8. WARRANT LIABILITY

On February 3, 2025, the Company entered into a Securities Purchase Agreement (the “2025 Purchase Agreement”) with an institutional investor. In exchange for $8.0 million, the Holder agreed to purchase 383,349 shares of common stock (the “closing shares”) and warrants to purchase up to 383,349 shares of common stock at an exercise price of $23.55 per share (the “warrants”). On February 4, 2025, the 2025 Purchase Agreement closed for net proceeds of approximately $7.8 million, inclusive of all fees and expenses related to the transaction. The warrants are exercisable beginning August 4, 2025 and expire on August 4, 2030. There have been no exercises of warrants as of June 30, 2026.

The warrants are accounted for as a liability under ASC 480, Distinguishing Liabilities from Equity. Both the closing shares and the warrants are initially recorded on February 4, 2025 at their fair values of $9.0 million and $6.3 million, respectively. The warrant liability is subsequently remeasured and reported at fair value each reporting period, with the changes in fair value recorded as an unrealized gain or loss and recognized in earnings.

The fair value of warrants is as follows:

 SCHEDULE OF FAIR VALUE OF WARRANTS 

Unrealized gains and losses associated with warrants are as follows:

 SCHEDULE OF UNREALIZED GAINS AND LOSSES ASSOCIATED WITH WARRANTS 

Interest expense of $7.3 million representing the discount on the transaction was recorded on the condensed consolidated financial statements for the six months ended June 30, 2025.

The valuation inputs hierarchy classification for liabilities measured at fair value on a recurring basis are summarized below as of June 30, 2026 and December 31, 2025 (in thousands). See Note 6. Investment Securities, Available-For-Sale and Fair Value Measurements, for discussion of the fair value level hierarchy.

 SCHEDULE OF HIERARCHY WARRANT LIABILITIES FAIR VALUE 

Activity related to the warrant liability during the three and six months ended June 31, 2026 and 2025 is as follows:

SCHEDULE OF ACTIVITY RELATED TO WARRANT LIABILITY

The fair value of the warrants is measured using the Black-Scholes option pricing model as of the measurement dates. The table below lists the inputs and assumptions for the Company’s valuations as of June 30, 2026 and December 31, 2025:

 SCHEDULE OF INPUTS AND ASSUMPTIONS FOR VALUATIONS