Note 13 - Fair Value Measurements and Fair Value of Financial Instruments

The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. These levels are:

Financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, warrant asset, accounts payable, warrant liability, convertible notes, and the loan conversion derivative. Cash and cash equivalents, accounts receivable and accounts payable are stated at their respective carrying amounts, which approximate fair value due to their short-term nature.

The changes in fair value of the warrant liability, convertible notes, and warrant asset are presented within ‘Change in fair value of warrant liability’, ‘Change in fair value of convertible notes’, and ‘Other expense’, respectively, in the condensed consolidated statements of operations.

The fair value of the Level 3 warrant liability was determined using a pricing model with certain significant unobservable market data inputs.

Investment in Publicly Traded Equity Securities

As of December 31, 2025, the Company held a de minimis investment in publicly traded equity securities with a carrying value of less than $0.1 million. Changes in fair value were immaterial for the year ended December 31, 2025.

Investment in Convertible Promissory Note – Valkyrie Sciences Holdings LLC

On October 21, 2025, the Company made a $2.0 million strategic investment in Valkyrie Sciences Holdings LLC (“Valkyrie”) through the purchase of a convertible promissory note with an initial principal amount of $2.0 million (the “Valkyrie Note”). The Valkyrie Note bears interest at 10.0% per annum and matures on December 31, 2026. The note may be converted, at the Company’s option, into equity securities of Valkyrie upon the occurrence of certain qualified financing or other defined transactions and contains customary repayment and default provisions. The Company may provide additional funding of up to $8.0 million under the Valkyrie Note; no additional amounts were funded as of December 31, 2025.

The Company determined that it does not have a controlling financial interest in Valkyrie and therefore does not consolidate the entity.

The Valkyrie Note is accounted for as an available-for-sale debt security under ASC 320. Available-for-sale debt securities are recorded at fair value with unrealized gains and losses recognized in accumulated other comprehensive income (loss), unless such declines are determined to be credit-related.

During the year ended December 31, 2025, the Company evaluated the investment for expected credit losses in accordance with ASC 326. Based on management’s assessment of the issuer’s financial condition, limited operating revenues, reliance on future financing, and the uncertainty surrounding the issuer’s ability to repay the contractual obligations, the Company determined that collection of the contractual cash flows associated with the note was not expected.

Accordingly, the Company recorded a full allowance for expected credit losses of approximately $2.0 million, which reduced the carrying value of the Valkyrie Note to zero as of December 31, 2025. The credit loss expense was recorded within Other (Expense) Income in the consolidated statements of operations.

Because the investment’s carrying value was reduced to zero through the recognition of expected credit losses, the asset had no remaining fair value as of December 31, 2025 and therefore is not presented in the fair value hierarchy table.

Warrant Liability – Fair Value Measurement

The Company’s warrant liability is classified as a Level 3 liability within the fair value hierarchy as the valuation utilizes significant unobservable inputs.

The fair value of the warrants was estimated using a Black-Scholes option pricing model. The model requires the use of significant assumptions, including:

Expected volatility was based on the historical volatility of the Company’s common stock. The risk-free interest rate was based on U.S. Treasury yields commensurate with the expected term of the warrants. The expected term was based on the contractual remaining life of the warrants. The Company assumed a dividend yield of zero, as it does not expect to declare dividends in the foreseeable future.

As of December 31, 2025, the significant assumptions used in the Black-Scholes model were as follows:

Changes in these assumptions could result in a material change in the fair value of the warrant liability.

Fair Value Tables

As of December 31, 2024, the Company did not have any material assets or liabilities measured at fair value on a recurring basis. Accordingly, no fair value hierarchy table has been presented for that date.

As of December 31, 2025, the Company did not have any assets measured at fair value on a recurring basis. The Company’s liabilities measured at fair value consisted of the following at December 31, 2025:

The table below provides a summary of changes in the estimated fair value of the Company’s Level 3 assets and liabilities: