The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrants may require—outside the Company’s control—settlement through transferring assets, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and at the time of any modification while the warrants are outstanding.

Warrants classified as equity

During December 2021 and January 2022, 188,715 pre-funded common stock warrants were issued to the Company’s placement agent in connection with the Company’s Series A Convertible Preferred Stock financing and accounted for as equity as part of the placement agent’s services. The warrants had a term of seven and one-half years from the original issuance date and an exercise price of $0.03 per share. As of June 30, 2026 and December 31, 2025 there were 188,715 warrants outstanding with a weighted average exercise price of $0.03, a weighted average remaining contractual term of 3 and 3.5 years, respectively and a weighted average grant date fair value of $0.90. There was no change in the number of warrants classified as equity during the quarter ended June 30, 2026. Immediately prior to the closing of the IPO, these warrants were cashlessly exercised for an aggregate of 188,279 shares of the Company’s common stock. 

Warrants classified as liabilities

The Company issued 471,805 warrants to purchase common stock with an exercise price of $5.70 in connection with its Series A Convertible Preferred Stock offering in December 2021 and January 2022. The warrants were issued to purchasers of the Company’s Series A Convertible Preferred Stock and had a five year term from the original issuance date. The warrants have been recorded as liability-classified instruments at estimated fair value. The Company adjusts the liability for changes in fair value until the earlier of the exercise or expiration of the warrants. Any change in fair value of the warrant liability is recognized in the statement of operations under the change in fair value of warrant liability.

The estimated fair value of the warrants on the date of issuance was determined using Level 3 inputs on December 21, 2021 and January 28, 2022 the dates of issuance. Inherent in a Black-Scholes-Merton (“BSM”) model are assumptions related to expected share-price volatility, expected term, and risk-free interest rate. The Company estimates the volatility of its common stock based on management’s understanding of the volatility associated with instruments of other similar entities. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the warrants. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. The assumptions used in calculating the estimated fair values at the end of the reporting period represent the Company’s best estimate and include the annualized volatility percentage.

However, inherent uncertainties are involved. If factors or assumptions change, the estimated fair values could be materially different.

As of June 30, 2026 and December 31, 2025, there were 471,805 warrants outstanding with a weighted average exercise price of $5.70, a weighted average remaining contractual term of six months and one year, respectively, and a weighted average grant date fair value of $0.33. There was no change in the number of warrants classified as liability during the quarter ended June 30, 2026. Immediately prior to the closing of the IPO, these warrants were cashlessly exercised for an aggregate of 264,904 shares of the Company’s common stock.