Promissory Notes |
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| Promissory Notes |
NOTE 6 — Promissory Notes
Convertible Promissory Note from DNA Holdings Venture Inc., a Related Party
On December 15, 2025, the Company issued a note (the “Original DNA Note”) to DNA Holdings in exchange for proceeds of $1,200 in cash. The Original DNA Note was an unsecured obligation of the Company and would have matured on December 15, 2026. The Original DNA Note bore interest at a rate of 10% per annum, payable in cash on the earlier of (i) the Maturity Date and (ii) the date of any mandatory redemption of the Original DNA Note. Upon the occurrence and during the continuance of an event of default under the Original DNA Note, the interest rate would have increased to 20% per annum. On January 30, 2026, when an owner of DNA Holdings became a member of the Company’s board of directors, the Original DNA Note became a related party note.
On May 26, 2026, the Original DNA Note was cancelled and the $1,200 balance of the Note, plus $53 in accrued interest, was transferred to a new note with the same counterparty. This new note included an additional $1,800 that was paid in cash to the Company on May 26, 2026. The initial principal amount of the new note was $3,053 (the “New DNA Note”).
The Company reviewed the transaction to determine if it met the criteria as a debt modification or a debt extinguishment. The Company evaluated the exchange of the Original DNA Note for the New DNA Note to determine whether the transaction should be accounted for as a debt modification or a debt extinguishment. Because the present value of the cash flows under the terms of the New DNA Note differed by more than 10% from the present value of the remaining cash flows under the Original DNA Note, the Company determined that the transaction should be accounted for as a debt extinguishment. Accordingly, the Company derecognized the Original DNA Note and accounted for the New DNA Note as a new debt instrument.
On May 26, 2026, the Company derecognized the outstanding loan principal, loan discounts, accrued interest, and derivative liability for the conversion feature associated with the Original DNA Note. A gain on extinguishment of $191 was recognized with the derecognition.
The New DNA note issued on May 26, 2026 was cancelled and exchanged for preferred stock on July 8, 2026. See Note 13.
Prior to its cancellation, the New DNA Note provided for maturity on December 31, 2026, accrued interest at a rate of 10% per annum, and, subject to the prior approval of the conversion of the Note by the Company’s stockholders, would have been convertible into shares of the Company’s common stock at the election of the holder at an initial conversion price of $6.00 per share, subject to adjustment as provided in the New DNA Note, provided, that (i) during the continuance of any Event of Default (as defined in the New DNA Note), the conversion price would have been equal to 80% of the closing price of the common stock on the principal trading market on the date of conversion and (ii) upon the occurrence of a Change of Control Transaction (as defined in the New DNA Note), and subject to the prior obtainment of the aforementioned stockholder approval, the conversion price would have been equal to the lower of the closing price of the common stock on (x) the original issue date of the New DNA Note or (y) the date that the Change of Control Transaction is consummated.
The Company’s obligations under the New DNA Note were secured by a first priority lien and security interest in and to the following collateral: (i) the limited liability company membership interests owned by the Company in DNA X, LLC, and all dividends, cash, instruments, and other property from time to time received or distributed in respect thereof and all proceeds of any of the foregoing in whatever form. The security interest in the pledged collateral terminated and all rights to the pledged collateral reverted to the Company in connection with the cancellation of the New DNA Note.
The following table presents the components of the net carrying amount of the New DNA Note that is from a related party. This is the only note outstanding as of June 30, 2026. (in thousands of dollars):
Cancellation and Exchange of New DNA Note
On July 8, 2026, the full value of the New DNA Note, including accrued interest, was cancelled and exchanged for preferred stock of the Company at a purchase price of $6.00 per share. Each preferred share can be converted into one share of common stock upon stockholders’ approval. The preferred shares have no special rights to dividends and no voting rights. See Note 13.
Because the New DNA Note contained an alternate conversion price, the conversion price was not fixed, and we are required to separate the debt portion from the conversion feature portion. We determined the value of the conversion feature using a binomial tree option calculation. A debt discount of $679 was recorded based on the calculation, with the offset to a derivative liability. The debt discount is amortized on a straight-line basis through the maturity date of December 31, 2026. The derivative liability was remeasured on June 30, 2026 using the same binomial tree option calculation.
The schedule below shows the change in the fair value of the derivative liability for the December 15, 2025 DNA Holdings Note (in thousands of dollars):
For the DNA Holdings May 26, 2026 Note (in thousands of dollars):
On May 26, 2026, the Company used a binomial tree option calculation to determine the fair value of the conversion feature using the following inputs: strike price $6.00, stock price on May 26, 2026 which was $, days to expiration 219, volatility 130.8%, and risk-free interest rate of 3.77%.
The closing of the note transaction on May 26, 2026 was done contemporaneously with the termination of the put option on the purchase of the DNA X LLC business. See Note 7.
Streeterville Capital LLC Notes
On January 23, 2026, the Company paid off promissory notes issued to Streeterville Capital LLC in February 2025 and July 2025 using proceeds from the transactions contemplated by the Asset Purchase Agreement. The total payoff for both notes was $5,467. See Note 5.
The effective interest rate on the February 2025 note and the July 2025 note are approximately 28.4%, and 23.0%, respectively, for the period from the date of issuance through the date they were paid in full on January 23, 2026.
The following table sets forth total interest expense recognized related to the Streeterville notes and the DNA Holdings December 15, 2025 note, and financing fees from factored accounts receivable for the three and six months ended June 30, 2026 (in thousands of dollars):
The following table presents the components of the net carrying amount of the only outstanding note as of December 31, 2025:
The effective interest rate on the Note was 22.6% for the period from the date of issuance through June 30, 2025. The following table sets forth total interest expense recognized related to the Note:
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