Fair Value Measurement

6 Months Ended

Jun. 30, 2026

3. Fair Value Measurement

ASC 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

•

Level 1 – Observable inputs such as quoted prices (unadjusted) for identical instruments in active markets.

•

Level 2 – Observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or model-derived valuations whose significant inputs are observable.

•

Level 3 – Unobservable inputs that reflect the reporting entity’s own assumptions.

The following tables set forth the fair value of the Company’s consolidated financial instruments that were measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025. The liabilities categorized as Level 3 within the hierarchy below represent notes payable, derivative instruments and liability-classified instruments for which the Company has elected the fair value option.


	June 30, 2026
				(unaudited)
(in thousands)	Level 1		Level 2			Level 3		Total
Assets
Derivative asset	$	—	$		—	$	—	$	—
Total fair value of assets	$	—	$		—	$	—	$	—

Liabilities
Streeterville Note	$	—	$		—	$	7,726	$	7,726
Series O convertible preferred stock		—			—		1,653		1,653
Commitment share liability		—			—		800		800
Streeterville 2		—			—		356		356
Derivative liability		—			—		196		196
Convertible Notes		—			—		169		169
Uptown		—			—		93		93
Iliad		—			—		—		—
Total fair value of liabilities	$	—	$		—	$	10,993	$	10,993


	December 31, 2025
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Derivative asset	$	—	$	—	$	322	$	322
Total fair value of assets	$	—	$	—	$	322	$	322

Liabilities
Streeterville Note	$	—	$	—	$	8,222	$	8,222
Streeterville 2		—		—		8,580		8,580
Derivative liability		—		—		—		—
Convertible Notes		—		—		2,540		2,540
Uptown		—		—		11,387		11,387
Iliad		—		—		1,172		1,172
Total fair value of liabilities	$	—	$	—	$	31,901	$	31,901

The change in the estimated fair value of Level 3 asset is summarized below:


	Six Months Ended
	June 30, 2026
	(unaudited)
(in thousands)	Derivative asset (liability)
Beginning fair value of Level 3 asset	$	322
Additions		—
Changes in fair value		(518	)
Ending fair value of Level 3 asset (liability)	$	(196	)


	Year Ended
	December 31, 2025
(in thousands)	Derivative asset
Beginning fair value of Level 3 liability	$	—
Additions		322
Changes in fair value		—
Ending fair value of Level 3 asset	$	322

The change in the estimated fair value of Level 3 liabilities is summarized below:


	Six Months Ended
	June 30, 2026
	(unaudited)
(in thousands)	Streeterville Note			Streeterville 2			Series O Convertible Preferred Stock			Commitment share liability		Convertible Notes			Uptown			Iliad
Beginning fair value of Level 3 liability	$	8,222		$	8,580		$	—		$	—	$	2,540		$	11,387		$	1,172
Additions		—			18,223			9,470			800		—			9,981			—
Exchanges		—			(3,700	)		—			—		—			(113	)		—
Converted		—			—			(8,510	)		—		—			—			—
Extinguishments		—			(22,956	)		—			—		—			(21,322	)		(1,172	)
Settlements		—			—			—			—		(2,435	)		—			—
Changes in fair value		(496	)		209			693			—		64			160			—
Ending fair value of Level 3 liability	$	7,726		$	356		$	1,653		$	800	$	169		$	93		$	—


	Year Ended
	December 31, 2025
(in thousands)	Streeterville Note			Streeterville 2			Series O Convertible Preferred Stock		Commitment share liability		Convertible Notes			Uptown			Iliad
Beginning fair value of Level 3 liability	$	11,853		$	8,673		$	—	$	—	$	—		$	9,615		$	5,215
Additions		—			—			—		—		1,833			—			—
Exchanges		—			(3,234	)		—		—		(227	)		(1,210	)		(5,900	)
Converted		—			—			—		—		(926	)		—			—
Extinguishments		—			—			—		—		—			—			(7	)
Settlements		—			—			—		—		(50	)		—			—
Changes in fair value		(3,631	)		3,141			—		—		1,910			2,982			1,864
Ending fair value of Level 3 liability	$	8,222		$	8,580		$	—	$	—	$	2,540		$	11,387		$	1,172

The fair value of the Streeterville Note recognized as a Level 3 liability at the date of issuance and as of June 30, 2026, amounted to $7.8 million and $7.7 million, respectively. The fair value of the remaining notes payable at FVO at the extinguishment date and as of June 30, 2026, amounted to $21.1 million and $618,000. The fair values were based on the weighted average discounted expected future cash flows representing the terms of the notes, discounting them to their present value equivalents. The notes were classified as Level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including the Company’s own credit risk.

The Company determined and performed the valuations with the assistance of an independent valuation service provider. On a quarterly basis, the Company considers the main Level 3 inputs for hybrid instruments used derived as follows:

•

Discount rate which was determined using a comparison of various effective yields on bonds as of the valuation date

•

Market indications for vouchers, which affect the Return Bonus from the sale of Tropical Disease Priority Review Voucher (“TDPRV”)

•

Weighted probability of cash outflows which was estimated based on the entity's knowledge of the business and how the current economic environment is likely to impact the timing of the cash outflows, attributed to the different repayment features of the notes

The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement for the Streeterville Note:


	Range of inputs
	(probability-weighted average)		Relationship of unobservable inputs
Unobservable inputs	June 30, 2026	December 31, 2025	to fair value
Risk adjusted discount rate	9.43% - 29.52% (29.52%)	8.85% - 28.67% (28.67%)	If discount rate is adjusted to a total of an additional 100 basis points (bps), fair value would have decreased by $262,000. If discount rate is adjusted to a total deduction of 100 bps, fair value would have increased by $262,000.
Sales proceeds: Amount of comparable TDPRV	$67.5 million to $350.0 million ($100 million)	$67.5 million to $350.0 million ($110 million)	If expected cash flows by Management considered the highest amount of market indications for vouchers, FV would have decreased by $509,000. If expected cash flows by Management considered the lowest amount of market indications for vouchers, FV would have increased by $2.89 million.
Range of probability for timing of cash flows: Variations of the terms and conditions of the timing of cash flows, including settlement of the note principal, interest, penalties, and acceleration clause	0.00%-85.00%	0.00%-50.00%	If expected cash flows by Management considered the Scenario with the least amount of indicated value, FV would have decreased by $254,000. If expected cash flows by Management considered the Scenario with the most significant amount of indicated value, FV would have increased by $1.77 million.

The fair value of the Convertible Notes recognized as a Level 3 liability at the date of issuance and as of June 30, 2026, amounted to $169,000. The fair value was determined based on the discounted expected future cash flows representing the terms of the notes, including their short-term maturity and conversion features, and was discounted to present value equivalents. The notes were classified as Level 3 within the fair value hierarchy due to the use of unobservable inputs, including the Company’s own credit risk.

The Company determined and performed the valuation with the assistance of an independent valuation service provider. On a quarterly basis, the Company considers the main Level 3 input for these freestanding financial instruments to be the discount rate, which was determined using a comparison of various effective yields on bonds as of the valuation date

The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement for the Convertible Promissory Notes:


	Range of inputs
	(probability-weighted average)		Relationship of unobservable inputs
Unobservable inputs	June 30, 2026	December 31, 2025	to fair value
Risk adjusted discount rate	8.9% - 23.51% (23.51%)	8.9% - 23.51% (23.51%)	If discount rate is adjusted to a total of an additional 100 bps, fair value would have decreased by $2,000. If discount rate is adjusted to a total deduction of 100 bps, fair value would have increased by $2,000.

For the additional notes designated at FVO that are freestanding, the Company considers only the discount rate which was determined using a comparison of various effective yields on bonds as of valuation date.

The following table summarizes the quantitative information about the significant unobservable inputs used in Level 3 fair value measurement for the remaining instruments that are not classified as hybrid instruments:


	Range of inputs
	(probability-weighted average)		Relationship of unobservable inputs
Unobservable inputs	June 30, 2026	December 31, 2025	to fair value
Risk adjusted discount rate	9.5% - 32.30% (32.30%)	8.9% - 26.00% (26.00%)	If discount rate is adjusted to a total of an additional 100 bps, fair value would have decreased by $2.54 million. If discount rate is adjusted to a total deduction of 100 bps, fair value would have increased by $2.88 million.

The fair value of the derivative instrument recognized as a Level 3 asset at the date of issuance and as of June 30, 2026, amounted to $322,000 derivative asset and $196,000 derivative liability, respectively. The fair value was determined using a Black-Derman-Toy ("BDT") binomial lattice model in conjunction with a discounted cash flow methodology. The valuation incorporates a discount rate derived from the risk-free rate, based on the US Treasury Daily Treasury Par Yield Curve, plus a weighted option-adjusted spread ("OAS"). The weighted OAS reflects a blended credit profile of the Company and the financial institution holding the related collateral.

The following table summarizes the quantitative information about the significant unobservable inputs used in the Level 3 fair value measurement for the derivative instrument:


	Range of inputs
	(probability-weighted average)		Relationship of unobservable inputs
Unobservable inputs	June 30, 2026	December 31, 2025	to fair value
Option-adjusted spread	9.4% - 25.10% (25.10%)	5.40% - 7.40% (6.40%)	If discount rate is adjusted to a total of an additional 100 bps, fair value would have increased by $105,000. If discount rate is adjusted to a total deduction of 100 bps, fair value would have decreased by $101,000.

The fair value of the Series O convertible preferred stock recognized as a Level 3 asset at the date of issuance and as of June 30, 2026, amounted to $9.5 million and $1.7 million, respectively. The fair value was estimated using a discounted cash flow technique consisting of a 30.00% risk-adjusted discount rate, which reflects the Company's credit risk profile and expected settlement mechanics. Sensitivities to changes in the unobservable input indicate that an increase in the discount rate would result in a significantly lower fair value liability, whereas a decrease would result in a significantly higher fair value liability.

The fair value of the commitment share liability recognized as a Level 3 asset at the date of issuance and as of June 30, 2026, amounted to $800,000. The fair value reflects the fixed contractual settlement amount given the proximity to the reporting date and the imminent conversion into common stock.

Fair Value Option

The Company elected to apply the FVO accounting to certain freestanding instruments and to the entire class of hybrid instruments, including structured notes, of which there are assessed embedded derivatives that would be eligible for bifurcation, to align the measurement attributes of those instruments under US GAAP and to simplify the accounting model applied to these financial instruments.

The valuations of these instruments were predominantly driven by the discount rate and the derivative features embedded within the instruments. The Company determined and performed the valuations of the freestanding and hybrid instruments with the assistance of an independent valuation service provider. The valuation methodology utilized is consistent with the income approach for estimating the fair value of the interest-bearing portion of the instruments and the related derivatives. Cash flows of the financial instruments in their entirety, including the embedded derivatives, are discounted at an appropriate rate for the applicable duration of the instrument. Interests on the interest-bearing portion of the instruments held to maturity and mark-to-market adjustments are aggregated in the changes in fair value of freestanding and hybrid financial instruments designated at FVO in the condensed consolidated statements of operations. As of June 30, 2026 and December 31, 2025, the Company did not note any fair value movement on FVO liabilities attributable to any instrument-specific credit risk, which should be recorded in other comprehensive income (loss).

The following tables summarize the fair value and outstanding balance for items the Company accounts for under FVO:


	Fair value		Unpaid Principal Balance		Accrued Interest		Fair Value Over (Under) Outstanding Balance
(in thousands)	(unaudited)
At June 30, 2026
Streeterville Note	$	7,726	$	6,570	$	—	$	1,156
Streeterville 2		356		364		—		(8	)
Convertible Notes		169		152		17		—
Uptown		93		96		1		(4	)
Iliad	$	—	$	—	$	—	$	—


(in thousands)	Fair value		Unpaid Principal Balance		Accrued Interest		Fair Value Over (Under) Outstanding Balance
At December 31, 2025
Streeterville Note	$	8,222	$	6,000	$	1,036	$	1,186
Streeterville 2		8,580		6,953		2,649		(1,022	)
Convertible Notes		2,540		2,572		41		(73	)
Uptown		11,387		13,563		5,988		(8,164	)
Iliad	$	1,172	$	—	$	1,183	$	(11	)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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+ Details