Note 6 Warrants and Derivatives

Warrants and derivatives consist of freestanding financial instruments and embedded derivatives requiring bifurcation issued in connection with the Company’s debt and equity financing transactions. The Company does not have any derivatives designated as hedging instruments.

The Company evaluates whether each warrant or derivative represents a liability-classified financial instrument within the scope of ASC 480, Distinguishing Liabilities from Equity, or either a liability-classified or equity-classified financial instrument within the scope of ASC 815, Derivatives and Hedging.

Warrants and derivatives classified as liabilities are recognized at fair value in the condensed consolidated balance sheets and are remeasured at fair value as of each reporting period with changes in fair value recorded in the condensed consolidated statements of operations and comprehensive loss. Warrants and derivatives classified as equity are recognized at fair value, or relative fair value if issued with other financial instruments, in additional paid-in capital in the condensed consolidated balance sheets and are not subsequently remeasured.

Liability-classified Warrants and Derivatives

During the three months ended March 31, 2024, the Company received notice from the holders of the FP Combination Warrants of their intent to exercise their right to redeem the FP Combination Warrants for $25 million in cash on March 25, 2025. Accordingly, the Company reclassified the fair value of the FP Combination Warrants as of March 31, 2024 from warrant and derivative liabilities to accrued expenses and other current liabilities on the condensed consolidated balance sheets.

Equity-classified Warrants and Derivatives

There were no significant changes to the Company’s equity-classified warrants and derivatives during the three months ended March 31, 2024 and 2023.