v3.25.4
Note 4 - Fair Value Measurement and Fair Value of Financial Instruments
 3 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

4.   Fair Value Measurement and Fair Value of Financial Instruments

 

The Company’s financial instruments consist principally of accounts receivable, accounts payable, warrant liabilities, and long-term debt arrangements. The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., exit price) in an orderly transaction between market participants at the measurement date. Additionally, under U.S. GAAP, companies are required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e., inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

 

Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

 

Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

 

The carrying value of the Company’s accounts receivable and accounts payable approximates fair value due to their short-term nature. As of December 31, 2025 and September 30, 2025, the aggregate fair values of long-term debts were $0.2 million and $0.3 million, respectively, with an aggregate carrying value of $0.2 million and $0.3 million, respectively. The fair value is based on interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. If measured at fair value in the financial statements, the debt would be classified as Level 2 in the fair value hierarchy.

 

The Company’s warrant liabilities are measured at fair value at each reporting period with changes in fair value recognized in earnings during the period. The fair value of the Company’s warrant liabilities are valued utilizing Level 3 inputs. Warrant liabilities are valued using a Monte Carlo option-pricing model, which takes into consideration the volatilities of comparable public companies, due to the relatively low trading volume of the Company’s common stock. The Monte Carlo option-pricing model uses certain assumptions, including expected life and annual volatility. The range and weighted average volatilities of comparable public companies utilized was 24.4% - 91.3% and 49.1%, respectively, as of December 31, 2025, and 25.1% - 78.4% and 47.9%, respectively, as of September 30, 2025. The volatility utilized in the Monte Carlo option-pricing model was determined by weighing 60% to the Company-specific volatility and 40% on comparable public companies. The significant inputs and assumptions utilized were as follows:

 

  

As of December 31, 2025

  

As of September 30, 2025

 
  

Series D Preferred

  

Montage Capital

  

Series D Preferred

 

Volatility

  68.7%  51.0%  72.1%

Risk-free rate

  3.5%  4.8%  3.7%

Stock price

 $0.83  $1.32  $1.32 

   

The Company recognized a gain of $90 thousand and a loss of $(114) thousand related to the change in fair value of warrant liabilities for the three months ended December 31, 2025 and 2024, respectively. The changes in fair value of warrant liabilities were due to changes in inputs to the Monte Carlo option-pricing model, primarily a change in the stock price. 

 

Assets and Liabilities of the Company measured at fair value on a recurring basis as of December 31, 2025 and September 30, 2025, are as follows:

 

  

As of December 31, 2025

     
  

Level 1

  

Level 2

  

Level 3

  

Total

 
                 

Liabilities:

                

Warrant liabilities:

                

Series D

 $-  $-  $12  $12 

 

  

As of September 30, 2025

     
  

Level 1

  

Level 2

  

Level 3

  

Total

 
                 

Liabilities:

                

Warrant liabilities:

                

Montage

 $-  $-  $2  $2 

Series D

  -   -   100   100 

Total warrant liabilities

 $-  $-  $102  $102 

 

The following table provides a roll forward of the fair value, as determined by Level 3 inputs, as follows:

 

  

Warrant Liabilities

 

Balance at beginning of period, September 30, 2025

 $102 

Additions

  - 

Payments, exercises or expirations

  - 

Adjustment to fair value

  (90)

Balance at end of period, December 31, 2025

 $12