Debt

12 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Debt

8. Debt

The aggregate principal amount of debt outstanding as of December 31, 2024 and 2023 consisted of the following:

	December 31, 2024		December 31, 2023
Senior secured notes	$	2,237	$	8,900
Note payable - related parties		1,930		—
Total Debt	$	4,167	$	8,900

Current and non-current debt obligations reflected in the consolidated balance sheets as of December 31, 2024 and 2023 consisted of the following: 

	December 31, 2024		December 31, 2023
Current liabilities:
Note payable - related parties	$	1,618	$	—
Debt, current portion		1,618		—
Non-current liabilities:
Note payable - related parties		312		—
Senior secured notes		2,237		8,900
Debt, net of current portion		2,549		8,900
Total Debt	$	4,167	$	8,900

Senior Notes

On June 13, 2023, Legacy Zapata entered into a senior note purchase agreement with and issued senior promissory notes to certain lenders. Under the agreements, Legacy Zapata was permitted to issue convertible notes in an aggregate principal amount of up to $20,000 (the “Senior Notes”). The Senior Notes accrued interest at a rate of 20.0% per annum, had a maturity date of June 13, 2024, and could be extended one year from the maturity date at the option of Legacy Zapata. The Senior Notes were convertible in connection with a business combination between Legacy Zapata and a publicly traded special purpose acquisition company, including the Merger, or in connection with an IPO, in each on or prior to the maturity date, at a conversion price of $8.50 per share. On December 22, 2023, the aggregate principal amount of $5,625 plus accrued and unpaid interest of $557 of the Senior Notes were exchanged for $6,182 of the aggregate principal amount of the Senior Secured Notes (as defined below). Accrued and unpaid interest on the borrowings under the Senior Notes prior to the exchange was calculated at an interest rate of 20.0% based on the 365-day period from the issuance date to the amendment date. As of December 22, 2023, all Senior Notes were canceled in exchange for Senior Secured Notes with a principal amount equal to the principal amount of the Senior Notes plus accrued and unpaid interest through the date immediately prior to the exchange.

Senior Secured Notes

On December 22, 2023, Legacy Zapata entered into a Security Agreement and Senior Secured Note Purchase Agreement (collectively, the “Senior Secured Notes Agreements”) with new and existing noteholders. Under the Senior Secured Notes Agreements, Legacy Zapata was authorized to issue convertible notes (the “Senior Secured Notes”) in an aggregate principal amount of up to $14,375 and offered to exchange its outstanding Senior Notes for Senior Secured Notes. The Senior Secured Notes accrue interest at a compound rate of 15.0% per annum and mature on December 15, 2026. The Senior Secured Notes Agreements allowed existing noteholders the option to surrender their existing Senior Notes in exchange for Senior Secured Notes of an equal aggregate principal amount plus accrued and unpaid interest. All existing holders of Senior Notes exercised this option. The total principal and accrued interest of Senior Notes exchanged amounted to $5,625 and $557, respectively. The Company determined that the exchange is a debt extinguishment. During the year ended December 31, 2023, the Company issued an additional $3,275 of the senior secured notes. As of December 31, 2023, Legacy Zapata had an outstanding balance of Senior Secured Notes of $8,900, which was netted with $158 of unamortized debt issuance costs.

From January through March 2024, Legacy Zapata issued $7,150 in additional aggregate principal amount of Senior Secured Notes, which includes certain Senior Secured Notes with an aggregate principal amount of $1,150 that were issued to third party advisors in lieu of cash payment for services rendered to Legacy Zapata related to the Merger (Note 3). The Senior Secured Notes were or are, as applicable, convertible at the option of the holder in connection with a business combination between Legacy Zapata and a publicly-traded special purpose acquisition company, including the Merger, or in connection with an initial public offering, in each case on or prior to the maturity date, at a conversion price (as may be adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) of (i) $4.50 per share at the closing of such business combination, including the Merger, or initial public offering, as applicable, or (ii) $8.50 per share at any time after the closing of such business combination, including the Merger, or initial public offering, as applicable.

The Senior Secured Notes issued from January 2024 to March 2024 totaling $6,150 were issued at a substantial premium. Accordingly, the Company accounted for the issuance of these Senior Secured Notes under the amortized cost model, which is the principal plus accrued interest. The remaining Senior Secured Note issued to a third-party advisor totaling $1,000 is carried at redemption value, which is the principal plus accrued interest.

The Company issued a Senior Secured Note to a third party for capital market advisory services that vested contingently with the Merger. Upon the satisfaction of the performance condition as described in the agreement, the Company accounted for the Senior Secured Note as a stock-based award granted to a non-employee and measured the award based on the fair value on the Merger date, with the liability portion of the award recorded as Senior Secured Notes at the redemption value, and the excess fair value recorded as a loss on issuance of convertible note within total other expense, net in the consolidated statements of operations and comprehensive loss.

The aggregate premium associated with the Senior Secured Notes, which was recorded as a loss on the issuance date of $9,776 was recorded within other income (expense) and as additional paid-in capital. For the years ended December 31, 2024 and 2023, the Company recognized $594 and $0 in interest expense related to contractual interest on the Senior Secured Notes, respectively, which is recorded in interest expense within the consolidated statement of operations and comprehensive loss. Legacy Zapata incurred an additional $210 debt issuance costs in connection with the Senior Secured Notes issued from January 2024 to March 2024 and were accounted as a debt discount, of which $53 was settled through the issuance of 11,666 shares of the Company’s common stock upon the Closing of the Merger (Note 3). The Company recognized $368 in interest expense associated with the accelerated amortization of debt issuance costs upon the conversion of a portion of the outstanding Senior Secured Notes at the Closing of the Merger, which is recorded in interest expense within the consolidated statement of operations and comprehensive loss.

The aggregate premium associated with the Senior Secured Notes issued during the year ended December 31, 2024 was estimated utilizing a binomial lattice model which includes a combination of the discounted cash flow and optional conversion with De-SPAC features. The following table presents the significant unobservable inputs that were included in the discounted cash flow feature and the optional conversion with De-SPAC feature for the period of January 1, 2024 to March 27, 2024 (the last issuance date):

Significant Unobservable Input	Input Range
Model	Discounted cash flow
Discount rate	29.7% to 31.4%
Model	Optional conversion with De-SPAC
Closing stock price	$9.49 to $10.97
Expected annual volatility	55.0%
Risk free rate	4.2% to 4.4%
Dividend yield	0.0%
Preferred yield	29.7% to 31.4%

Upon the Closing of the Merger, a portion of the aggregate outstanding the Senior Secured Notes converted into 3,257,876 shares of the Company’s common stock (856,202 shares to related parties). Upon the conversion of the Senior Secured Notes, the principal balance of the debt of $14,207 and associated accrued interest of $453 were converted, resulting in an increase in common stock and additional paid-in capital of $14,660. Certain holders of the Senior Secured Notes, holding $2,237 in aggregate principal and accrued interest as of December 31, 2024, did not convert their Senior Secured Notes into shares of the Company’s common stock.

The Company recognizes the remaining Senior Secured Notes at amortized cost. As of December 31, 2024, the $2,237 of aggregate principal and accrued interest on the outstanding Senior Secured Notes did not include any associated costs that are being recorded as a debt discount and amortized over the remaining term of the outstanding Senior Secured Notes. The $2,237 of aggregate principal and accrued interest on the outstanding Senior Secured Notes mature on December 15, 2026.

Notes Payable - Related Parties

To finance transaction costs in connection with the Merger, the Sponsor and certain of AAC’s officers and directors made working capital loans (the “Notes Payable – Related Party”) to AAC prior to the Closing. The Notes Payable – Related Party would either be repaid upon the consummation of the Merger, without interest, or at AAC’s discretion, up to $1,500 of such Notes Payable – Related Party could be convertible into Private Placement Warrants of the Company at a price of $1.00 per warrant at the Closing Date of the Merger (Note 11).

On March 28, 2024, the terms of the Notes Payable – Related Party were amended, pursuant to which the outstanding principal balance plus the accrued interest of $2,619, which was also due per its terms at the Closing of the Merger was deferred and became due in monthly installments (including interest accruing from the Closing of the Merger through the payment date) for twelve months thereafter beginning thirty days following the effectiveness of the Lincoln Park Registration Statement (Notes 3 and 10). The Lincoln Park Registration Statement was declared effective on April 18, 2024. Upon the closing of the Merger, none of the note holders elected to exercise their option of converting their respective loans into warrants. The Notes Payable – Related Party bear interest at a rate of 4.5% per annum. The Company assumed the obligation for the related party notes upon the Closing. The Company accounted for the Notes Payable – Related Party under the amortized cost model. As of December 31, 2024, the outstanding balance of the Notes Payable – Related Party was $1,930 within the Company’s consolidated balance sheet. There was no unamortized debt discount related to Notes Payable – Related Party as of December 31, 2024.

As of December 31, 2024, future minimum payments required on the Senior Secured Notes and the Notes Payable – Related Party are as follows:

Year Ending	Amount
2025		1,730
2026		2,549
Total future minimum payments		4,279
Less: imputed interest		(112	)
Total Debt	$	4,167

As described in Note 20, Subsequent Events, in the second quarter of 2025, the Company satisfied its Notes Payable – Related Party through the issuance of 5,407,000 shares of the Company’s common stock to note holders.