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Warrant Liabilities

3 Months Ended

Mar. 31, 2026

11. Warrant Liabilities

On January 23, 2024, in connection with the Amended and Restated Credit Agreement, the Company issued 20.0 million 2024 Warrants to the Lenders, on March 12, 2025, in connection with the 2025 Amendment, the Company issued 6.2 million 2025 Warrants to the 2025 Lenders, on May 2, 2025, in connection with the Second 2025 Amendment, the Company issued 6.6 million 2025 Additional Warrants to the 2025 Lenders, and on May 2, 2025, in connection with the SGI Agreements (as defined below), the Company issued to SGI warrants to purchase 8.0 million shares of the Company’s Common Stock (the “SGI Warrants,” collectively, the “Warrants”). Each Warrant entitles the registered holder to purchase one share of the Company’s Class A common stock at a price of $1.50 per share, subject to adjustment. While the Warrants are exercisable, the Company may call the Warrants for redemption in whole and not in part at any time at a price of $0.01 per share of Class A common stock issuable upon exercise of the Warrants upon not less than 45 days’ prior written notice of redemption to each holder, provided that this redemption right is only available if the reported last sale price of the Class A common stock equals or exceeds $24.00 per share on each of 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the holders. The Warrants will expire on the 10-year anniversary of issuance, or earlier upon redemption. The holders do not have the rights or privileges of holders of Class A common stock or any voting rights until they exercise their Warrants. After the issuance of shares of Class A common stock upon exercise of the Warrants, each holder will be entitled to one vote for each share of Class A common stock held on all matters to be voted on by stockholders generally. A holder of the Warrants will not have the right to exercise its Warrants, to the extent that after giving effect to such exercise, the holder (together with its affiliates) would beneficially own in excess of 49.9% of the shares of Class A common stock outstanding immediately after giving effect to such exercise. The Warrants contain a repurchase provision which, upon an occurrence of a fundamental transaction as defined in the warrant agreement, could give rise to an obligation of the Company to pay cash to the warrant holders. In addition, other provisions may lead to a reduction in the exercise price of the Warrants. The Company determined the fundamental transaction provisions require the Warrants to be accounted for as a liability at fair value on the date of the transaction, with changes in fair value recognized in earnings in the period of change. As a result, the liability for these Warrants was recorded at fair value on the date of issuance with the offset included in debt issuance costs. This liability is subsequently re-measured to fair value at each reporting date or exercise date with changes in the fair value included in earnings.

The Company used a Monte Carlo Simulation model to determine the fair value of the liability associated with the Warrants. The model used key assumptions and inputs, such as exercise price, fair market value of common stock, risk free interest rate, warrant life, expected volatility and the probability of a warrant re-price event. The following are the assumptions used in calculating fair value of the Warrants:

	March 31,			December 31,
	2026			2025
Trading price of common stock on measurement date	$	0.66		$	0.69
Exercise price	$	1.50		$	1.50
Risk free interest rate		4.08 – 4.15	%		3.95 – 4.03	%
Warrant life in years		7.82 – 8.95			8.06 – 9.20
Expected volatility		87.0	%		88.0	%
Expected dividend yield		—			—
Probability of an event causing a warrant re-price		40.0	%		70.0	%
Estimated date of event causing a warrant re-price		March 2027			May 2026

The Warrants had a fair value of $23.1 million as of March 31, 2026. The Company recognized a $7.0 million expense in the unaudited condensed consolidated statement of operations for the three months ended March 31, 2026 related to an increase in the fair value of the Warrants outstanding at the end of the period compared to the fair value of the Warrants at the end of 2025. The Company recorded a de minimis gain for the three months ended March 31, 2025 related to the increase in fair value of the Warrants outstanding at the end of the period.