FAIR VALUE MEASUREMENTS |
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| FAIR VALUE MEASUREMENTS | 5. FAIR VALUE MEASUREMENTS Recurring Fair Value Measurements The following tables set forth by level, within the fair value hierarchy, the Company’s assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025. In accordance with U.S. GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts of certain financial instruments, including cash, accounts payable, and accrued liabilities approximate fair value due to their short maturities. Consequently, such financial instruments are not included in the following tables.
The fair value of the Convertible Notes is considered Level 3 as the Company considers unobservable inputs related to the probability of the occurrence of certain contingent conversion and redemption features in its determination of fair value, and unobservable inputs related to potential changes in the Company’s future stock prices based on a binomial lattice pricing model. Changes in those unobservable inputs could significantly impact the estimated fair value of the Convertible Notes. The estimated fair value of the Convertible Notes as of June 30, 2026 and December 31, 2025, were computed using the following assumptions:
The Company did not make any transfers into or out of Level 3 of the fair value hierarchy during the three and six months ended June 30, 2026 and 2025. As of June 30, 2026, the remaining principal balance for the Series A-1 Convertible Notes and Series B-1 Convertible Notes were approximately $1.4 million and $0.4 million, respectively. However, subsequent to June 30, 2026, the Company voluntarily redeemed the entire outstanding Convertible Notes for approximately $2.4 million in cash. The net carrying amounts of the liability for the three and six months ended June 30, 2026, are summarized as follows:
Losses and gains on Convertible Notes related to conversions and changes in fair value, respectively, were recognized as “Non-Operating Income (Expenses)” within the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2026, as the losses were unrelated to instrument specific credit risk. During the three and six months ended June 30, 2026, the Company issued approximately 2.7 million and 5.4 million shares of the Company’s Common Stock to settle approximately $1.2 million and $2.9 million of the net carrying amount, respectively related to the Convertible Notes. |
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