Debt and Warrants Transactions

12 Months Ended

Dec. 31, 2024

Notes and Warrants Offering

On August 11, 2022, the Company entered into a Securities Purchase Agreement ("SPA") with certain accredited investors, and, pursuant to the SPA, sold a new series of senior secured convertible notes (the "Notes") with an aggregate original principal amount of $15.0 million and an initial conversion price of $26.80 per share, subject to adjustment as described in the Notes, and warrants to acquire up to an aggregate amount of 279,851 additional shares of the Company’s common stock (the "Notes Warrants" and together with the Notes, the "Notes and Warrants Offering"). The closing of the Notes and Warrants Offering occurred on August 11, 2022. The Notes accrued compounding interest at the rate of 6.0% per annum, which was payable in cash or shares of the Company's common stock at the Company's option, in arrears quarterly in accordance with the terms of the Notes. Upon the occurrence and during the continuance of an Event of Default (as defined in the Notes), the Notes would accrue interest at the rate of 15.0% per annum. Upon conversion and other designated events, holders of the Notes were also entitled to receive an interest make-whole payment. Upon a redemption due to a Change in Control (as defined in the Notes), holders of the Notes were entitled to cash settlement. The Notes matured on December 31, 2023, with amortization payments being made monthly from April 2023 through December 2023, and the balance at maturity, with a total of 2.1 million of shares transferred valued at a total of $19.1 million as of the dates conveyed. The entire balance of the note was repaid in 2023 and as such all of the debt and the related derivative were derecognized as of December 31, 2023. The Notes contained a make-whole feature and a redemption right payable in cash upon change in control feature, as well as certain other conversion and redemption features. These features were viewed as a compound embedded derivative that met the criteria to be bifurcated and carried at fair value. This was classified in the balance sheet line "Derivative liabilities" and as a discount on the Notes, with

subsequent adjustments to fair value each reporting period with a charge to earnings. The derivative was eliminated with the retirement of the notes on December 31, 2023. The following assumptions were utilized:


Convertible Notes Derivative	Common stock market price		Risk-free interest rate		Expected dividend yield	Expected term (in years)	Expected volatility
August 11, 2022 at Issuance	$	3.04	3.28	%	—	1.39	56.3	%
December 31, 2022	$	2.10	4.68	%	—	1.00	61.6	%
March 31, 2023 for April 1, 2023 Installment date	$	1.16	4.68	%	—	0.75	84.3	%
May 1, 2023 for May 1, 2023 Installment date	$	1.22	4.68	%	—	0.67	81.6	%
May 31, 2023 for June 1, 2023 Installment date	$	1.21	4.91	%	—	0.59	86.2	%
June 30, 2023 for July 1, 2023 Installment date	$	1.11	5.42	%	—	0.50	90.7	%
July 31, 2023 for August 1, 2023 Installment date	$	1.14	5.53	%	—	0.42	59.9	%
August 31, 2023 for September 1, 2023 Installment date	$	1.71	5.54	%	—	0.33	69.9	%
September 30, 2023 for October 1, 2023 Installment date	$	1.21	5.56	%	—	0.25	78.2	%
November 1, 2023 for November 1, 2023 Installment date	$	1.03	5.60	%	—	0.17	52.4	%
December 1, 2023 for December 1, 2023 Installment date	$	0.68	5.53	%	—	0.08	147.5	%
December 31, 2023 for December 31, 2023 Installment date	$	0.83	5.53	%	—	0.00	—	%

Given that the Notes Warrants and the derivative are liability instruments that are measured at fair value, the transaction proceeds were allocated first to the Notes Warrants and derivative, with the residual to the Notes. Transaction issuance costs for the Notes and Warrants Offering were allocated in the same manner, with $0.5 million relating to the Notes Warrants and derivative being expensed immediately in 2022 within "General and administrative expenses." Deferred financing costs for the Notes and Warrants Offering totaled $0.5 million and were reported net of accumulated amortization as a deduction from the face amount of the debt. Amortization of the deferred financing costs and discount was reported as a component of interest expense and is computed using the effective interest method over the expected term of the debt. In the Notes and Warrants Offering, the Company raised net cash proceeds of $14.0 million.

During the year ended December 31, 2023, the Company recognized interest expense of $6.6 million on the Notes and related instruments utilizing the effective interest rate of 155%, which includes amortization of debt issuance costs of $0.3 million, amortization of discount of $5.7 million, and contractual interest of $0.6 million. The Notes were retired at maturity on December 31, 2024, and as such there was no remaining amortization of debt issuance costs, amortization of discount, or contractual interest.

The Notes contained certain customary affirmative and negative covenants regarding the incurrence of indebtedness, acquisition and investment transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer of assets, among other matters. Throughout the duration of the notes the Company was in compliance with all covenants

Warrant Liabilities

On August 11, 2022, the Company issued the Notes Warrants in conjunction with the Notes and Warrants Offering, at an initial fair value of $3.8 million. The exercise price of and number of shares underlying the Notes Warrants were immediately proportionately adjusted pursuant to the Reverse Stock Split to $26.80 and 279,851

shares, respectively, and on May 2, 2024, the exercise price for each of the Notes Warrants was further adjusted to $2.06 in accordance with their terms.

The Company issued additional warrants (the "Additional Warrants") to purchase Common Stock on August 12, 2022 in conjunction with a registered direct offering for the sale of shares of the Company's Common Stock and the Additional Warrants. The Additional Warrants do not reprice further beyond the immediate proportionate adjustments to the per share exercise price and number of shares issuable of $21.20 and 141,509 shares, respectively, that occurred upon and as a result of the Reverse Stock Split.

All changes in the fair value of the Notes Warrants and Additional Warrants liabilities are recognized in the Company's consolidated statements of operations until they are either exercised or expire. Since their issuance, none of the Notes Warrants or Additional Warrants have been exercised. The Notes Warrants and Additional Warrants are not traded in an active securities market and, as such, the estimated fair value is determined by using a Black-Scholes option pricing model which considers the likelihood of repricing adjustments and utilizes assumptions noted in the following table. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of valuation. Expected volatility is based on the historical volatility over the expected remaining term of the warrants. The Company has no reason to believe future volatility over the expected remaining life of the Notes Warrants and Additional Warrants is likely to differ materially from historical volatility. Expected life is based on the term of the applicable warrants. Below are the specific assumptions utilized:


	Notes Warrants						Additional Warrants
	December 31, 2024			December 31, 2023			December 31, 2024			December 31, 2023
Common stock market price	$	1.31		$	0.83		$	1.31		$	0.83
Risk-free interest rate	4.2		%	4.1		%	4.3		%	4.1		%
Expected dividend yield	—			—			—			—
Expected term (in years)	2.61			3.61			3.12			4.12
Expected volatility	105.9		%	66.8		%	99.6		%	68.7		%