v3.26.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
The fair value of our financial assets and liabilities reflects management’s estimate of amounts that we would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of our assets and liabilities, we seek to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities.
The following table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025, and indicates the fair value hierarchy of the valuation inputs we utilized to determine such fair value (in thousands):
LevelMarch 31, 2026December 31, 2025
Assets:
Certificate of deposit2$50 $50 
Liabilities:
Warrant liability2$276 $103 
Earnout liability3$2,160 $2,210 
Warrant Liability
Working Capital Note Warrants, Private Warrants, and Public Warrants
We determined that the warrants that were a constituent part of (i) the private placement units issued in a private placement sale by GigCapital5 prior to the Merger and (ii) the private placement units issued upon conversion of working capital notes issued by GigCapital5 (the “Working Capital Note Warrants”) prior to the Merger, which conversion occurred concurrent with the Merger (“Private Warrants”), are subject to treatment as a liability, as the transfer of the warrants to anyone other than the purchasers or their permitted transferees would result in these warrants having substantially the same terms as the warrants included in the public units that were issued by GigCapital5 prior to the Merger (“Public Warrants”). We determined that the fair value of each Private Warrant approximates the fair value of a Public Warrant. Accordingly, the Private Warrants are valued upon observable data and have been classified as Level 2 financial instruments. A total of 889,364 Private Warrants to purchase 296,445 shares of common stock were outstanding as of March 31, 2026 and December 31, 2025, at a fair value of approximately $0.310 and $0.116 per warrant, respectively. Refer to Note 8 - Stockholders’ Equity for more information.
The activity for the fair value of the warrant liability during the three months ended March 31, 2026 and 2025 was as follows (in thousands):
Three Months Ended March 31,
20262025
Beginning balance$103 $22 
Change in fair value
173 (13)
Ending balance$276 $9 
Lynrock Lake Warrant
In connection with the Lynrock Lake Term Loan, we issued to Lynrock Lake a warrant to purchase 20,333,623 shares of common stock at an exercise price of $1.20 per share (the “Lynrock Lake Warrant”). Upon the closing of the October 2025 Private Placement, the number of shares which may be purchased upon exercise of the Lynrock Lake Warrant and the per share exercise price were adjusted to 24,396,416 and $1.0002, respectively. The Lynrock Lake Warrant is exercisable until February 26, 2035. Lynrock Lake may cashless exercise the Lynrock Lake Warrant. The Lynrock Lake Warrant is also subject to anti-dilution adjustments to the exercise price and the number of shares which may be purchased upon exercise of the Lynrock Lake Warrant in the event that we issue shares of common stock (or derivative securities) at a price that is either less than the $1.0002 exercise price or the fair market value of a share of common stock from the immediately prior trading day. The fair value of the Lynrock Warrant at issuance amounted to $16.5 million. On June 11, 2025, the Lynrock Lake Warrant was amended to update the provisions that would trigger cash settlement such that, when such events occur, the holders of the warrants receive the same form of consideration as the underlying stockholders. As equity classification is permitted for an instrument that requires net-cash settlement if the holders of the contract’s underlying
shares receive the same form of consideration in transactions outside our control, consequently the warrants were revalued and then reclassified to additional paid-in capital on the consolidated balance sheet upon modification. We determined the fair value of the Lynrock Lake Warrant using the Black-Scholes pricing model through the modification. Refer to Note 5 - Long-Term Debt and Note 8 - Stockholders’ Equity for more information.
Significant assumptions used in the valuation of the fair value of the Lynrock Lake Warrant as of issuance on February 26, 2025 and as of the modification on June 11, 2025 were as follows:
February 26, 2025June 11, 2025
Fair value of common stock$1.20 $1.50 
Exercise price
$1.20 $1.20 
Expected warrant terms (years)
10.09.7
Expected volatility
51.6 %39.2 %
Risk-free rate of return
4.3 %4.4 %
Expected annual dividend yield
— %— %
The activity for the fair value of the Lynrock Lake Warrant during the three months ended March 31, 2025 was as follows (in thousands):
Three Months Ended March 31, 2025
Beginning balance, January 1, 2025
$— 
   Fair value at issuance
16,496 
   Change in fair value
606 
Ending balance, March 31, 2025$17,102 
Yorkville Warrant
On February 26, 2025, we issued to YA II PN, LTD (“Yorkville”) a warrant (the “Yorkville Warrant”) to purchase 5,000,071 shares of common stock at an exercise price of $1.20 per share to fully settle and discharge our obligations under the promissory note issued to Yorkville (the “Yorkville Note”) and extinguish the Yorkville Note as having been fully performed. The Yorkville Warrant was exercisable until February 26, 2030. The fair value of the Yorkville Warrant at issuance amounted to $3.0 million. On June 11, 2025, the Yorkville Warrant was amended to update the provisions that would trigger cash settlement such that, when such events occur, the holders of the warrants receive the same form of consideration as the underlying stockholders. Consequently, upon modification, the warrants were revalued and then reclassified to additional paid-in capital on the consolidated balance sheets. We determined the fair value of the Yorkville Warrant using the Black-Scholes Model through the modification. Refer to Note 5 - Long-Term Debt and Note 8 - Stockholders’ Equity for more information.
Significant assumptions used in the valuation of the fair value of the Yorkville Warrant as of issuance on February 26, 2025 and as of the modification on June 11, 2025 were as follows:
February 26, 2025June 11, 2025
Fair value of common stock
$1.20 $1.50 
Exercise price$1.20 $1.20 
Expected warrant term (years)
5.04.7 
Expected volatility
51.6 %39.2 %
Risk-free rate of return
4.1 %4.0 %
Expected annual dividend yield
— %— %
The activity for the fair value of the Yorkville Warrant during the three months ended March 31, 2025 was as follows (in thousands):
Three Months Ended March 31, 2025
Beginning balance, January 1, 2025
$— 
   Fair value at issuance
2,992
   Change in fair value
112 
Ending balance, March 31, 2025
$3,104 
Earnout Liability
The fair value of the Merger Earnout Consideration Shares was calculated using a Monte Carlo simulation. The simulation used as significant inputs our management’s then-current assessment of placements of breast scanning systems in 2024 and 2025, likely expected values for revenue from 2024 through 2026, probabilities for regulatory approvals including FDA clearances, and probabilities of other triggering events related to the open angle scanner. Refer to Note 2 - Business Combination for more information.
Significant assumptions used in the valuation of the fair value of the earnout liability as of March 31, 2026 and December 31, 2025 were as follows:
March 31, 2026December 31, 2025
Fair value of common stock$6.15 $6.09 
Volatility of revenue18.0 %20.0 %
Discount rate applicable to revenue7.0 %7.0 %
Risk-free rate3.7 %3.5 %
Risk premium3.3 %3.5 %
Cost of debt15.5 %15.5 %
Credit risk spread11.8 %12.0 %
Equity volatility80.0 %95.0 %
The activity for the fair value of the earnout liability for the three months ended March 31, 2026 and 2025 was as follows (in thousands):
Three Months Ended March 31,
20262025
Beginning balance$2,210 $440 
Change in fair value(50)50 
Ending balance$2,160 $490 
Derivative Liability
In March 2024, we recorded a derivative liability related to the Pre-Paid Advance of $10.0 million from Yorkville on March 4, 2024 pursuant to the Standby Equity Purchase Agreement, dated November 15, 2023, between QT Imaging and Yorkville (the “SEPA”). We and Yorkville entered into a Termination Agreement, dated February 26, 2025 (the “Termination Agreement”), pursuant to which the parties acknowledged the termination of the SEPA dated November 15, 2023 and the Yorkville Note, effective as of February 26, 2025. As such, on the effective date of the Termination Agreement, the derivative liability related to the Pre-Paid Advance issued on March 4, 2024 pursuant to the SEPA was deemed to be extinguished. We recorded the change in fair value of the derivative liability within the unaudited condensed
consolidated statements of operations and comprehensive loss as of the date immediately prior to the effective date of the Termination Agreement. Refer to Note 5 - Long-Term Debt for more information.
Significant assumptions used in the valuation of the fair value of the derivative liability as of February 26, 2025 were as follows:
February 26, 2025
Fair value of common stock$1.23 
Term in years1.11
Volatility125.0 %
Risk-free rate4.1 %
Debt discount30.0 %
The activity for the fair value of the derivative liability during the three months ended March 31, 2025 was as follows (in thousands):
Three Months Ended March 31, 2025
Beginning balance$304 
Extinguishment upon Termination Agreement(203)
Change in fair value(101)
Ending balance$— 
The extinguishment of the derivative liability of $0.2 million was recorded in other expense, net within the unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025.