Fair Value Measurements

3 Months Ended

Mar. 31, 2025

Fair Value Disclosures [Abstract]

Fair Value Measurements

13. Fair Value Measurements

The Company’s financial instruments consist of derivatives, convertible notes held at fair value, and warrants.

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 were as follows:

	March 31, 2025						December 31, 2024
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
	(in thousands)						(in thousands)
Assets
Cash and cash equivalents	$	2,207	$	—	$	—	$	138	$	—	$	—
Derivatives		—		—		95		—		—		—
Total	$	2,207	$	—	$	95	$	138	$	—	$	—
Liabilities
Derivatives	$	—	$	—	$	959	$	—	$	—	$	73
Convertible Notes		—		—		1,541		—		—		2,557
Warrants		—		—		767		—		—		4
Total	$	—	$	—	$	3,267	$	—	$	—	$	2,634

During the three months ended March 31, 2025, there were no transfers between Level 1 and Level 2, nor into and out of Level 3. The carrying values of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

The following summarizes the activity for the Company Level 3 assets and liabilities measured at fair value on a recurring basis for the three months ended March 31, 2025.

Derivative Assets

	Loss Restoration
(in thousands)	Derivative
Fair value at December 31, 2024	$	—
Change in estimated fair value of derivatives		95
Fair value at March 31, 2025	$	95

Derivative Liabilities

	Loss Restoration			Jan 2025			Mar 2025			Total
(in thousands)	Derivative			Derivative			Derivative			Derivatives
Fair value at December 31, 2024	$	73		$	—		$	—		$	73
Issuance of derivatives		—			963			1,141			2,104
Derivative settlement		(2,800	)		—			—			(2,800	)
Change in estimated fair value of derivatives		2,727			(741	)		(404	)		1,582
Fair value at March 31, 2025	$	—		$	222		$	737		$	959

Loss Restoration Derivative Asset / Liability

In connection with the Company entering into the Loss Restoration Agreement the Company recorded the Loss Restoration Derivative as a derivative asset or a derivative liability in the Company’s condensed consolidated balance sheet depending on the fair value in accordance with FASB ASC 815, Derivatives and Hedging. Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, discount rate, dividend rate and risk-free interest rate. The Company recognized a gain equal to $2.6 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively, related to change in fair value of the Loss Restoration Derivative recorded in the condensed consolidated statements of operations in change in fair value of derivatives. The assumptions used to estimate the fair value of the Loss Restoration Derivative are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.1	%		4.2	%
Weighted-average expected term (in years)		0.75			1.00
Weighted-average expected volatility		123.1	%		111.7	%
Expected dividend yield		15.0	%		15.0	%

January 2025 Convertible Note Derivative

In connection with the Company issuing the January 2025 Convertible Notes, the Company recorded the January 2025 Convertible Note Derivatives (the "January 2025 Derivative") as a liability in the Company’s condensed consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The fair value of the January 2025 Derivative as of January 28, 2025 was $1.0 million and was determined using a Monte Carlo simulation. The Monte Carlo Simulation valuation model incorporates assumptions as to stock price volatility, discount rate, dividend rate and risk-free interest rate. The Company recognized a gain equal to $0.7 million for three months ended March 31, 2025, respectively, related to change in fair value of the January 2025 Derivative recorded in the condensed consolidated statements of operations in change in fair value of derivatives. The assumptions used to estimate the fair value are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		3.9	%		—	%
Weighted-average expected term (in years)		2.82			—
Weighted-average expected volatility		95.0	%		—	%
Expected dividend yield		—	%		—	%

March 2025 Convertible Note Derivative

In connection with the Company issuing the March 2025 Convertible Notes, the Company recorded the March 2025 Convertible Note Derivatives (the "March 2025 Derivative") as a liability in the Company’s condensed consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The fair value of the March 2025 Derivative as of March 11, 2025 was $1.1 million and was determined using a Monte Carlo simulation. The Monte Carlo Simulation valuation model incorporates assumptions as to stock price volatility, discount rate, dividend rate and risk-free interest rate. The Company recognized a gain equal to $0.4 million for three months ended March 31, 2025, respectively, related to change in fair value of the March 2025 Derivative recorded in the condensed consolidated statements of operations in change in fair value of derivatives. The assumptions used to estimate the fair value are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		3.9	%		—	%
Weighted-average expected term (in years)		2.95			—
Weighted-average expected volatility		95.0	%		—	%
Expected dividend yield		—	%		—	%

Convertible Notes

February 2024 Convertible Notes

The Company entered into a convertible note arrangement in February 2024. The amendment to the Note represents the addition of a substantive conversion feature and as a result the Company recorded a loss on extinguishment upon issuance and the remaining unamortized discount was written off upon extinguishment. The Company elected the fair value option for the February 2024 Convertible Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the February 2024 Convertible Notes were determined using a discounted cash flow analysis at a discount rate of 16.3%. The fair value of the February 2024 Convertible Notes of $4.0 million was recorded as a current liability upon issuance. The Company recorded a change in fair value adjustment of $0.3 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively.

	February 2024
(in thousands)	Convertible Notes
Fair value at December 31, 2024		2,557
Cash paid for interest		(88	)
Conversion to common stock		(1,212	)
Change in estimated fair value of convertible notes		284
Fair value at March 31, 2025	$	1,541

January 2025 Exchange Notes

On February 4, 2025, the Company and the Exchange Agreement Investor entered into an Exchange Agreement (the “Exchange Agreement”), pursuant to which the Company and the Exchange Agreement Investor exchanged the Former Principal Stockholder Notes for five new secured promissory notes of the Company secured by the Company’s assets (the “January 2025 Exchange Notes”). The amendment to the Note represents the addition of a substantive conversion feature and as a result the Company recorded a gain on extinguishment included in condensed consolidated statement of stockholders equity. The Company elected the fair value option for the January 2025 Exchange Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the January 2025 Exchange Notes were determined using a discounted cash flow analysis at a discount rate of 16.3%. The fair value of the January 2025 Exchange Notes of $5.1 million was recorded as a current liability upon issuance. The January 2025 Exchange Notes, in the aggregate principal amount of $5.4 million were fully converted into 2,642,878 shares of Common Stock in February 2025. The Company recorded a change in fair value adjustment of $0.3 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively.

	January 2025
(in thousands)	Exchange Notes
Carrying amount at February 4, 2025		5,380
Conversion to common stock		(5,391	)
Gain on extinguishment of debt with related party		(279	)
Change in estimated fair value of convertible notes		290
Fair value at March 31, 2025	$	—

Warrants

The following table summarizes the activity for the Company Level 3 warrant liabilities measured at fair value on a recurring basis for the three months ended March 31, 2025:

(in thousands)	Nov 2023		Feb 2024		Woodway		Registered Direct		Registered Direct Agent		Best Efforts Pre-Funded		Best Efforts A-1			Best Efforts A-2		Best Efforts Agent		Jan 2025 Class A		Jan 2025 Class B		Jan 2025			Mar 2025			Total
Fair value at December 31, 2024	$	—	$	—	$	—	$	—	$	—	$	—	$	4		$	—	$	—	$	—	$	—	$	—		$	—		$	4
Issuance of warrants		—		—		—		—		—		—		—			—		—		—		—		677			535			1,212
Change in estimated fair value of warrants		—		—		—		—		—		—		(4	)		—		—		—		—		(337	)		(108	)		(449	)
Fair value at March 31, 2025	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	—	$	—	$	—	$	—	$	340		$	427		$	767

November 2023 Warrants

On November 10, 2023, the Company issued warrants to two accredited investors to purchase shares of Common Stock. The fair value of the warrants was determined using the Monte Carlo Simulation, given the variable number of shares issuable upon exercise of the warrant. For the outstanding warrants as of March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) and risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.1 million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the November 2023 Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.0	%		4.4	%
Weighted-average expected term (in years)		4.17			4.42
Weighted-average expected volatility		81.2	%		81.2	%
Expected dividend yield		—	%		—	%

February 2024 Warrants

On February 1, 2024, the Company issued an aggregate 75,000 warrants to purchase shares of common stock to an accredited investor in conjunction with the issuance of its $6.0 million February 2024 Note. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as of March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $1.2 million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the February 2024 Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.2	%		4.6	%
Weighted-average expected term (in years)		8.97			9.22
Weighted-average expected volatility		93.3	%		93.3	%
Expected dividend yield		—	%		—	%

Woodway Warrants

On February 20, 2024, the Company issued warrants in connection with an Exclusive Distribution Agreement with WOODWAY USA, INC. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.3 million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Woodway Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.2	%		4.6	%
Weighted-average expected term (in years)		9.02			9.27
Weighted-average expected volatility		66.6	%		66.6	%
Expected dividend yield		—	%		—	%

Registered Direct Placement Agent Warrants

On May 8, 2024, the Company issued warrants in connection with an agreement with the Placement Agent, pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Registered Offering. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, and (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Placement Agent Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.0	%		4.4	%
Weighted-average expected term (in years)		4.20			4.45
Weighted-average expected volatility		81.5	%		81.5	%
Expected dividend yield		—	%		—	%

Registered Direct Offering Warrants

On May 20, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Registered Offering Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.0	%		4.4	%
Weighted-average expected term (in years)		4.71			4.96
Weighted-average expected volatility		77.8	%		77.8	%
Expected dividend yield		—	%		—	%

Best Efforts Offering Pre-Funded Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively. The warrants were exercised in full in July 2024.

Best Efforts A-1 Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.004 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Best Efforts A-1 Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.0	%		4.4	%
Weighted-average expected term (in years)		4.31			4.57
Weighted-average expected volatility		80.0	%		80.0	%
Expected dividend yield		—	%		—	%

Best Efforts A-2 Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0

million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Best Efforts A-2 Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.1	%		4.2	%
Weighted-average expected term (in years)		0.77			1.02
Weighted-average expected volatility		116.7	%		116.7	%
Expected dividend yield		—	%		—	%

Best Efforts Placement Agent Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million for three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Best Efforts Placement Agent Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.0	%		4.4	%
Weighted-average expected term (in years)		4.31			4.56
Weighted-average expected volatility		80.0	%		80.0	%
Expected dividend yield		—	%		—	%

January 2025 Warrants

On January 28, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. The fair value of the January 2025 Warrants of $0.7 million was recorded as a long-term liability upon issuance. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.3 million for the three months ended March 31, 2025. The assumptions used to estimate the fair value of the January 2025 Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.1	%		—	%
Weighted-average expected term (in years)		6.83			—
Weighted-average expected volatility		150.0	%		—	%
Expected dividend yield		—	%		—	%

January 2025 Class A Incremental Warrants

On January 28, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Monte Carlo simulation and the determined value as of issuance date was $0.0 million. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million for the three months ended March 31, 2025. The assumptions used to estimate the fair value of the January 2025 Class A Incremental Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		3.9	%		—	%
Weighted-average expected term (in years)		2.82			—
Weighted-average expected volatility		95.0	%		—	%
Expected dividend yield		—	%		—	%

January 2025 Class B Incremental Warrants

On January 28, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Monte Carlo simulation and the determined value as of issuance date was $0.0 million. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million for the three months ended March 31, 2025. The assumptions used to estimate the fair value of the January 2025 Class B Incremental Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		3.9	%		—	%
Weighted-average expected term (in years)		2.82			—
Weighted-average expected volatility		95.0	%		—	%
Expected dividend yield		—	%		—	%

March 2025 Warrants

On March 11, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. The fair value of the March 2025 Warrants of $0.5 million was recorded as a long-term liability upon issuance. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.1 million for the three months ended March 31, 2025. The assumptions used to estimate the fair value of the March 2025 Warrants are as follows:

	March 31,			December 31,
	2025			2024
Weighted-average risk-free interest rate		4.1	%		—	%
Weighted-average expected term (in years)		6.95			—
Weighted-average expected volatility		150.0	%		—	%
Expected dividend yield		—	%		—	%

The following summarizes the activity for the Company Level 3 liabilities measured at fair value on a recurring basis for the three months ended March 31, 2024:

Derivatives

In connection with the Company’s issuance of its December 2023 Note, the Company bifurcated the embedded conversion option and redemption rights and recorded embedded conversion option and redemption rights as a short term derivative liability in the Company’s balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The fair value of the embedded derivative was determined using a lattice model. The Company recognized gains equal to $0.05 million for the three months ended March 31, 2024 related to changes in fair value of the embedded derivative for the December 2023 Note recorded in the condensed consolidated statements of operations in other expense (income).

(in thousands)	Derivatives
Fair value at December 31, 2023	$	122
Change in estimated fair value of financial instruments		(54	)
Fair value at March 31, 2024	$	68

November 2023 Bridge Notes

On November 10, 2023, the Company issued the November Bridge Notes. The fair value of the bridge notes were determined using a discounted cash flow analysis at a discount rate of 21.0%. The Company amended the Bridge notes into convertible notes in January 2024 and subsequently converted the notes into Preferred Stock Series A in February 2024 and March 2024. The Company recognized a loss equal to $0.3 million on the extinguishment of debt and loss on change in fair value of $0.3 million upon conversion to Series A Preferred Stock for the three months ended March 31, 2024.

(in thousands)	Bridge Notes
Fair value at December 31, 2023	$	1,717
Loss on extinguishment of debt upon conversion to convertible notes		275
Change in estimated fair value of financial instruments		316
Conversion to Series A Preferred Stock		(2,308	)
Fair value at March 31, 2024	$	—

Warrants

The change in fair value of warrants for the three months ended March 31, 2024 was as follows:

	November 10, 2023			December 7, 2023			Treadway			Woodway			Total
(in thousands)	Warrants			Warrants			Warrants			Warrants			Warrants
Fair value at December 31, 2023	$	165		$	426		$	—		$	—		$	591
Issuance of warrants		—			—			1,800			345			2,145
Change in estimated fair value of financial instruments		(124	)		(179	)		(1,245	)		(251	)		(1,799	)
Fair value at March 31, 2024	$	41		$	247		$	555		$	94		$	937