WARRANT LIABILITY

6 Months Ended

Jun. 30, 2025

Warrant Liability

WARRANT LIABILITY

7. WARRANT LIABILITY

On February 3, 2025, the Company entered into a new Securities Purchase Agreement (the “2025 Purchase Agreement”) with an institutional investor. In exchange for $8.0 million, the Holder agreed to purchase 5,750,225 shares of common stock (the “closing shares”) and warrants to purchase up to 5,750,225 shares of common stock at an exercise price of $1.57 per share (the “warrants”). On February 4, 2025, the 2025 Purchase Agreement closed for net proceeds of approximately $7.8 million, inclusive of all fees and expenses related to the transaction. The warrants are exercisable beginning August 4, 2025 and expire on August 4, 2030. There have been no exercises of warrants as of June 30, 2025.

The warrants are accounted for as a liability under ASC 480, Distinguishing Liabilities from Equity. Both the closing shares and the warrants are initially recorded on February 4, 2025 at their fair values of $9.0 million and $6.3 million, respectively. The warrant liability is subsequently remeasured and reported at fair value each reporting period, with the changes in fair value recorded as an unrealized gain or loss and recognized in earnings.

The fair value of warrants as of June 30, 2025 and December 31, 2024 are as follows:

	June 30,		December 31,
(in thousands)	2025		2024
Warrant liability	$	3,733	$	-
Total	$	3,733	$	-

Unrealized gains and losses associated with warrants are as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2025		2024		2025		2024
Unrealized gain (loss) on warrant liability	$	803	$	-	$	2,564	$	-

Interest expense of $7.3 million representing the discount on the transaction was recorded on the condensed consolidated financial statements for the six months ended June 30, 2025.

The valuation inputs hierarchy classification for liabilities measured at fair value on a recurring basis are summarized below as of June 30, 2025 and December 31, 2024 (in thousands). See Note 5. Investment Securities, Available-For-Sale and Fair Value Measurements, for discussion of the fair value level hierarchy.

As of June 30, 2025	Level 1		Level 2		Level 3
Warrant liability	$	-	$	-	$	3,733
Total	$	-	$	-	$	3,733

As of December 31, 2024	Level 1		Level 2		Level 3
Warrant liability	$	-	$	-	$	-
Total	$	-	$	-	$	-

The fair value of the warrants is measured using the Black-Scholes option pricing model as of the measurement dates. The table below lists the inputs and assumptions for the Company’s valuations as of June 30, 2025 and upon initial measurement as of February 4, 2025:

	June 30,			February 4,
	2025			2025
Expected term (years)		5.1			5.5
Risk-free interest rate		3.80	%		4.34	%
Dividend yield		0	%		0	%
Volatility		71.97	%		80.14	%