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rates, market multiples, the selection of comparable companies, and the probability of possible future events. 
Changes  in  any  or  all  of  these  estimates  and  assumptions  or  the  relationships  between  those  assumptions 
impact  our  valuations  as  of  each  valuation  date  and  may  have  a  material  impact  on  the  valuation  of  our 
common stock.

Following this offering, it will not be necessary to determine the fair value of our common stock, as the shares of 
our common stock will be traded in the public market.

Fair Value of Convertible Notes, Derivative Liabilities, and SAFEs

We  elected  to  account  for  our  convertible  notes  at  fair  value  pursuant  to  Accounting  Standards  Codification 
(“ASC”) Topic 825, Financial Instruments. The convertible notes are recognized at their estimated fair value on 
our  consolidated  balance  sheet,  and  changes  in  fair  value  are  recorded  in  change  in  fair  value  of  convertible 
notes,  derivative  liabilities,  and  SAFEs  in  our  consolidated  statement  of  operations.  We  elected  the  fair  value 
option to eliminate the accounting complexity that would otherwise result from separately accounting for the 
liability and equity components of the convertible notes under the traditional bifurcation model.

In connection with the 2023 and 2024 note purchase agreements with both Amazon and Google, we recognized 
derivative  liabilities  representing  obligations  to  issue  future  convertible  notes  pursuant  to  the  terms  of  those 
agreements. The derivative liabilities were measured at estimated fair value, with changes in fair value recorded 
in  change  in  fair  value  of  convertible  notes,  derivative  liabilities,  and  SAFEs  in  the  consolidated  statement  of 
operations.

The estimated fair value of the convertible promissory notes is determined using a hybrid approach comprising 
a  CCA  and  a  CSE  method.  The  analysis  estimates  the  fair  value  of  the  convertible  promissory  notes  using  a 
scenario-based  analysis  that  considers  the  probability-weighted  present  value  of  the  instruments  across  the 
range  of  possible  outcomes  available  to  the  note  holders,  including  conversion  into  redeemable  convertible 
preferred stock, Class N common stock, cash repayment at maturity, and cash settlement at a premium upon a 
change  of  control.  The  scenarios  included  consider  the  probability-weighted  value  of  the  instruments  in  the 
CCA and CSE framework.

The  application  of  this  methodology  involves  the  use  of  complex  and  subjective  estimates,  judgments,  and 
assumptions,  including  the  probability  and  timing  of  each  settlement  scenario  such  as  a  qualified  equity 
financing,  initial  public  offering,  direct  listing,  or  change  of  control;  the  estimated  fair  value  of  our  equity 
securities into which the notes may convert; the applicable conversion prices, which vary by note series and are 
contingent on factors such as elapsed time since issuance and contractual caps and percentage discounts; and 
the ownership thresholds and rollover provisions that determine the extent to which principal balances convert 
into equity versus being reissued as rollover notes. In particular, the ownership cap and rollover mechanism—
whereby conversion is capped at specified ownership thresholds and any unconverted principal balance is re-
issued  as  a  non-interest  bearing  rollover  note  that  remains  subject  to  fair  value  measurement—requires 
significant judgment in estimating what proportion of each note financing will convert versus roll over, because 
this determination depends on the size and structure of future equity financings that are inherently uncertain. 
Changes  in  any  or  all  of  these  estimates  and  assumptions,  or  the  relationships  between  those  assumptions, 
impact our valuations as of each measurement date and may have a material impact on the amounts recognized 
in our consolidated statement of operations. 

The fair value option election described above also applied to the SAFEs that we issued during the year ended 
December  31,  2023.  The  SAFEs  were  measured  at  estimated  fair  value  using  the  same  scenario-based 
framework, with the monetary settlement amount fixed at inception and the number of equity shares received 
upon  conversion  being  variable;  consistent  with  the  convertible  notes,  changes  in  fair  value  were  recorded  in 
change  in  fair  value  of  convertible  notes,  derivative  liabilities,  and  SAFEs  in  the  consolidated  statement  of 
operations.  All  SAFEs  were  converted  into  redeemable  convertible  preferred  stock  during  the  years  ended 
December  31,  2023  and  2024,  and  no  SAFEs  remained  outstanding  as  of  December  31,  2024  or  2025.  No 
SAFEs  were  outstanding  at  any  point  during  the  six  months  ended  June  30,  2026.  Accordingly,  the  primary 
ongoing  estimation  exposure  under  the  fair  value  option  relates  to  the  convertible  notes  and  rollover  notes 
described above.

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