Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Cash Equivalents

The fair value of the Company’s money market funds is based on the closing price of these assets as of the reporting date, which are included in cash equivalents. The Company’s money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted prices for identical instruments in active markets. The Company had no cash equivalents on December 31, 2024 and 2023.

Notes Payable & Related Party Notes Payable

The Company has elected to measure certain notes payable and related party notes payable at fair value. Specifically, the SPA Portfolio Notes or notes convertible into SPA Portfolio Notes as they contain embedded liquidation premiums with conversion rights that represent embedded derivatives (see Note 7, Notes Payable and Note 8, Related Party Transactions). The Company used a binomial lattice model and discounted cash flow methodology to value the notes carried at fair value. The significant assumptions used in the models include the volatility of the Class A Common Stock, the Company’s expectations around the full ratchet anti-dilution trigger, the Company’s debt discount rate based on a CCC rating, annual dividend yield, and the expected life of the instrument. Fair value measurements associated with the notes payable and related party notes payable represent Level 3 valuations under the fair value hierarchy.

The fair value adjustments related to notes payables and related party notes payable were recorded in Change in fair value of notes payable, warrant liabilities, and derivative call options or Change in fair value of related party notes payable and related party warrant liabilities, respectively, in the Consolidated Statements of Operations and Comprehensive Loss.

For notes payable and related party notes payable where the Company did not elect the fair value option pursuant to ASC 825, Financial Instruments, the carrying value approximates the fair value of the obligation.

SPA Portfolio Note Warrants

The Company is required to measure certain SPA Portfolio Note warrants at fair value. The Company uses a Monte Carlo simulation model to measure the fair value of the liability classified SPA Warrants, where the significant assumptions used include the volatility of the Company’s Class A Common Stock, the Company’s expectations around the full ratchet anti-dilution trigger, the contractual term of the warrant, the risk-free rate and annual dividend yield. Fair value measurements associated with the liability-classified warrants represent Level 3 valuations under the fair value hierarchy.

The fair value adjustments related to the liability classified warrants were recorded in Change in fair value of notes payable, warrant liabilities, and derivative call options or Change in fair value of related party notes payable and related party warrant liabilities, in the Consolidated Statements of Operations and Comprehensive Loss

Public and Private Warrants

Upon the closing of the Business Combination, the Company assumed 2,394 Public Warrants and 62 Private Warrants from PSAC. The Company also issued 9 Private Warrants to settle related party notes of PSAC. The Public Warrants are indexed to the Company’s own stock and, as such, meet the scope exception in accordance with ASC 815-40 to be classified in equity. The Private Warrants are classified as liabilities and the fair value is included in Warrant liabilities in the Consolidated Balance Sheets. The Company valued the Private Warrants using a binomial lattice model. Inherent in a binomial lattice model are assumptions related to risk free rate, annual dividend yield, expected warrant life, and volatility of the Company's stock. The Company estimated the fair value of the Private Warrants to be zero and $0.1 million as of December 31, 2024, and 2023, respectively. Changes in the fair value of the Private Warrants are recorded in Change in fair value of notes payable, warrant liabilities, and derivative call options in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

Fair value measurements associated with the Private Warrants liabilities represent Level 3 valuations under the fair value hierarchy.

Derivative Call Options

The Junior Secured SPA investors and the 2024 Unsecured SPA investors were issued Incremental Warrants to purchase additional Junior Secured SPA Notes and 2024 Unsecured SPA Notes, respectively, up to the amounts originally funded under their commitments. The Company estimates the fair value of the Incremental Warrants using a Monte Carlo simulation model where the significant assumptions used include the volatility of the Company’s Class A Common Stock, the Company’s expectations around the full ratchet trigger, the contractual term of the Incremental Warrants, the risk-free rate and annual dividend yield. The underlying convertible notes and the warrants issuable upon the exercise of the Incremental Warrant were assumed to be exercisable up to the maximum allowable amount. Additionally, the terms of these instruments were presumed to be consistent with those of the convertible notes and warrants issued in connection with the Incremental Warrants. Fair value measurements associated with the liability-classified derivatives represent Level 3 valuations under the fair value hierarchy.

The fair value adjustments related to the Incremental Warrants were recorded in Change in fair value of notes payable, warrant liabilities, and derivative call options in the Consolidated Statements of Operations and Comprehensive Loss

Liabilities due to Insufficient Authorized Shares

From time to time, certain of the Company’s equity-linked financial instruments may be classified as derivative liabilities under ASC 815, Derivatives and Hedging, due to the Company having insufficient authorized shares to fully settle the equity-linked financial instruments in shares. See Note 12, Stockholders' Equity. As of December 31, 2024, the Company did not have any instruments classified as a liability due to insufficient authorized shares.

Recurring Fair Value Measurements

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables present financial assets and liabilities remeasured on a recurring basis by level within the fair value hierarchy:

	December 31, 2024
(in thousands)	Level 1		Level 2		Level 3
Liabilities:
Warrant liabilities1	$	—	$	—	$	28,864
Derivative call options	$	—	$	—	$	29,709
Notes payable1	$	—	$	—	$	46,628

1 Includes both related party and non-related party balances for the Company’s notes payable and warrant liabilities.

	December 31, 2023
(in thousands)	Level 1		Level 2		Level 3
Liabilities:
Warrant liabilities1	$	—	$	—	$	306
Notes payable1	—		—		86,712

1 Includes both related party and non-related party balances for the Company’s notes payable and warrant liabilities.

There were not any transfers of assets and liabilities between Level 1, Level 2 and Level 3 of the fair value measurement hierarchy during the year ended December 31, 2024. The carrying amounts of the Company’s financial assets and liabilities, including cash, restricted cash, deposits, accounts payable, accrued liabilities and notes payable, other than the SPA Portfolio Notes, approximate fair value because of their short-term nature or contractually defined value.

The following table summarizes the activity of Level 3 fair value measurements:

(in thousands)	Warrant Liabilities1		Derivative Call Option		Notes Payable1
Balance as of December 31, 2023	$	306	$	—	$	86,712
Additions	34,441		14,267		58,789
Debt extinguishments	—		—		2,699
Change in fair value measurements	(5,723)		15,442		(34,460)
Reclassification of liability classified warrants to equity	(160)		—		—
Conversions of notes to Class A Common Stock	—		—		(67,112)
Balance as of December 31, 2024	$	28,864	$	29,709	$	46,628

1 Includes both related party and non-related party balances for the Company’s notes payable and warrant liabilities.