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Note 7 - Convertible Notes
 6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Debt Disclosure [Text Block]

7.

CONVERTIBLE NOTES

 

2024 Promissory Note

 

On May 10, 2024, the Company entered into a Securities Purchase Agreement with an investor for the sale and issuance of 330,823 shares of common stock and a 5-year promissory note with a principal balance of $146 ( “May 2024 Note”) for total gross cash proceeds of $1,000. The May 2024 Note bears interest at an annual rate equal to the Secured Overnight Financing Rate plus 1.0%, which is compounded quarterly in arrears, and has a maturity date of June 4, 2029. At maturity, the principal balance and accrued, unpaid and uncapitalized interest can be settled in cash, shares of common stock based on the closing price of the common stock as of the immediately preceding trading day, or any combination of the foregoing at the option of the investor. 

 

2025 Convertible Note

 

In January 2025, the Company entered into a Securities Purchase Agreement with a certain institutional investor and issued (i) a senior unsecured convertible promissory note (the "2025 Note") for an aggregate principal amount of $3,240 for an aggregate purchase price of $3,000 and (ii) a warrant to purchase up to 805,263 shares of the Company’s common stock. The 2025 Note, subject to an original issue discount of 7.4%, has a term of eighteen months and accrues interest at the rate of 7% per annum.  The interest may be settled in cash or shares at the option of the Company and is payable together with monthly redemptions of the outstanding principal amount of the Note. The 2025 Note is convertible into Common Stock, at a per share conversion price equal to $2.22, subject to adjustments noted in the Note. 

 

Monthly redemptions began in April 2025 and are due on the first of each subsequent month (each a "Monthly Redemption Date or an "Installment Date"). The Company shall redeem the Monthly Redemption Amount until the 2025 Note is fully redeemed, payable in cash or, so long as certain equity conditions are met, shares of Common Stock, at the option of the Company. The equity conditions that must be met in order for the Company to settle the Monthly Redemption Amount in shares include requirements for the daily volume weighted average price of the Company's Common Stock to exceed $0.50 and the average daily trading volume of the Company's Common Stock to exceed $100 for the twenty (20) trading days prior to the applicable Installment Notice Date (which is the sixth (6th) trading day prior to each Installment Date). The Monthly Redemption Amount, in most instances, will be 1/15th of the original principal amount, plus any amount accelerated pursuant to the 2025 Note, accrued but unpaid interest, and late fees, if any. If the Company elects to settle such redemptions in shares of Common Stock, the number of shares to be settled shall be based on an Installment Conversion Price equal to the lower of (i) $2.22 or (ii) the greater of $0.30 and 90% of average volume weighted average price of the Common Stock during the five (5) trading days immediately preceding the applicable Monthly Redemption Date. The investor is permitted, not exceeding five times, to accelerate up to one Monthly Installment Amount, between Installments, (each, an "Acceleration," and each such amount, an "Acceleration Amount", and the Conversion Date of any such Acceleration, each an "Acceleration Date") at the Acceleration Conversion Price. The Acceleration Conversion Price shall be the lower of (i) $2.22 or (ii) the greater of $0.30 and 90% of average volume weighted average price of the Common Stock during the five (5) trading days immediately preceding the applicable Acceleration Date.  

 

The 2025 Note may not be converted into Common Stock to the extent such conversion would result in the investor and its affiliates having beneficial ownership of more than 19.99% of our then outstanding shares of Common Stock. This limitation is waived if the Company either obtains stockholder approval as required by the applicable exchange rules or secures a satisfactory written opinion from its counsel stating that such approval is unnecessary. 

 

The Company and investor entered into a registration rights agreement (the “Registration Rights Agreement”) to which the Company is required to file a registration statement registering the resale by the investor of any shares of the Company’s common stock issuable upon conversion, including the resale of shares issuable upon exercise of the associated warrants. The Company is required to meet certain obligations with respect to the timeliness of the filing and effectiveness of the registration statement. The Company filed such registration statement on January 16, 2025, and an amendment thereto on February 25, 2025, which was declared effective by the U.S. Securities and Exchange Commission on March 4, 2025.

 

The Company elected to apply the fair value option to the measurement of the 2025 Note. As a result of adopting the fair value option, no embedded derivatives are bifurcated from the 2025 Note. The Company classifies the 2025 Note as a liability at fair value and will remeasure the 2025 Note to fair value at each reporting period. The total proceeds received from the investor of $3,000 is allocated between the 2025 Note and the related warrants issued using the relative fair value method at issuance date. This resulted in an initial fair value of $3,266 being allocated to the 2025 Note, and $1,046 allocated to the associated warrants (see Note 2 for further details). The Company recorded a non-cash issuance cost of $1,312, representing the difference between the fair value and proceeds received, within Interest expense and other on the condensed consolidated statement of operations. The fair value measurement includes the assumption of accrued interest and expense and thus a separate amount is not reflected on the condensed consolidated statement of operations.

 

As of June 30, 2025, the 2025 Note has an outstanding principal balance and accrued interest of $1,958 and is recorded as a current liability at fair value of $1,997.