Note 9 – Derivative Liabilities

Fair Value Assumptions Used in Accounting for Derivative Liabilities

ASC 815 requires the Company to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense.

In January 2023, in connection with the issuance of a certain Convertible Note (the “Alto Convertible Note”), the Company issued warrants (the “Alto Warrants”) to purchase 510 shares of common stock, with an exercise price of $33.80 per share valued at inception at $1.1 million and as of June 30, 2026, at less than $0.1 million. The Company determined that the derivative liabilities from the Alto Warrants issued in relation to the Alto Convertible Note did not qualify for classification as equity instruments due to the existence of certain net cash settlement provisions that are not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future.

In October 2024, in connection with the October 2024 Equity Financing, the Company issued warrants to purchase 11,803 shares of common stock, with an exercise price of $350.00 per share, valued at inception at $0.2 million and as of June 30, 2026, at less than $0.1 million. The Company determined that the derivative liabilities from the warrants issued in relation to the October 2024 Equity Financing did not qualify for classification as equity instruments as they did not meet the requirements to be considered indexed to the Company’s own stock, due to potential variability in the settlement amount upon a fundamental transaction, as defined.

In May 2026, in connection with the PIPE Financing, the Company issued May 2026 PIPE Warrants to purchase 927,185 shares of common stock, with an exercise price of $10.30 per share, valued at inception at approximately $61 thousand and at June 30, 2026, at approximately $35 thousand. The Company determined that the May 2026 PIPE Warrants did not qualify for equity classification as they were not considered indexed to the Company’s own stock due to adjustment features that introduce variables that are not inputs to the fair value of a fixed-for-fixed option on equity shares.

As of June 30, 2026, the Company utilized a Black-Scholes Model to calculate the fair value of the May 2026 PIPE Warrants, the Alto Warrants and the October 2024 Equity Financing Warrants. The key inputs for the Black-Scholes Model as of June 30, 2026, were as follows:

 Schedule of Key Inputs for Valuation Assumptions

The following table summarizes the changes in the derivative liabilities:

 Schedule of Derivative Liabilities