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Stockholders’ Deficit
 3 Months Ended
Mar. 31, 2026
Equity [Abstract]  
Stockholders’ Deficit

7. Stockholders’ Deficit

 

SEPA Draws

 

As further described in the Form 10-K, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership managed by Yorkville Advisors Global, LP (“Yorkville”). Under the SEPA, the Company has the right to sell to Yorkville up to $25.0 million of its Common Stock, subject to certain limitations and conditions set forth in the SEPA, from time to time, over a 24-month period. The SEPA was accounted for as a liability under ASC 815 as it includes an embedded put option and an embedded forward option. The put option is recognized at inception and the forward option is recognized upon issuance of notice for the sale of the Company’s Common Stock.

 

The fair value of the derivative liability related to the embedded put option was estimated at $0.1 million and $0.2 million at March 31, 2026 and December 31, 2025, respectively. The balances outstanding at March 31, 2026 and December 31, 2025 were classified within short-term liabilities on the condensed consolidated balance sheets because the commitment period expires in less than one year.

 

During the three months ended March 31, 2026, the Company delivered two advance notices for the sale of 400,000 shares of its Common Stock, resulting in cumulative gross proceeds of $0.5 million. A derivative asset for each embedded forward option was initially recorded at fair value upon delivery of each advance notice, which was subsequently remeasured with changes in fair value recorded in the condensed consolidated statements of operations until settlement. The Company recognized an aggregate gain of $0.1 million related to embedded forward options during the three months ended March 31, 2026. The embedded forward option was deemed to have no value at March 31, 2026 and December 31, 2025 as there were no outstanding notices for the sale of the Company’s Common Stock. During the three months ended March 31, 2025, the Company did not deliver any advance notices under the SEPA.

 

The estimated issuance date fair value and remeasurement adjustment for the embedded put option and embedded forward option are presented as a single line within other (income) expense, net in the accompanying consolidated statements of operations under the caption change in fair value of SEPA derivative liabilities. The embedded put option fair value adjustment was a gain of $0.1 million and $0.3 million for the three months ended March 31, 2026 and 2025, respectively. The embedded forward option fair value adjustment was a gain of $0.1 million for the three months ended March 31, 2026, and $0 for the three months ended March 31, 2025.

 

Subscription Agreement – Related Party

 

On February 6, 2026, the Company entered into a subscription agreement with a related party investor pursuant to which the Company agreed to issue and sell 595,238 shares of its Common Stock at a price of $0.84 per share. The Company received gross proceeds of approximately $0.5 million from the related party subscription agreement.

 

ARC Forward Contract

 

As of March 31, 2026 and December 31, 2025, the Company had an outstanding forward contract to issue 1,240,644 shares of its Common Stock to ARC Group Limited for success fees earned from Data Knights in connection with the Business Combination. The forward contract was included in additional paid-in-capital in stockholders’ deficit in the consolidated balance sheets as it met the criteria for equity accounting under ASC 815.