Quarterly report [Sections 13 or 15(d)]

Notes Payable

v3.26.1
Notes Payable
 6 Months Ended
Jun. 30, 2026
Debt Disclosure [Abstract]  
Notes Payable Notes Payable
Notes payable consisted of the following:
June 30,
2026		 December 31,
2025
November 2024 Debentures - (fair value) $ 2,729,000  $ 163,672 
Senior Secured Convertible Term Loan 16,363,459  19,284,709 
SBA loan 485,325  485,300 
AmeriState loan 1,757,571  1,811,327 
Insurance Financing 297,355  331,607 
Total 21,632,710  22,076,615 
Less: debt discount, net (1,895) (26,225)
Less: capitalized debt issuance costs, net (77,341) (321,004)
2023 Term Loan Agreement exit fee provision 55,813  115,638 
Total notes payable $ 21,609,287  $ 21,845,024 
November 2024 Debentures (principal amount) $ 2,485,000  100,000 
November 2024 Debentures
The November 2024 Debentures provide for, among other items: (a) an interest rate of the Prime Rate published in the Wall Street Journal plus 2% per annum, payable quarterly and added to the principal amount of the November 2024 Debentures, and/or in cash, at the Company’s option; (b) conversion by the holder into shares of the Company’s Common Stock at any time (subject to limitations on conversion described therein); (c) a conversion price of $88.56 (subject to adjustment as provided therein) with shares of the Company’s Common Stock issuable on conversion determined by dividing 120% of the applicable “conversion amount” (as defined in the November 2024 Debentures) by the conversion price; (d) an alternate conversion price at the lower of (1) $88.56 (subject to adjustment as provided therein) and (2) the greater of a floor price of $17.71 (subject to adjustment as provided therein) and 98% of the lowest VWAP of the Company’s shares of Common Stock during the applicable 10-trading day period (subject to payment in cash if the applicable VWAP calculation is less than the floor price); (e) a maturity date of September 9, 2026, and (f) an option by the holder to extend the maturity date by an additional year. The Company has elected to add the interest payable to the principal amount of the November 2024 Debentures.

In addition, the exercise price of the November 2024 Debentures is subject to customary anti-dilution adjustments, and, in the case of a subsequent equity sale at a per share price below the exercise price, the exercise price will be adjusted to such lower price.

On February 9, 2026, March 10, 2026 and May 12, 2026, the Company issued Senior Secured Convertible Debentures Due 2026 to ATW Special Situations II LLC ("ATW II"), in aggregate principal amounts of $1,960,000, $1,000,000 and $1,525,000, respectively, pursuant to the Securities Purchase Agreement dated November 4, 2024.

During the six months ended June 30, 2026, November 2024 Debentures with a principal value of $100,000 and fair value of $283,790, were converted into 27,932 shares of Common Stock. During the six months ended June 30, 2026, November 2024 Debentures with a principal value of $2,000,000 and fair value of $2,729,994, were exchanged into 2,023 shares of Series C Preferred Stock. The fair value of the Series C Preferred Stock was $3,659,502 and a loss on extinguishment of debt of $929,508 was reported in the condensed consolidated statements of operations for the six months ended June 30, 2026.
The fair value of the November 2024 Debentures at June 30, 2026 and December 31, 2025 was estimated at $2,729,000 and $163,672, respectively, using Monte Carlo simulations with the following assumptions at June 30, 2026: stock price of $1.23, a risk free rate of 4.0% implied volatility of 145% and a remaining term of 0.19 years and assumptions at December 31, 2025: stock price of $6.16, a risk free rate of 3.55% implied volatility of 154% and a remaining term of 0.69 years. A gain of $94,728 and a loss of $1,094,112 on change in fair value was reported in the condensed consolidated statements of operations for the three and six months ended June 30, 2026, respectively. The principal amount of the November 2024 Debentures at June 30, 2026 and December 31, 2025 was $2,485,000 and $100,000, respectively.
Senior Secured Convertible Term Loan
The Company entered into senior secured convertible term loan agreements in September 2023 and January 2024 (the "2023 Term Loan Agreement" and "2024 Term Loan Agreement" and collectively, the "Term Loan Agreements") that provide aggregate financing of approximately $30.6 million (the "2023 Term Loans" and the "2024 Term Loans" and collectively the "Senior Secured Convertible Term Loan"). The 2023 Term Loan bears interest at 12.5% per annum and includes a 2.5% exit fee and an original issue discount. The 2024 Term Loan bears interest at 15% per annum, with an option for the Company to elect to capitalize and add to the principal amount of the 2024 Term Loan, accrued but unpaid
interest as of the Interest Payment Date (as defined therein), up to (x) 100% for the six (6) months after the Closing Date (as defined therein) and (y) thereafter, 50%. The Company opted to capitalize interest payable.
The Senior Secured Convertible Term Loans mature on various dates, generally tied to the third anniversary of the respective Term Loan Agreements, with the exception of a $1.0 million extended maturity loan with a 30-year term.
The Senior Secured Convertible Term Loans are convertible into shares of the Company’s common stock at the lenders’ option, subject to anti-dilution adjustments.
On May 11, 2026, the Company entered into a Second Amendment to the 2023 Term Loan Agreement, with each lender thereto, pursuant to which the conversion price was reduced from $15,552 to $2.20, for the period from May 11, 2026 to May 21, 2026. Thereafter the conversion price reverted to $15,552. During this period, a lender converted its 2023 Term Loan notes with a principal amount of $500,000 into 227,273 shares of Common Stock. On June 1, 2026, the Company entered into a Third Amendment to the 2023 Term Loan Agreement, with each lender thereto, pursuant to which the conversion price was reduced from $15,552 to $1.80 for the period from June 1, 2026 to June 15, 2026. Thereafter the conversion price reverted to $15,552. During this period, a lender converted its 2023 Term Loan notes with a principal amount of $1,000,000 into 555,556 shares of Common Stock.
The Company evaluated these transactions under ASC 470-50, Debt Modifications and Extinguishments, and concluded they qualified as an extinguishment of debt through the issuance of equity securities. The fair values of the May 11, 2026 and June 1, 2026 conversions were estimated as $532,991 and $1,075,150, respectively, and a loss on extinguishment of debt of $108,141 was reported in the condensed consolidated statements of operations for the three and six months ended June 30, 2026.
On June 26, 2026, the Company entered into an Exchange Agreement pursuant to which a lender converted a total of $4,000,000 2023 Term Loan notes, with principal and interest amounts of $2,146,701 and $1,853,299, respectively, into 4,800 shares of Series C Convertible Preferred Stock with a total stated value of $4,800,000. The fair value of the Series C Preferred Stock was $8,320,000 and a loss on extinguishment of debt of $4,320,000 was reported in the condensed consolidated statements of operations for the three and six months ended June 30, 2026.
The principal amounts outstanding on the Senior Secured Convertible Term Loans as of June 30, 2026 to related parties ATW II, ATW III and MIF was $9,274,089, $1,245,695 and $4,490,377, respectively. The principal amount outstanding on the Senior Secured Convertible Term Loans as of December 31, 2025 to related parties ATW II, ATW III and MIF was $2,687,981, $7,197,668, and $4,399,060, respectively.
Term Loan Note Conversions
During the six months ended June 30, 2025, ATW I and ATW II converted Senior Secured Convertible Term Loan notes with principal amount of $2,551,855 and interest payable of $318,718 into 25,075 shares of Common Stock.
Interest accrues on each note in accordance with its applicable interest rate, which is recorded as interest expense. Interest expense also includes the following relating to the Senior Secured Convertible Term Loans:
Three months ended
June 30,		 Six months ended
June 30,
2026 2025 2026 2025
Debt discount amortization $ 14,354  $ 10,025  $ 24,329  $ 19,920 
Amortization of debt issuance costs 132,183  176,856  244,023  350,303 
Provision for exit fee (72,423) 24,472  (59,824) 48,624 
Capitalized paid-in-kind (PIK) interest 185,349  171,900  365,288  338,782 
For the three and six months ended June 30, 2026, interest expense, including amortization of debt discount and issuance costs, exit fee provision and PIK interest, attributable to ATW II, ATW III and MIF on the Senior Secured Convertible
Term Loans was $235,318, $27,812 and $118,796 and $465,519, $54,812 and $235,275 respectively. For the three and six months ended June 30, 2025, interest expense attributable to ATW I, ATW II, ATW III and MIF was $51,944, $139,161, $25,794 and $114,762 and $103,317, $276,793, $75,876 and $277,386, respectively.
Small Business Association Loan (SBA)

In 2020, SeaTrepid entered into a term loan with the US Small Business Administration ("SBA") for principal amount of $485,300, with an annual interest rate of 3.75%, and a maturity date of June 19, 2050. In connection with the acquisition of SeaTrepid on March 20, 2025, the loan, with an outstanding principal of $485,325 as of June 30, 2026, is now an obligation of the Company. The loan is secured by collateral which includes all tangible and intangible property of SeaTrepid. Under the terms of the agreement, the sale of collateral without lender consent constitutes a violation of the loan agreement. As of June 30, 2026, the lender had not issued a notice of default. As a result of this and as the Company intends to repay the loan on or before December 31, 2026, the outstanding loan balance has been classified as a current liability.

AmeriState Loan

In 2017, SeaTrepid entered into a term loan with AmeriState Bank for a principal amount of $2,335,000 with an annual interest rate of prime plus 2.5%, and a maturity date of May 4, 2036. In connection with the acquisition of SeaTrepid on March 20, 2025, the loan with an outstanding principal of $1,757,571 as of June 30, 2026 is now an obligation of the Company. The loan is secured by collateral which includes all assets of SeaTrepid. The loan agreement includes customary affirmative and negative covenants, including financial covenants that require SeaTrepid to maintain a maximum Debt-to-Net Worth Ratio of 9.0 to 1.0 and a minimum Debt Service Coverage Ratio of 1.0 to 1.0, measured annually. The agreement also restricts the Company’s ability to incur additional indebtedness, pay dividends, compensate officers and owners, invest in fixed asset purchases, and dispose of collateral without the consent of the bank. Under the terms of the agreement, the sale of collateral without lender consent constitutes a violation of the loan agreement and as such constitutes a non compliance with the financial covenants related to the debt-to-net worth ratio and debt service coverage ratio. As of June 30, 2026 the lender had not issued a notice of default. As a result of this and as the Company intends to repay the loan on or before December 31, 2026, the outstanding loan balance has been classified as a current liability.

Insurance Financing

The Company finances certain insurance premiums through premium finance agreements with third-party lenders. The agreements are generally collateralized by the underlying insurance policies and require monthly installment payments over terms of twelve months or less.

At June 30, 2026, the outstanding balance under the agreements was $297,355, with interest rates ranging from 7.15% to 7.69%. The agreements mature at various dates through the fourth quarter of 2026.