v3.26.1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurements
3.
Fair value measurements

The Company had no financial assets or liabilities measured at fair value on a recurring basis at June 30, 2026.

The following table presents the Company’s financial liabilities measured at fair value on a recurring basis for the period indicated (in thousands):

 

December 31, 2025

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative liability

 

$

—

 

 

$

—

 

 

$

32,413

 

 

$

32,413

 

Convertible preferred stock warrant liability

 

 

—

 

 

 

—

 

 

 

1,884

 

 

 

1,884

 

 

$

—

 

 

$

—

 

 

$

34,297

 

 

$

34,297

 

Derivative Liability

The Convertible Notes contained a conversion feature that met the definition of an embedded derivative that required bifurcation and measurement at fair value (Note 8, Convertible Notes). The Company estimated the fair value of the embedded derivative using a “with-and-without” model. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with the embedded derivative compared to the instrument without the embedded derivative was the fair value of the derivative liability on issuance. The estimated probability and timing of underlying events triggering the conversion features contained within the Convertible Notes are inputs used to determine the estimated fair value of the entire instrument with the embedded derivative. The fair values are subjective and are affected by certain significant inputs. Changes in the estimated fair value were recognized in the Company's statements of operations and comprehensive loss. Upon conversion of the Convertible Notes in connection with Company’s IPO in February 2026, the derivative liability was remeasured to fair value, and the carrying values of the Convertible Notes and the derivative liability were reclassified to additional paid-in capital.

The Company used the following assumptions to determine the fair value of the derivative liability for the period indicated:

 

 

December 31,

 

2025

Risk-free interest rate

 

3.58%

Expected term (in years)

 

0.10

Volatility

 

62.90%

Dividend yield

 

—%

 

The following table provides a summary of the change in the estimated fair value of the Company’s derivative liability (in thousands):

 

Fair value as of December 31, 2025

 

$

32,413

 

Change in fair value

 

 

(340

)

Reclassification to additional paid-in capital upon conversion

 

 

(32,073

)

Fair value as of June 30, 2026

 

$

—

 

 

Fair value as of December 31, 2024

 

$

23,847

 

Change in fair value

 

 

17,860

 

Fair value as of June 30, 2025

 

$

41,707

 

 

Convertible Preferred Stock Warrant Liability

The Company estimated the fair values of its convertible preferred stock warrant liability using a hybrid valuation approach. The hybrid approach assigns a probability weighting to both a merger and acquisition (“M&A”) scenario and an initial public offering scenario. For the M&A scenario, the Company utilized the Income Approach and Guideline Public Company (“GPC”) to determine the estimated fair value of equity, which was then allocated to the various classes of equity using approach and the Option Pricing Method (“OPM”). Under the OPM, the shares are valued by creating a series of call options with exercise prices based on the liquidation preferences and conversion terms of each equity class. The estimated fair values of the common stock, preferred stock and preferred stock warrants are then inferred by analyzing these options. The OPM assumptions are based on the individual characteristics of the warrants on the valuation date, and assumptions related to fair value of the underlying stock, risk-free rate, expected volatility, dividends and an expected term based on the estimated time to a liquidity event.

For the initial public offering scenario, the Company estimated the exit value upon an IPO and then performed a waterfall analysis to systemically allocate the equity value across share classes accordingly to their fully diluted ownership percentages. This method estimates the future value of each share class under the initial public offering scenario, adjusts for option and warrant proceeds and discounts the resulting value to present terms using an appropriate discount rate.

In determining the fair value of the convertible preferred stock warrant liability, the following assumptions were used:

 

 

 

December 31,

 

 

2025

 

 

OPM

 

Waterfall

Risk-free interest rate

 

3.58%

 

N/A

Discount Rate

 

N/A

 

12.50%

Expected term (in years)

 

0.50

 

0.08

Volatility

 

62.90%

 

N/A

Dividend yield

 

—%

 

N/A

 

 

The following table provides a summary of the change in the estimated fair value of the Company’s convertible preferred stock warrant liability (in thousands):

 

Fair value as of December 31, 2025

 

$

1,884

 

Change in fair value

 

 

(13

)

Reclassification to additional paid-in capital upon net exercise

 

 

(1,871

)

Fair value as of June 30, 2026

 

$

—

 

 

Fair value as of December 31, 2024

 

$

1,396

 

Change in fair value

 

 

928

 

Fair value as of June 30, 2025

 

$

2,324

 

 

In February 2026, following the consummation of the IPO, all then-outstanding convertible preferred stock warrants issued in connection with a credit facility were net exercised, resulting in the issuance of 103,896 shares of common stock, and the related warrant liability was remeasured to fair value as of the IPO date and reclassified to stockholders’ equity (deficit) (see Note 7, Nonconvertible Debt and Warrants).