v3.26.1
Note 5 - Financial Instruments and Fair Value Measurements
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

5.

Financial Instruments and Fair Value Measurements

 

The Company’s financial instruments consist of money market funds. The following tables show the Company’s cash equivalent's carrying value and fair value as of December 31, 2025 and 2024 (in thousands):

 

  

As of December 31, 2025

 
  

Carrying Amount

  

Fair Value

  

Quoted Priced in active markets (Level 1)

  

Significant other observable inputs (Level 2)

  

Significant unobservable inputs (Level 3)

 

Assets

                    

Money market funds

 $12,191  $12,191  $12,191  $—  $— 

Total assets

 $12,191  $12,191  $12,191  $—  $— 
                     

Liabilities

                    

Derivative liability

 $292  $292  $—  $—  $292 

Total liabilities

 $292  $292  $—  $—  $292 

 

  

As of December 31, 2024

 
  

Carrying Amount

  

Fair Value

  

Quoted Priced in active markets (Level 1)

  

Significant other observable inputs (Level 2)

  

Significant unobservable inputs (Level 3)

 

Assets

                    

Money market funds

 $1,819  $1,819  $1,819  $—  $— 

Total assets

 $1,819  $1,819  $1,819  $—  $— 

 

Cash equivalents – Cash equivalents of $12.2 million and $1.8 million as of December 31, 2025 and 2024, respectively, consisted of money market funds. Money market funds are classified as Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

 

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

 

Recurring Fair Value Measurements

 

The Company’s derivative liability embedded in the Financing Agreement is measured at fair value using a probability-weighted discounted cash flow model and is classified as a Level 3 liability of the fair value hierarchy due to the use of significant unobservable inputs. The liability is presented as an embedded derivative liability on the consolidated balance sheets and is subject to remeasurement to fair value at the end of each reporting period, with the change in fair value recognized as a component of other income (expense) in its consolidated statements of operations. The assumptions used in the discounted cash flow model include: (1) management's estimates of the probability and timing of future cash flows and related events; (2) the Company's risk-adjusted discount rate that includes a company-specific risk premium; and (3) the Company's cost of debt.

 

The following table provides a reconciliation for the opening and closing balance of the derivative liability for the year ended December 31, 2025 (in thousands):

 

 

 

Derivative Liability

 

Balance as of January 1, 2025

 $— 

Issuances

  320 

Net change in fair value

  (28)

Balance as of December 31, 2025

 $292 

 

There have been no changes to the valuation methods utilized by the Company during the years ended December 31, 2025 and 2024. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of financial instruments between levels during the years ended December 31, 2025 and 2024.