Note 3 - Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2026

Notes to Financial Statements

Financial Instruments Disclosure [Text Block]

3.	FAIR VALUE OF FINANCIAL INSTRUMENTS

The following tables present information about the Company’s financial liabilities that are measured at fair value on a recurring basis and the fair value hierarchy of the valuation (in thousands):

		*June 30, 2026*
						*Quoted Prices*				*Significant*				*Significant*
						*in Active Markets*				*Observable*				*Unobservable*
						*for Identical Assets*				*Inputs*				*Inputs*
Category Class		*Total*				*(Level 1)*				*(Level 2)*				*(Level 3)*
Senior Secured Note (unpaid principal of $1,367)		$	567			$	-			$	-			$	567
Warrant Liability			1,079				-				-				1,079
Total		$	1,646			$	-			$	-			$	1,646

		*December 31, 2025*
						*Quoted Prices*				*Significant*				*Significant*
						*in Active Markets*				*Observable*				*Unobservable*
						*for Identical Assets*				*Inputs*				*Inputs*
Category Class		*Total*				*(Level 1)*				*(Level 2)*				*(Level 3)*
Senior Secured Note (unpaid principal of $15,000)		$	5,448			$	-			$	-			$	5,448
Warrant Liability			7,842				-				-				7,842
Total		$	13,290			$	-			$	-			$	13,290

The fair value of the Senior Secured Note at issuance and as of June 30, 2026, has been determined using a discounted cash flow model. The fair value of the Warrant (as defined below in Footnote 8) liabilities at issuance and as of June 30, 2026, was measured using a Monte Carlo simulation model.

3.	FAIR VALUE OF FINANCIAL INSTRUMENTS (cont.)

The significant unobservable inputs that are included in the valuation model of the Senior Secured Note and Warrants liability at issuance, at the date of the Warrant Exchange, and as of June 30, 2026, were as follows:

		Input Range
		Senior Secured Note				Warrant Liability
Significant Unobservable Inputs:
Discount rate			25%-26.5%				-
Term to expiration (in years)			2.49-3				4.85-5
Calibration discount			61.5%				-
No exercise window (in years)			-				0.19-0.21
Volatility			-				82.5%95.5%
Risk-free rate			-				3.65%4.14%

The following table provides a rollforward of the aggregate fair values of the Senior Secured Note and Warrant liability for the six months ended June 30, 2026 (in thousands):

		*Senior Secured Note*				*Warrant Liability*
Balance as of December 31, 2025		$	5,448			$	7,842
Change in fair value			128				(5,869	)
Cash payments on Notes Payable			(9,144	)			-
Loss on settlement of debt			8,861
Extinguishment of liability due to Warrant Exchange			-				(894	)
Settlement of Notes Payable via common stock issuance			(4,726	)			-
Balance as of June 30, 2026		$	567			$	1,079

The decrease in the fair value of the Senior Secured Note and Warrant liability during the six months ended June 30, 2026, was primarily driven by changes in valuation assumptions, including the Company’s stock price and volatility.

The following table provides a rollforward of the aggregate fair values of the Senior Secured Note and Warrant liability for the three months ended June 30, 2026 (in thousands):

		*Senior Secured Note*				*Warrant Liability*
Balance as of March 31, 2026		$	2,157			$	4,699
Change in fair value			(17	)			(2,726	)
Cash payments on Notes Payable			(1,765	)			-
Loss on settlement of debt			2,841
Extinguishment of liability due to Warrant Exchange			-				(894	)
Settlement of Notes Payable via common stock issuance			(2,649	)			-
Balance as of June 30, 2026		$	567			$	1,079

During the six months ended June 30, 2026, the Company made $9.1 million cash payments on the Senior Secured Note. Due to a $0.1 million early settlement discount, the outstanding principal was reduced by $9.0 million. Additionally, $3.7 million of the Senior Secured Note was settled through the issuance of 201,119 shares of common stock and $1.0 million cashless settlement, further decreasing the carrying amount of the Senior Secured Note liability. The fair value of the common shares issued was approximately $4.0 million, resulting in a $0.3 million difference, which was recognized as a loss on the settlement of debt.

These transactions are reflected in the overall change in fair value presented above. The warrant liability is remeasured at fair value at each reporting date, with changes in fair value recognized in the condensed consolidated statements of operations and comprehensive loss.

The Company has certain non-financial assets, primarily intangible assets, and goodwill, which are measured at fair value on a nonrecurring basis and are adjusted to fair value only to the extent that an impairment charge is recognized. The Company estimates the fair value of these assets using primarily unobservable inputs; therefore, these are considered Level 3 fair value measurements.