v3.26.1
Note 3 - Fair Value Measurements
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

NOTE 3. FAIR VALUE MEASUREMENTS

 

The following tables present the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2025 and 2024 (in thousands):

 

           

Fair Value Measurements Using

  
           

Quoted

                  
           

Prices in

                 
           

Active

                  
           

Markets

    

Significant

          
           

for

    

Other

    

Significant

  
   

As of

   

Identical

   

Observable

   

Unobservable

  
   

December

   

Items

   

Inputs

   

Inputs

  
   

31, 2025

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Assets

                                

Restricted cash held as a certificate of deposit

   $ 267     $ 267     $ —     $ —  
                                 

Liabilities

                                

Warrant liability

   $ 30,432     $ —     $ 30,432     $ —  

 

           

Fair Value Measurements Using

  
           

Quoted

                  
           

Prices in

                 
           

Active

                  
           

Markets

    

Significant

          
           

for

    

Other

    

Significant

  
   

As of

   

Identical

   

Observable

   

Unobservable

  
   

December

   

Items

   

Inputs

   

Inputs

  
   

31, 2024

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Assets

                                

Restricted cash held as a certificate of deposit

   $ 477     $ 477     $ —     $ —  

 

The Company’s restricted cash held as a deposit is classified within Level 1 of the fair value hierarchy because it is valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

 

The warrant liability is measured at fair value based on the intrinsic value of the warrants, which is determined using the quoted market price of the Company’s common stock at the measurement date. Because the warrants themselves are not actively traded and the valuation relies on observable market inputs other than quoted prices for identical instruments, the liability is classified within Level 2 of the fair value hierarchy.

 

Black Scholes Valuation Models and Assumptions

 

The Company utilizes a Black Scholes model for various valuations as outlined throughout this report. The following tables summarize the assumptions utilized for valuations impacting results for the periods reported.

 

Warrant Liabilities

 

Certain of the Company’s warrants were subject to stockholder approval upon issuance or amendment and prior to exercise. Warrants requiring stockholder approval are recorded as a liability at fair value upon issuance or amendment and continue to be recorded as a liability at fair value at each reporting date until stockholder approval occurs at which time they are transferred to stockholders’ equity at their fair value on the date of approval.

 

For warrants with substantive exercise prices, fair value is determined using a Black-Scholes option pricing model as outlined below. Pre-funded warrants with a nominal exercise price are considered to be substantially intrinsic value instruments, as the exercise price is de minimis relative to the fair value of the underlying common stock. Accordingly, the fair value of such pre-funded warrants is based on the market price of the Company’s common stock less the nominal exercise price. See Note 9, “Common Stock Warrants” for additional information and the definitions of the Company’s warrants.

 

   

December

2023

Warrants

  

Measurement event

  

Stockholder Approval

  
         

Date

  

May 28, 2024

  

Total Value (in millions)

   $ 0.2  

Gain (Loss) (in thousands)

   $ (51 )
         

Assumptions:

        

Exercise price

   $ 43.75  

Market price

   $ 24.70  

Volatility

     83.9 %

Risk-free rate

     4.56 %

Dividend yield

     0.0 %

Term (years)

     5.1  

 

 

   

March

    

March

  
   

2024

    

2024

  
   

Warrant

    

Warrant

  

Measurement event

  

Reporting Date

    

Stockholder Approval

  

Date

  

March 31, 2024

    

May 28, 2024

  

Total Value (in millions)

   $ 0.1     $ 0.1  

Gain (Loss) (in thousands)

   $ 21     $ 28  
                 

Assumptions:

                

Exercise price

   $ 24.50     $ 24.50  

Market price

   $ 18.30     $ 24.70  

Volatility

     86.9 %     83.9 %

Risk-free rate

     4.21 %     4.56 %

Dividend yield

     0.0 %     0.0 %

Term (years)

     5.5       5.3  

 

Warrant Modifications

 

Amendments to warrant terms are recorded as a non-cash gain (or loss) on modification of common stock warrants. The gain or loss represents the decrease or increase in the fair value of the amended warrants when comparing the value immediately before and after amendment using the Black Scholes option pricing model. Fair value was determined using a Black Scholes model as outlined below.

 

   

September 2022, November 2022,

and May 2023 Warrants

  

Measurement event

  

Prior to amendment

    

After amendment

  

Date

  

June 14, 2024

    

June 14, 2024

  

Total Value (in thousands)

  

$66

    

$100

  

Loss (in thousands)

  

not applicable

    

$70

  
                 

Assumptions:

                

Exercise price

  

$

43.75

 - 262.50    

$

12.50

  

Market price

  

$

12.55

    

$

12.55

  

Volatility

    

89.3

%

    

89.3

%

Risk-free rate

    

4.27

-

5.08

%

    

4.27

-

5.08

%

Dividend yield

    

0.0

%

    

0.0

%

Term (years)

    

1.0

-

4.4

      

1.0

-

4.4

%

 

Warrant Down Round Feature Adjustment

 

Terms of the Company’s outstanding 2024 July Warrants included a down round feature adjustment whereby the applicable exercise price was automatically adjusted (see Note 7, “Financing Activities”). When the exercise price was adjusted, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the 2024 July Warrants immediately prior to the conversion price adjustment and (2) the fair value of the 2024 July Warrants immediately after the conversion price adjustment. Fair value was determined using a Black Scholes model, as outlined below.

 

   

Series F-1

  

Measurement event

  

Prior to adjustment

    

After adjustment

  
                 

Date

  

September 27, 2024

    

September 27, 2024

  

Total value (in millions)

   $ 1.7     $ 1.9  

Deemed dividend (in millions)

  

not applicable

     $ 0.2  
                 

Assumptions:

                

Exercise price

   $ 5.50     $ 3.30  

Market price

   $ 3.55     $ 3.55  

Volatility

     97.1 %     97.1 %

Risk-free rate

     3.55 %     3.55 %

Dividend yield

     0.0 %     0.0 %

Term (in years)

     4.84       4.84  

 

   

Series F-2

  

Measurement event

  

Prior to adjustment

    

After adjustment

  
                 

Date

  

September 27, 2024

    

September 27, 2024

  

Total value (in millions)

   $ 0.2     $ 0.6  

Deemed dividend (in millions)

  

not applicable

     $ 0.4  
                 

Assumptions:

                

Exercise price

   $ 5.50     $ 3.30  

Market price

   $ 3.55     $ 3.55  

Volatility

     97.1 %     97.1 %

Risk-free rate

     4.64 %     4.64 %

Dividend yield

     0.0 %     0.0 %

Term (in years)

     0.34       0.34  

 

   

Series F-3

  

Measurement event

  

Prior to adjustment

    

After adjustment

  
                 

Date

  

September 27, 2024

    

September 27, 2024

  

Total value (in millions)

   $ 0.6     $ 1.0  

Deemed dividend (in millions)

  

not applicable

       0.4  
                 

Assumptions:

                

Exercise price

   $ 5.50     $ 3.30  

Market price

   $ 3.55     $ 3.55  

Volatility

     97.1 %     97.1 %

Risk-free rate

     4.10 %     4.10 %

Dividend yield

     0.0 %     0.0 %

Term (in years)

     0.84       0.84  

 

Preferred Stock Conversion Price Adjustments

 

Terms of the Company’s outstanding Series C Preferred Stock historically included a ratchet whereby the applicable conversion price could be adjusted (see Note 10, “Stockholders’ Deficit”). The applicable ratchet provisions of the Company’s outstanding Preferred Stock terminated during the year ended December 31, 2024. Prior to its termination, when a conversion price for outstanding Preferred Stock was adjusted under the ratchet, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the Preferred Stock immediately prior to the conversion price adjustment (but without the ratchet anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the ratchet anti-dilution protection feature). Fair value was determined using a Black Scholes model as outlined below.

 

   

Series C Preferred Stock

  

Measurement event

  

Prior to ratchet

    

After ratchet

  

Date

  

March 24, 2024

    

March 24, 2024

  

Total value (a) (in millions)

   $ 0.5     $ 0.9  

Deemed dividend (in millions)

  

not applicable

     $ 0.4  
                 

Assumptions:

                

Exercise price

   $ 43.75     $ 24.50  

Market price

   $ 23.85     $ 23.85  

Volatility

     79.9 %     79.9 %

Risk-free rate

     5.51 %     5.51 %

Dividend yield

     0.0 %     0.0 %

Term (in years)

     0.1       0.1  

 

 

(a)

Includes value of incremental shares underlying preferred stock and adjusted for probability of occurrence.

 

Derivative liability Issued in Conjunction with Unsecured Convertible Notes

 

Upon issuance in March 2024, the Unsecured Convertible Notes contained a lender’s conversion option which represented an embedded call option requiring bifurcation as an embedded derivative liability at fair value (see Note 8, “Convertible Notes” for additional discussion). Fair value was determined using a Black Scholes model as outlined below.

 

   

Unsecured

Convertible

Notes

derivative

    

Unsecured

Convertible

Notes

derivative

  

Measurement event

  

Issuance

    

Shareholder Approval

  

Date

  

March 25, 2024

    

May 28, 2024

  

Total value (in millions)

   $ 0.2     $ 0.2  

Gain (Loss) (in thousands)

  

not applicable

     $ (82 )
                 

Assumptions:

                

Exercise price

   $ 24.50     $ 24.50  

Market price

   $ 22.55     $ 24.70  

Volatility

     86.9 %     83.9 %

Risk-free rate

     4.54 %     4.94 %

Dividend yield

     0.0 %     0.0 %

Term (years)

     2.0       1.8