XML 111 R11.htm IDEA: XBRL DOCUMENT v3.25.1
Fair Value Measurements
 12 Months Ended
Dec. 31, 2024
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS

5. FAIR VALUE MEASUREMENTS

 

Fair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis.

 

The table below presents the Company’s liabilities measured at fair value on a recurring basis aggregated by the level in the fair value hierarchy as of December 31, 2024 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Liabilities:                
Public placement warrant liability  $
—
   $
—
   $267   $267 
Related party private placement warrant liability   
—
    
—
    133    133 
Long-term debt, non-current  $
—
   $13,186   $
—
   $13,186 
Total liabilities  $
—
   $13,186   $400   $13,586 

 

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis aggregated by the level in the fair value hierarchy as of December 31, 2023 (in thousands):

 

   Level 1   Level 2   Level 3   Total 
Liabilities:                
Convertible notes, current  $
—
   $
—
   $15,604   $15,604 
Related party convertible notes, current   
—
    
—
    2,133    2,133 
Shared-based termination liability   
—
    
—
    6,349    6,349 
Convertible preferred stock warrant liability   
—
    
—
    203    203 
Long-term debt, non-current   
—
   $13,340   $
—
   $13,340 
Total liabilities  $
—
   $13,340   $24,289   $37,629 

 

The Company’s convertible notes, current, related party convertible notes, current, share-based termination liability, public placement warrant liability, related party private placement liability, and preferred stock warrant liabilities are classified as Level 3 in the fair value hierarchy as the valuations are based on unobservable inputs, which reflect the Company’s own assumptions incorporated in valuation techniques used to determine fair value; further discussion of these assumptions is set forth below. There were no transfers into or out of Level 3 of the fair value hierarchy during the periods presented.

Changes in the fair value measurement of Level 3 liabilities are related mainly to unrealized gains (losses) resulting from remeasurement each period and are reflected in the consolidated statements of operations and comprehensive loss.

 

Public Placement Warrant Liability

 

In connection with the Merger, the Company assumed the Public Placement Warrants (see Note 9 – Warrants) to purchase the Company’s Common stock. The Company accounts for the Public Placement Warrants as a liability in accordance with ASC 815-40-15 since the Public Placement Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. This liability is subject to remeasurement at each balance sheet date until exercised. The fair value of the public placement liability at December 31, 2024 was determined using the Monte Carlo simulation model. The public placement warrant liability represents a Level 3 measurement within the fair value hierarchy as it has been valued using some unobservable inputs.

 

Related Party Private Placement Warrant Liability

 

In connection with the Merger, the Company assumed the Private Placement Warrants (see Note 9 – Warrants) to purchase the Company’s Common stock, which were issued to the Sponsor, a related party. The Company accounts for the Private Placement Warrants as a liability in accordance with ASC 815-40-15 since the Private Placement Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. This liability is subject to remeasurement at each balance sheet date until exercised. The fair value of the related party private placement warrant liability at December 31, 2024 was determined using the Monte Carlo simulation model. The related party private placement warrant liability represents a Level 3 measurement within the fair value hierarchy as it has been valued using unobservable inputs.

 

Convertible notes

 

The Company concluded that the Convertible Notes and its related features are within the scope of ASC 825, Financial Instruments, as a combined financial instrument, and the Company elected the fair value option where changes in fair value of the convertible notes are measured through the accompanying consolidated statement of operations and comprehensive loss until settlement. The Convertible Notes liability represents a Level 3 measurement within the fair value hierarchy as it has been valued using certain unobservable inputs. These inputs include the underlying fair value of the equity instrument into which the Convertible Notes are convertible. The fair value is based on significant inputs not observable in the market, namely potential financing scenarios, the likelihood of such scenarios, the expected time for each scenario to occur, and the required market rates of return utilized in modeling these scenarios.

 

Share-based termination liability

 

The fair value of the share-based termination liability at December 31, 2023 was determined based on the expected exchange fair value of the Company’s common stock using the probability weighted expected return method (“PWERM”). The PWERM method is a scenario-based methodology that estimates the fair value of equity securities based upon an analysis of future values of the Company, assuming various outcomes. The significant inputs to the PWERM methodology included rights and preferences of each class of Company’s shares, the Company’s assumptions related to the expected timing of a liquidation event, lack of marketability and the Company’s estimated equity value and volatility on the valuation date, which are based on management’s analysis of comparable publicly traded peer companies. There was no shared-based termination liability as of December 31, 2024.

 

Convertible preferred stock warrant liability

 

The fair value of the convertible preferred stock warrant liability as of December 31, 2023 was determined using the PWERM. There was no convertible preferred stock warrant liability as of December 31, 2024.

Change in fair value of Level 3 liabilities

 

The change in the fair value of the Level 3 liabilities during the years ended December 31, 2024 and 2023 was as follows (in thousands):

 

   Public placement warrant liability 
Balance at January 1, 2024  $
—
 
Warrants assumed from the Merger   25,174 
Change in estimated fair value   (24,907)
Balance at December 31, 2024  $267 

 

The change in fair value of the Public Placement Warrants is recognized in the consolidated statements of operations and comprehensive loss as the remeasurement of the public placement warrant liability of $24.9 million and zero for the years ended December 31, 2024 and 2023, respectively.

 

   Related party private placement warrant liability 
Balance at January 1, 2024  $
—
 
Warrants assumed from the Merger   13,134 
Change in estimated fair value   (13,001)
Balance at December 31, 2024  $133 

 

The change in fair value of the Private Placement Warrants is recognized in the consolidated statements of operations and comprehensive loss as the remeasurement of the related party private placement warrant liability of $13.0 million and zero for the years ended December 31, 2024 and 2023, respectively.

 

   Convertible
notes, current		 
Balance at January 1, 2023  $
—
 
Note issuance during the period   15,323 
Change in estimated fair value   281 
Balance at January 1, 2024  $15,604 
Note issuance during the period   17,559 
Loss on extinguishment   22,183 
Change in estimated fair value   31,664 
Conversion into common stock  $(87,010)
Balance at December 31, 2024  $
—
 

The change in fair value of the convertible notes is recognized in the consolidated statements of operations and comprehensive loss as the remeasurement of the convertible notes totaling loss of $31.7 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively. There was no change in fair value attributable to the instrument-specific credit risk for the years ended December 31, 2024 and 2023.

 

   Related party
convertible
notes, current		 
Balance at January 1, 2023  $
—
 
Note issuance during the period   2,018 
Change in estimated fair value   115 
Balance at January 1, 2024  $2,133 
Note issuance during the period   5,084 
Loss on extinguishment   4,176 
Change in estimated fair value   3,752 
Conversion into common stock   (15,145)
Balance at December 31, 2024  $
—
 

 

The change in fair value of the related party convertible notes is recognized in the consolidated statements of operations and comprehensive loss as the remeasurement of the related party convertible notes totaling loss of $3.8 million and $0.1 million for the years ended December 31, 2024 and 2023, respectively. There was no change in fair value attributable to the instrument-specific credit risk for the years ended December 31, 2024 and 2023.

 

   Share-based
termination
liability		 
Balance at January 1, 2023  $
      —
 
Addition during the period   6,053 
Change in estimated fair value   296 
Balance at January 1, 2024  $6,349 
Change in estimated fair value   979 
Liability settlement due to issuance of common stock  $(7,328)
Balance at December 31, 2024  $
         —
 

 

The change in fair value of the share-based termination liability is recognized in the consolidated statements of operations and comprehensive loss as the remeasurement of the share-based termination liability totaling loss of $1.0 million and $0.3 million for the years ended December 31, 2024 and 2023, respectively.

 

   Convertible
preferred
stock
warrants
liability		 
Balance at January 1, 2023  $330 
Change in estimated fair value   (127)
Balance at January 1, 2024  $203 
Change in estimated fair value   (6)
Conversion into Private Warrants   (197)
Balance at December 31, 2024   
—
 

The change in fair value of the convertible preferred stock warrants is recognized in the consolidated statements of operations and comprehensive loss as the remeasurement of the convertible preferred stock warrant liability totaling a gain of $0.01 million and $0.1 million for the years ended December 31, 2024 and 2023, respectively.