On December 19, 2024, the Company entered into privately negotiated Exchange Agreements with a limited number of holders of the Company’s 2026 Convertible Notes, to exchange the 2026 Convertible Notes for 2029 Convertible Notes. The 2029 Convertible Notes contain conversion features that meet the definition of a derivative and require separate accounting treatment from the debt host.


	December 31, 2024		December 19, 2024
Value of 2029 Notes Conversion Option ($ thousands)	$	115,831	$	61,402
Conversion price	$	3.55	$	3.55
Common stock price	$	4.45	$	2.82
Expected term (years)	5.0		5.0
Expected volatility	37.60%		37.60%
Risk-free rate of return	4.30%		4.40%
Expected annual dividend yield	—%		—%

As of December 31, 2024, the 2029 Notes Conversion Option had a fair value of $115.8 million and is presented on the consolidated balance sheets within derivative liabilities. A loss of $54.4 million was recognized during the twelve months ended December 31, 2024, and is presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations.

On June 13, 2023, the Company consummated the closing of a registered direct offering pursuant to an Underwriting Agreement with Cowen and Company, LLC, as representative of the underwriters, for the sale and purchase of an aggregate of 11,848,341 shares of common stock at par value and accompanying common warrants (“RDO warrants”). Each share of common stock is accompanied by a common warrant to purchase three-quarters of a share of common stock at an exercise price of $2.32 per share. The RDO warrants were initially exercisable for up to 8,886,255 shares of common stock and became exercisable six months after issuance and had a five-year term.


	December 31, 2023
Value of each RDO warrant	$	1.69
Exercise price	$	2.32
Common stock price	$	2.14
Expected term (years)	5.0
Expected volatility	110.00%
Risk-free rate of return	3.80%
Expected annual dividend yield	—%

On February 27, 2024, the Company entered into a warrant exercise agreement (the “RDO Warrant Exercise Agreement”) with an existing accredited investor (the “RDO Investor”) to exercise in full the outstanding RDO warrants to purchase up to an aggregate of 8,886,255 shares of the Company’s common stock for gross proceeds of $20.6 million. Upon settlement of the RDO warrants,

A loss of $1.9 million, which includes transaction costs associated with the issuance of the 2023 RDO warrants, was recognized for the year ended December 31, 2023, and is presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations.

In consideration for the immediate and full exercise of the RDO warrants, on February 28, 2024, the RDO Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 5,800,000 of the Company’s common stock (the “2024 RDO warrants”) in a private placement. The 2024 RDO warrants will become exercisable commencing at any time on or after August 28, 2024, with an expiration date five years thereafter, with an exercise price per share equal to $3.78.


	December 31, 2024		February 28, 2024
Value of each 2024 RDO warrant	$	3.73	$	2.62
Exercise price	$	3.78	$	3.78
Common stock price	$	4.45	$	3.14
Expected term (years)	4.7		5.5
Expected volatility	120.00%		117.60%
Risk-free rate of return	4.31%		4.20%
Expected annual dividend yield	—%		—%

As of December 31, 2024, the 2024 RDO warrants had a fair value of $21.6 million and is presented on the consolidated balance sheets within derivative liabilities. A loss of $6.4 million, which includes transaction costs associated with the issuance of the RDO warrants, was recognized during the twelve months ended December 31, 2024, and is presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations.

On January 19, 2023, the Company consummated the closing of a private placement (the “Private Placement”) by and among the Company and Armistice Capital Master Fund Ltd (the “Purchaser”). At the closing of the Private Placement, the Company issued 13,888,889 shares of the Company’s common stock at par value and warrants to purchase up to an additional 13,888,889 shares of common stock (the “PIPE warrants”). The PIPE warrants had an exercise price of $2.39 per share and were exercisable as of July 19, 2023. The PIPE warrants were subject to a 4.99% beneficial ownership limitation.


	January 19, 2023
Value of each PIPE warrant	$	1.22
Exercise price	$	2.39
Common stock price	$	1.87
Expected term (years)	5.5
Expected volatility	82.10%
Risk-free rate of return	3.40%
Expected annual dividend yield	—%

On March 4, 2024, the Company entered into a warrant exercise agreement (the “PIPE Warrant Exercise Agreement”) with an existing accredited investor (the “PIPE Investor”) to exercise in full the outstanding PIPE warrants to purchase up to an aggregate of 13,888,889 shares of the Company’s common stock for gross proceeds of $33.2 million. Upon settlement of the PIPE warrants, a loss of $32.2 million was recognized as a result of the change in fair value for the year ended December 31, 2024 and are presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations.

A loss of $11.8 million was recognized as a result of the change in fair value for the year ended December 31, 2023, respectively, and are presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations.

In consideration for the immediate and full exercise of the PIPE warrants, on March 5, 2024, the PIPE Investor received a new unregistered common stock purchase warrant to purchase up to an aggregate of 9,000,000 shares of the Company’s common stock (the “2024 PIPE warrant”) in a private placement. The 2024 PIPE Warrant will become exercisable commencing at any time on or after September 5, 2024, with an expiration date five years thereafter, with an exercise price per share equal to $4.75.


	December 31, 2024		March 4, 2024
Value of each 2024 PIPE warrant	$	3.64	$	3.11
Exercise price	$	4.75	$	4.75
Common stock price	$	4.45	$	3.75
Expected term (years)	4.7		5.5
Expected volatility	120.00%		117.00%
Risk-free rate of return	4.32%		4.10%
Expected annual dividend yield	—%		—%

As of December 31, 2024, the 2024 PIPE warrant has a fair value of $32.8 million and is presented on the consolidated balance sheets within derivative liabilities. A loss of $4.8 million was recognized as a result of the change in fair value during the twelve months ended December 31, 2024, and is presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations.

On December 7, 2021, the Company issued $200.0 million of unsecured convertible notes (the “2026 Convertible Notes”) to certain investors. The 2026 Convertible Notes contain conversion features that meet the definition of a derivative and require separate accounting treatment from the debt host.


	December 31, 2024		December 31, 2023
Value of 2026 Notes Conversion Option ($ thousands)	$	322	$	491
Conversion price	$	10.61	$	10.61
Common stock price	$	4.45	$	2.14
Expected term (years)	1.9		2.9
Expected volatility	93.30%		40.00%
Risk-free rate of return	4.25%		4.01%
Expected annual dividend yield	—%		—%

As of December 31, 2024, the 2026 Notes Conversion Option had a fair value of $0.3 million and is presented on the consolidated balance sheets within derivative liabilities. A gain of $0.2 million was recognized during the twelve months ended December 31, 2024, and is presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations.

Each warrant issued in connection with the Company’s initial public offering (the “IPO public warrants”) entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of common stock. This means only a whole warrant may be exercised at a given time by a warrant holder. The warrants will expire on December 7, 2026, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.

The Company may call the IPO public warrants for redemption as follows: (1) in whole and not in part; (2) at a price of $0.01 per warrant; (3) upon a minimum of 30 days’ prior written notice of redemption; (4) if there is an effective registration statement covering the shares of common stock issuable upon exercise of the warrants and a current prospectus available throughout the 30-day notice period; and (5) only if the last reported closing price of the common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

The exercise price and number of shares of common stock issuable upon exercise of the IPO public warrants may be adjusted in certain circumstances including stock dividends, stock splits, extraordinary dividends, consolidation, combination, reverse stock split or reclassification of shares of the Company’s common stock or other similar event. In no event will the Company be required to net cash settle the warrant shares.

The terms and provisions of the IPO public warrants above also apply to the private warrants issued by the Company (“IPO private warrants”). If the IPO private warrants are held by holders other than GigAcquisitions4, LLC (“Sponsor”), Oppenheimer & Co. Inc. and Nomura Securities International, Inc. (together, the “Underwriters”), or any respective permitted transferees, the IPO private warrants will be redeemable by the Company and exercisable by the holders on the same basis as the IPO public warrants. The Sponsor, the Underwriters and any respective permitted transferees have the option to exercise the IPO private warrants on a cashless basis.


	December 31, 2024		December 31, 2023
Fair value of each IPO private warrant	$	1.84	$	0.38
Exercise price	$	11.50	$	11.50
Common stock price	$	4.45	$	2.14
Expected term (in years)	1.9		2.9
Expected volatility	93.30%		82.30%
Risk-free rate of return	4.25%		4.00%
Expected annual dividend yield	—%		—%

As of December 31, 2024 and December 31, 2023, the IPO private warrants have a fair value of $0.3 million and $0.1 million and are presented on the consolidated balance sheets within derivative liabilities and other non-current liabilities, respectively. The following was recognized as a result of the change in fair value for the three and the year ended December 31, 2024 and December 31, 2023 and is presented in net increase (decrease) in fair value of derivatives on the consolidated statements of operations:

Immediately prior to the stockholder vote for the merger between the Company’s Parent, BBAI Ultimate Holdings, LLC (“Parent”), and GigCapital4, Inc. (“GigCapital4”), which was consummated on December 7, 2021 (the “Merger”), GigCapital4 executed a series of Forward Share Purchase Agreements (“FPAs”) with certain investors (the “Investors”). The FPAs provide that each of the Investors would not redeem their shares and instead would hold the shares for a period of up to three months following the consummation of the Merger, at which time they would have the right to sell the shares to the Company for $10.15 per share (the “Written Put Option”). The Investors had the right to sell shares on the open market before the end of the three-month period provided that the share price was at least $10.00 per share. If the Investors sold any shares in the open market within the first month of the three-month period and at a price greater than $10.05 per share, the Company would pay the Investors $0.05 per share sold.

During the first quarter of 2022, the Company settled the derivative liability associated with the Written Put Option by repurchasing all 9,952,803 shares of its common stock that were subject to the FPAs at the Investors’ request. Certain of the Investors requested for their shares to be repurchased prior to the end of the three-month period at a reduced price per share. As a result, 5,000,000 shares were repurchased at $10.125 per share during the first quarter of 2022. Of the $101.0 million previously presented as restricted cash on the Company’s consolidated balance sheets on December 31, 2021, $100.9 million was released from the escrow account to settle the obligation to Investors and the remaining $0.1 million was reclassified to cash and cash equivalents.

During the three months ended March 31, 2022, the derivative liability was remeasured to its intrinsic value at each date that the underlying shares were repurchased. The resulting gain of $1.3 million was presented in net increase (decrease) in fair value of derivatives on the consolidated statement of operations during the first quarter of 2022. The intrinsic value of the Written Put Option upon settlement was $43.5 million and was recognized directly in equity during the first quarter of 2022.