In conjunction with the issuance of Series A Preferred Stock and Preferred Tranche A and Tranche B Warrants (the “Warrants”) as described in Note 6, the Company established a warrant liability.

The Warrants meet the definition of freestanding instruments and are classified as liabilities in accordance with ASC 480, Distinguishing Liabilities from Equity. The Warrants were initially recognized at fair value and are subject to remeasurement at each balance sheet date after issuance. Any change in fair value is recognized as a component of other income (expense) in the statements of operations in the period of change. For the three months ended March 31, 2026 and 2025, the Company recognized a $109.4 million loss and no gain or loss, respectively, related to changes in the fair value of the warrant liability, which is included in other income (expense) in the statements of operations. In addition to the valuation inputs described below, there is an indirect relationship between the Company’s share price and the fair value of the warrant liability, whereby changes in the share price influence the valuation model used to determine fair value.

The fair value of the warrants is estimated using a binomial 2-node model in combination with the Black-Scholes Option Pricing Model using unobservable (Level 3) inputs that reflect the Company’s own assumptions, as described in Note 2. The significant unobservable inputs include the expected timing of the Milestone Event, the probability of the Milestone Event being successfully achieved, and the value of the Series A Preferred Stock upon the success or failure of the Milestone Event. Significant increases (decreases) in any of the inputs in isolation would result in a significantly higher (lower) fair value measurement.

The table below summarizes the valuation inputs used in the binomial model for the liability associated with the Warrants at March 31, 2026:


	March 31, 2026
	Tranche A Warrants			Tranche B Warrants
Scenario 1: Milestone Successfully Achieved
Discount rate		3.73	%		3.73	%
Time period between valuation date and Milestone Event		1.75			1.75
Risk-neutral probability of Milestone Event achievement		48.00	%		48.00	%
Probability-weighted present value of the Series A Preferred Warrants	$	2,264.20		$	2,375.40
Scenario 2: Milestone Not Achieved
Discount rate		3.73	%		3.73	%
Time period between valuation date and Milestone Event		1.75			1.75
Risk-neutral probability of Milestone Event achievement		52.00	%		52.00	%
Probability-weighted present value of the Series A Preferred Warrants	$	43.50		$	43.50
Fair Value of Series A Warrants	$	2,307.70		$	2,418.80

The table below summarizes the valuation inputs used in the binomial model for the liability associated with the Warrants at December 31, 2025:


	12/31/2025
	Tranche A Warrants			Tranche B Warrants
Scenario 1: Milestone Successfully Achieved
Discount rate		3.52	%		3.52	%
Time period between valuation date and Milestone Event		2.00			2.00
Risk-neutral probability of Milestone Event achievement		49.00	%		49.00	%
Probability-weighted present value of the Series A Preferred Warrants	$	1,360.60		$	1,500.60
Scenario 2: Milestone Not Achieved
Discount rate		3.52	%		3.52	%
Time period between valuation date and Milestone Event		2.00			2.00
Risk-neutral probability of Milestone Event achievement		51.00	%		51.00	%
Probability-weighted present value of the Series A Preferred Warrants	$	21.60		$	21.60
Fair Value of Series A Warrants	$	1,382.20		$	1,522.20

The table below summarizes the valuation inputs used in the Black-Scholes Option Pricing Model for the Warrants at March 31, 2026 and December 31, 2025.


	March 31, 2026			December 31, 2025
Term to expiration		1.81			1.81
Risk-free interest rate		3.73	%		3.51	%
Volatility		117.50	%		117.50	%
Dividend yield		0.00	%		0.00	%

The Company estimated the fair value of the Tranche A Warrants and Tranche B Warrants to be $181.8 million and $96.8 million, respectively, as of March 31, 2026, and $110.6 million and $60.9 million, respectively, as of December 31, 2025. The Company also recognized approximately $2.2 million of losses related to the exercise of Preferred Tranche A Warrants in 2026. These losses represent an additional non-cash expense included in changes in fair value of the warrant liability in the Company’s consolidated statements of operations. The following table provides a summary of the Company’s warrant liability fair value estimates as of March 31, 2026, and the changes in Level 3 fair value measurements during the three months ended March 31, 2026: