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Note 6 - Fair Value Measurements | 6 Months Ended
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Jun. 30, 2025
Notes to Financial Statements |
Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [Text Block] | Note 6 – Fair Value Measurements We closed on an offering of units consisting of Common Stock, Series A and B warrants in October 2024 (the “October 2024 Offering). In connection with the October 2024 Offering, we sold units comprised of Common Stock, Series A warrants and a Series B warrants (collectively referred to as the “Warrants”) (see Note 8). The Warrants were deemed to be derivative liabilities, at issuance, due to variability in the ultimate settlement of the Warrants caused by various settlement provisions embedded within the Warrants. Liability classified warrants are reported at fair value upon issuance and subsequently at each reporting period. On April 2, 2025, the Company and the majority holder of the Series B warrants, executed an Amendment to the Series B Warrant to Purchase Common Stock and Exchange Agreement (the "Series B Amendment"). The Series B Amendment amended the contractual terms of the Series B warrants by removing Section 3.2 of the original warrant agreement in its entirety (the "Share Combination Event"). Pursuant to the Share Combination Event, if a share split, share dividend, share combination recapitalization or other similar transaction involving common stock occurred after the issuance date of the Series B warrants, the exercise price of the Series B warrants would be adjusted to the lowest volume weighted average price during the five days prior and after such a Share Combination Event if less than the exercise price in effect. The Company reassessed the classification of the Series B warrants after the execution of the Series B Amendment and concluded that the Series B warrants were no longer precluded from being classified within stockholders' equity. On April 2, 2025, we reclassified the fair value of the Series B warrants of $7,766,000 from warrant liability to additional paid-in capital. See Note 8 for further disclosures regarding the Series A and B warrants. The following tables present information about the Company’s derivative liabilities that are measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024 and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
|  | Fair Value Measurements at June 30, 2025 |
|  | Quoted Prices in |  |  | Other |  |  | Significant |  |  |  |  |
|  | Active Markets for |  |  | Observable |  |  | Unobservable |  |  |  |  |
|  | Identical Assets |  |  | Inputs |  |  | Inputs |  |  |  |  |
|  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Derivative liabilities -Series A warrants |  | $ | — |  |  | $ | — |  |  | $ | 128,000 |  |  | $ | 128,000 |
Total |  | $ | — |  |  | $ | — |  |  | $ | 128,000 |  |  | $ | 128,000 |
|  | Fair Value Measurements at December 31, 2024 |
|  | Quoted Prices in |  |  | Other |  |  | Significant |  |  |  |  |
|  | Active Markets for |  |  | Observable |  |  | Unobservable |  |  |  |  |
|  | Identical Assets |  |  | Inputs |  |  | Inputs |  |  |  |  |
|  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |  |  | Total |
Derivative liabilities -Series A and B warrants |  | $ | — |  |  | $ | — |  |  | $ | 16,400,000 |  |  | $ | 16,400,000 |
Total |  | $ | — |  |  | $ | — |  |  | $ | 16,400,000 |  |  | $ | 16,400,000 |
The fair value of the warrants was determined by using a Black-Scholes pricing model and the following assumptions:
|  | June 30, 2025 |  |  | December 31, 2024 |
Exercise price |  | $ | — |  |  | $ | 1.9445 |
Stock price |  | $ | 1.03 |  |  | $ | 3.47 |
Expected term (years) |  |  | 4.25 |  |  |  | 4.75 |
Volatility |  |  | 131.98 | % |  |  | 133.00 | %
Risk-free rate |  |  | 3.74 | % |  |  | 4.28 | %
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Probability of capital raise below exercise price |  |  | 0.00 | % |  |  | 100 | %
As of June 30, 2025 and December 31, 2024, the Company measured the Warrants using significant unobservable inputs that are based on little or no verifiable market data, which is Level 3 in the fair value hierarchy, resulting in a fair value estimate of approximately $0.128 million and $16.4 million, respectively. Inherent in option pricing models are assumptions related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimates the volatility of its Common Stock based on historical volatility. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. As of December 31, 2024, the probability of a capital raise below the Warrants’ current exercise price was a significant unobservable input based on management’s estimate factoring in the Company’s capital needs and the Company’s stock price, which is volatile. As of June 30, 2025, this estimate was no longer relevant as the Series A warrants include an alternate cashless exercise which allows the holder to exercise the warrant for no consideration and receive two shares of common stock. This settlement provision was given a 100% probability in the Black-Scholes computation as it is the most economically beneficial settlement scenario to the holder. During the six months ended June 30, 2025, we recognized a gain on the change in the fair value of the warrant liabilities of $8,506,000 and reclassified the fair value of the Series B warrants to additional paid-in capital. A reconciliation of the warrant liabilities is below:
|  | Amount |
Balance as of December 31, 2024 |  | $ | 16,400,000 |
Amended Series B warrants reclassified to stockholders' equity |  |  | (7,766,000 | )
Change in fair value of warrant liabilities |  |  | (8,506,000 | )
Balance as of June 30, 2025 |  | $ | 128,000 |

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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 820 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/820/tableOfContent + Details
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