.

The Company received net cash proceeds of approximately $2.8 million and $4.5 million from the April 19, 2026, and June 4, 2026 issuances, respectively. The Convertible Notes were issued with a 5% original issue discount, resulting in original issue discounts of approximately $0.2 million and $0.3 million, respectively.

The Company elected the fair value option under ASC 825, Financial Instruments, for each of the Convertible Notes upon issuance. The election is irrevocable and applies to each Convertible Note in its entirety. The Convertible Notes are hybrid financial liabilities containing embedded conversion and other features that otherwise may require separate accounting under ASC 815, Derivatives and Hedging. Because the Company elected to measure the entire Convertible Notes at fair value, the embedded features are not bifurcated and accounted for separately.

The April Convertible Note had an original principal amount of $3.25 million and an issuance-date fair value of approximately $3.1 million. The June Convertible Note had an original principal amount of $5.0 million and an issuance-date fair value of approximately $4.8 million. The difference between the principal amounts and issuance-date fair values reflects the 5% original issue discounts. The original issue discounts are incorporated into the fair value measurements and are not separately recognized or amortized using the effective interest method.

The Company incurred approximately $0.2 million and $0.3 million of debt issuance costs associated with the April and June Convertible Notes, respectively, for aggregate debt issuance costs of approximately $0.5 million for each of the three and six months ended June 30, 2026. Because the Convertible Notes are measured at fair value, the debt issuance costs were expensed to other expense, net upon issuance and were not recorded as a reduction of the carrying amounts of the Convertible Notes.

The Convertible Notes are subsequently remeasured at fair value at each reporting date. Changes in fair value attributable to changes in instrument-specific credit risk are recognized in other comprehensive income, with the remaining changes in fair value recognized in earnings. The Company determined that no portion of the change in fair value for the three and six months ended June 30, 2026 was attributable to changes in instrument-specific credit risk. The Company separately presents contractual coupon interest as interest expense. Accordingly, the change in fair value recognized in earnings excludes contractual coupon interest separately recognized during the period.

As of June 30, 2026, the fair values of the April and June Convertible Notes were approximately $3.4 million and $4.8 million, respectively, for an aggregate fair value of approximately $8.2 million. The aggregate fair value included approximately $0.1 million of accrued contractual interest. 

For the three and six months ended June 30, 2026, the Company recognized a net loss of approximately $0.2 million from the change in fair value of the Convertible Notes, excluding contractual coupon interest separately recognized during the period. The net fair value loss consisted of an approximately $0.3 million loss associated with the April Convertible Note, partially offset by an approximately $28 thousand gain associated with the June Convertible Note, and is presented within Loss on fair market value of debt in the condensed consolidated statements of operations and comprehensive loss.

The fair values of the Convertible Notes were estimated using Monte Carlo simulation models that incorporate the contractual terms of the Convertible Notes and assumptions regarding the Company's common stock price, equity volatility, risk-free interest rates, credit spreads, expected terms, default probabilities, recovery assumptions and potential conversion outcomes. The valuations incorporate simulations of the Company's common stock price and the noteholder's optimal conversion behavior. Because certain significant inputs are not observable in active markets, the Convertible Notes are classified within Level 3 of the fair value hierarchy.

For the three and six months ended June 30, 2026, the Company recognized approximately $0.1 million of contractual coupon interest expense associated with the Convertible Notes. No original issue discount or debt issuance cost amortization was recognized because the Convertible Notes are measured at fair value.

Valuation Inputs

The table below presents inputs used in the fair value measurements of the Convertible Note:

Credit Agreement Matters

On June 30, 2025, we entered into a secured $50.0 million revolving credit agreement with Second Avenue Capital Partners LLC (the "Credit Agreement"). The borrowing capacity was subject to a borrowing base formula that could be increased up to an additional $25.0 million, subject to obtaining additional lender commitments and satisfying certain conditions. The Credit Agreement had a scheduled maturity date of June 30, 2028.

Interest on borrowings under the Credit Agreement accrued at a variable rate equal to the sum of (i) the Term Secured Overnight Financing Rate, plus (ii) 0.15%, plus (iii) a margin of 5.75% per annum. The commitment fee under the Credit Agreement was 0.45% per annum on the average daily unused portion of each lender's commitment.

The Credit Agreement contained customary representations and warranties, and affirmative covenants and negative covenants applicable to the Company and certain of its subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions of assets, dividends and other distributions, minimum unrestricted cash, and minimum consolidated EBITDA. As of December 31, 2025, the Company was in compliance with these covenants. In addition, the Credit Agreement contained certain customary events of default including, but not limited to, failure to pay interest, principal and fees or other amounts when due, material misrepresentations or misstatements in any representation or warranty, covenant defaults, certain cross defaults to other material indebtedness, certain judgment defaults and events of bankruptcy or insolvency.

Concurrently with entry into the Credit Agreement, we drew down $5.0 million on the revolving credit facility. The borrowings were used to, among other things, pay third-party debt issuance costs in the amount of $2.9 million.

During the year ended December 31, 2025, we drew approximately $19.2 million on our revolving credit facility, inclusive of interest and fees. As of December 31, 2025, there was $17.3 million outstanding under the Credit Agreement. 

On March 29, 2026, the Company and Second Avenue Capital Partners LLC entered into a Consent and First Amendment to Credit Agreement, which provided consent to the Company's entry into the Asset Sale and amended certain terms in the Credit Agreement. The First Amendment to Credit Agreement, among other things, (i) lowered the minimum amount of Unrestricted Cash required to be held by the Company and its Subsidiaries to avoid the commencement of a Cash Dominion Period from $10,000,000 to $7,500,000, (ii) increased the basket for Indebtedness consisting of reimbursement obligations in respect of the Existing Cash Collateralized Letter of Credit from $855,000 to $1,206,905, (iii) increased the unsecured Indebtedness basket from $2,500,000 to $11,000,000, (iv) extended the delivery date for the Consolidated Statements for the Fiscal Year ended December 31, 2025 from March 31, 2026 to April 15, 2026, (v) required delivery by Borrower of certain financial and other information with respect to the Asset Sale, and (vi) replaced the Minimum Consolidated EBITDA financial covenant, and corresponding equity cure right, with a minimum Consolidated Liquidity financial covenant.

On April 19, 2026, the Company and Second Avenue Capital Partners LLC entered into a Second Amendment to Credit Agreement. The Second Amendment to Credit Agreement, among other things, amended the Existing Credit Agreement to expressly permit the Company to enter into the Amended Purchase Agreement, issue the Convertible Notes and grant liens on the Company's assets (including on the AI Infrastructure) in favor of the holder of the Convertible Notes.

In connection with the Second Amendment to Credit Agreement, on April 19, 2026, the Company, Second Avenue Capital Partners LLC, the holders of the Convertible Notes and a wholly owned subsidiary of the Company entered into a Subordination Agreement, to among other things, provide for the subordination of (i) the Company's obligations to the holders of the Convertible Notes arising under the Facility to all of the Company's obligations owing to the Agent arising under Amended Credit Agreement and (ii) the holders of the Convertible Notes' security interests in the Company's assets and property (other than the Company's equity in the wholly owned subsidiary) to all of the Agent's security interests in the Company's assets and property.

On June 9, 2026, concurrent with the Closing of the Asset Sale, the Credit Agreement was repaid in its entirety, inclusive of interest and fees. The Company recorded a $3.2 million loss on debt extinguishment, presented within loss from discontinued operations on the condensed consolidated statement of operations and comprehensive loss for the three and six months ended  June 30, 2026. As of  June 30, 2026 there were no amounts outstanding under the Credit Agreement.