STOCKHOLDERS’ DEFICIT

12 Months Ended

Dec. 31, 2024

Equity [Abstract]

STOCKHOLDERS’ DEFICIT

NOTE 18. STOCKHOLDERS' DEFICIT

The Company has entered into a number of securities purchase and exchange agreements with affiliated and external parties throughout its history, and has provided equity-based compensation to its employees, directors and affiliated parties. See Note 11, Convertible Notes, Note 12, Related Party Transactions, and Note 14, Equity-Based Compensation, for further discussion of transactions impacting the Company’s stockholders’ deficit for the years ended December 31, 2024 and 2023.

January 2024 Units Offering

In January 2024, the Company completed the January 2024 Public Units Offering consisting of 6.8 million units (the “Units”), each consisting of one share of common stock and one warrant to purchase one share of common stock (each, a “Common Warrant”), and for certain investors in lieu thereof, pre-funded Units (the “Pre-Funded Units”), each consisting of one pre-funded warrant to purchase one share of common stock (each, a “Pre-funded Warrant”), and one Common Warrant to purchase one share of common stock. The public offering price for each Unit was $1.50 and the public offering price for each Pre-Funded Unit was $1.49.

The Company granted the underwriters for the January 2024 Public Units Offering a 30-day option to purchase up to an additional 1.0 million shares of common stock and/or additional Common Warrants to purchase up to 1.0 million shares of common stock, in any combination thereof, at the public offering price, less underwriting discounts and commissions. The underwriters elected to purchase an additional 36,003 Common Warrants from the Company under this option.

Common Warrants issued to investors in the January 2024 Public Units Offering have an exercise price of $1.65 per share, were immediately exercisable upon issuance and will remain exercisable until the date that is five years after their original issuance. The Pre-Funded Warrants have an exercise price of $0.01 per share, are immediately exercisable and will remain exercisable until exercised in full. The gross proceeds from the January 2024 Public Units Offering, before deducting underwriting discounts and commissions and other public offering expenses payable by the Company were approximately $10.2 million (excluding any proceeds that may be received upon the exercise of the Common Warrants or the Pre-Funded Warrants).

Concurrently with the completion of the January 2024 Public Units Offering, the Company sold 1.2 million Units at a purchase price of $1.73 per Unit to the Schuler Trust, which satisfied the Schuler Purchase Obligation and an aggregate of 33,332 Units at a purchase price of $1.50 per Unit to the Company’s Chief Executive Officer and Chief Financial Officer, in each case, in a private placement offering. The gross proceeds from the private placement offering, before deducting underwriting discounts and commissions and other expenses payable by the Company, were approximately $2.0 million (excluding any proceeds that may be received upon the exercise of the Common Warrants).

Pursuant to the subscription agreement entered into between the Schuler Trust and the Company in connection with the private placement offering of Units, the Schuler Trust also agreed to purchase an additional 1.6 million Units at a purchase price of $1.73 per Unit on or before May 20, 2024 (the “Forward Contract”). On May

20, 2024, the Company completed the sale of such additional Units to the Schuler Trust for gross proceeds of approximately $2.7 million (before deducting underwriting discounts and commissions and other expenses payable by the Company and excluding any proceeds that may be received upon the exercise of the Common Warrants).

Aggregate net proceeds from the January 2024 Public Units Offering and private placement offering of Units (including the additional Units purchased by the Schuler Trust in May 2024) for the year ended December 31, 2024 were approximately $13.7 million.

The Company evaluated the Pre-Funded Warrants to determine whether they are equity-classified or liability-classified instruments. The Company concluded that the Pre-Funded Warrants are indexed to the Company’s own stock and meet all other criteria for equity classification. Therefore, the Pre-Funded Warrants were recorded in contributed capital on the consolidated statements of stockholders’ deficit.

The Company also evaluated the Common Warrants and Forward Contract to determine whether they are equity-classified or liability-classified instruments. The Company concluded that the Common Warrants and Forward Contract are not indexed to the Company’s own stock and are therefore liability-classified. The Company further determined the Common Warrants and Forward Contract meet the definition of a derivative instrument and do not qualify for any scope exceptions to derivative accounting. Therefore, the Common Warrants and Forward Contract were initially recorded at fair value and are subsequently remeasured at fair value as of each reporting date.

Proceeds from the January 2024 Public Units Offering were first allocated to the liability-classified instruments based on their fair value with the residual proceeds allocated to the equity-classified instruments based on their relative fair values. Transaction expenses were allocated among the equity-classified and liability-classified instruments. Those transaction expenses allocated to the equity-classified instruments were recorded as an offset to the proceeds in contributed capital on the consolidated statements of stockholders’ deficit. Those transaction expenses allocated to the liability-classified instruments were recorded to other expense on the consolidated statements of operations and comprehensive loss.

Fair Value of the Common Warrants

The Common Warrants had a fair value of $5.0 million (liability) upon issuance in January 2024, and were subsequently measured at fair value using Level 3 inputs. The estimated fair value of the Common Warrant liability as of December 31, 2024 was $4.6 million. An adjustment of $(0.4) million to the fair value of the Common Warrants was recorded in (loss) gain on fair value adjustment on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024.

The following table summarizes the significant inputs used to estimate the fair value of the Common Warrant liability as of December 31, 2024 and January 23, 2024:

	December 31, 2024			January 23, 2024
Exercise price	$	1.65		$	1.65
Term (years)	4.1			5.0
Volatility	59.00		%	55.00		%
Risk-free rate	4.37		%	4.06		%
Dividend yield	0.00		%	0.00		%

The volatility used to estimate the fair value of the Common Warrant liability is an unobservable input. As volatility is an estimate, there is a range of values that could be considered appropriate. Changes to this input could impact the fair value reported.

Treasury Stock

In 2018, in connection with the 2.50% Notes, the Company entered into a prepaid forward stock repurchase transaction (“Prepaid Forward”) with a financial institution (“Forward Counterparty”). Pursuant to the Prepaid Forward, the Company used approximately $45.1 million of the net proceeds from its issuance of the 2.50% Notes to fund the Prepaid Forward. The aggregate number of shares of the Company’s common stock underlying the Prepaid Forward was approximately 185,850. During March 2023, 185,850 shares of common stock were returned to the Company pursuant to its agreement with the Forward Counterparty. As of December 31, 2024 and 2023, these shares purchased under the Prepaid Forward were treated as treasury stock on the consolidated balance sheets (and not outstanding for purposes of the calculation of basic and diluted earnings per share).