Fair Value Measurements

3. Fair Value Measurements

The Company had no financial assets or liabilities that required fair value measurement as of December 31, 2025 and 2024. During the year ended December 31, 2024, the Company had Level 3 financial liabilities that were measured at fair value on a recurring basis, which included 2022 Convertible Notes and 2024 Convertible Notes (together the “Convertible Notes’).

Convertible Notes

The Company elected the fair value option to account for its Convertible Notes. The fair value of the Convertible Notes was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. At each reporting period, and upon conversion of the Convertible Notes in 2024, the Company recorded an adjustment to mark-to-market the outstanding Convertible Notes to their fair value, with the change in fair value being presented within other income and expense in the consolidated statements of operations.

The Company determined the fair value of the Convertible Notes based on the proceeds received for the Convertible Notes; the terms of the Convertible Notes, including the rate at which the notes convert into equity securities; the probability and timing of conversion scenarios and; the fair value of the underlying equity shares. The Company estimated the probability and timing of the qualified equity financing based on management’s assumptions and knowledge of specified events at issuance and as of each reporting date.

The following table provides a roll-forward of the aggregate fair value of the Company’s Convertible Notes for which fair value was determined using Level 3 inputs (in thousands):

	2022 Convertible Notes			2024 Convertible Notes
Fair value at December 31, 2023	$	10,886		$	—
Issuance of convertible notes		—			1,150
Change in fair value		1,484			8
Conversion of Notes upon issuance of Series A-2 Preferred Stock and Series SA-2 Preferred Stock		(12,370	)		(1,158	)
Fair value at December 31, 2024	$	—		$	—

The Company recorded an expense of $1.5 million for changes in the fair value of the Convertible Notes in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2024. As of December 31, 2025 and 2024 the Company did not have any outstanding Convertible Notes.

- 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