v3.25.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements

5. Fair Value Measurements

 

Financial Instruments Measured and Recorded at Fair Value on a Recurring Basis

 

The Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have certain rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with accounting guidance. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

 

  Level 1 - quoted market prices for identical assets or liabilities in active markets.
     
  Level 2 - observable prices that are based on inputs not quoted on active markets but corroborated by market data.
     
  Level 3 - unobservable inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

The Company classifies assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant to their fair value measurement. No financial assets or liabilities (except the derivative liabilities explained above) were measured on a recurring basis as of March 31, 2025, and December 31, 2024. The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2025, and December 31, 2024 (in thousands):

 

   Fair Value Measurements as of March 31, 2025 
Description  Level 1   Level 2   Level 3   Total 
Derivative liability                    
Common stock warrants  $-   $-   $121   $121 

 

   Fair Value Measurements as of December 31, 2024 
Description  Level 1   Level 2   Level 3   Total 
Derivative liability                    
Common stock warrants  $-   $-   $208   $208 

 

 

The Company did not have any transfers of assets and liabilities between Level 1 and Level 2 of the fair value measurement hierarchy during the three months ended March 31, 2025, and 2024. The following table presents a reconciliation of the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2025, and 2024 (in thousands):

 

   Common Stock
Warrants		 
Balance as of December 31, 2023  $(304)
Issuance of derivatives   (3,366)
Exercise of warrants   - 
Change in fair value   2,838 
Other   (13)
Balance as of March 31, 2024  $(845)
      
Balance as of December 31, 2024  $(208)
Change in fair value   87 
Balance as of March 31, 2025  $(121)

 

Common Stock Warrants

 

The Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have registration rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with accounting guidance. As of March 31, 2025, and December 31, 2024, the derivative liability was calculated using the Monte Carlo Simulation valuation.

 

The assumptions used in estimating the common stock warrant liability using the Monte Carlo simulation valuation model as of March 31, 2025, and December 31, 2024 were as follows:

 

    March 31, 2025     December 31, 2024  
Weighted-average risk-free interest rate   3.85-3.99 %     4.12-4.35% 
Weighted-average expected life (in years)   0.34-3.84     0.10-4.09  
Expected dividend yield   -%   -%
Weighted-average expected volatility   140.00-200.00 %     140.00-210.00 % 

 

Other Financial Instruments

 

The Company’s recorded values of cash and cash equivalents, account and other receivables, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded value of notes payable approximates the fair value as the interest rate approximates market interest rates.