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Note 3 - Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

NOTE 3. FAIR VALUE MEASUREMENTS

 

The following tables present the Company’s financial instruments measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 (in thousands):

 

           

Fair Value Measurements Using

  
           

Quoted

                  
           

Prices in

                 
           

Active

                  
    Balance at    

Markets

    

Significant

          
    March 31,    

for

    

Other

    

Significant

  
    2025 and    

Identical

   

Observable

   

Unobservable

  
    December 31,    

Items

   

Inputs

   

Inputs

  
   

2024

    

(Level 1)

    

(Level 2)

    

(Level 3)

  

Assets

                                

Restricted cash held as a certificate of deposit

   $ 477     $ 477     $ —     $ —  

 

The Company’s cash equivalents and restricted cash held as certificates of deposit are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

 

Black Scholes Valuation Models and Assumptions

 

The Company utilizes a Black Scholes model for various valuations as outlined throughout this report. The following tables summarize the assumptions utilized for valuations impacting results for the periods reported. See also Note 12, “Equity-Based Compensation” for related Black Scholes valuation assumptions.

 

Warrant Liabilities

 

Certain of the Company’s warrants were subject to stockholder approval upon issuance or amendment and prior to exercise. Warrants requiring stockholder approval are recorded as a liability at fair value upon issuance or amendment and continue to be recorded as a liability at fair value at each reporting date until stockholder approval occurs at which time they are transferred to stockholders’ equity at their fair value on the date of approval. Fair value was determined using a Black Scholes model as outlined below. See Note 10, “Common Stock Warrants” for additional information and the definitions of the Company’s warrants.

 

   

December

2023

Warrants

    

December

2023

Warrants

  

Measurement event

  

Reporting Date

    

Reporting Date

  
                 

Date

  

December 31, 2023

    

March 31, 2024

  

Total Value

   $ 0.3 million     $ 0.2 million  

Gain (Loss)

           $ 173 thousand  
                 

Assumptions:

                

Exercise price

   $ 8.75     $ 8.75  

Market price

  

$

 7.14     $ 3.50  

Volatility

     79.3 %     92.3 %

Risk-free rate

     3.85 %     4.21 %

Dividend yield

     0.0 %     0.0 %

Term (years)

     5.5       5.2  

 

   

March

    

March

  
   

2024

    

2024

  
   

Warrant

    

Warrant

  

Measurement event

  

Issuance

    

Reporting Date

  

Date

  

March 25, 2024

    

March 31, 2024

  

Total Value

  

$0.1 million

    

$0.1 million

  

Gain (Loss)

          

$21 thousand

  
                 

Assumptions:

                

Exercise price

   $ 4.90     $ 4.90  

Market price

   $ 4.55     $ 3.50  

Volatility

     86.9 %     86.9 %

Risk-free rate

     4.24 %     4.21 %

Dividend yield

     0.0 %     0.0 %

Term (years)

     5.5       5.5  

 

Preferred Stock Conversion Price Adjustments

 

Terms of the Company’s outstanding Preferred Stock historically included a Ratchet whereby the applicable conversion price could be adjusted (see Note 11, “Stockholders’ Equity”). The applicable Ratchet provisions of the Company’s outstanding Preferred Stock terminated during the quarter ended March 31, 2024. Prior to its termination, when a conversion price for outstanding Preferred Stock was adjusted under the Ratchet, the Company recorded a deemed dividend as a reduction to income available to common stockholders. In accordance with ASC 820, the deemed dividend is measured as the difference between (1) the fair value of the Preferred Stock immediately prior to the conversion price adjustment (but without the Ratchet anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the Ratchet anti-dilution protection feature). Fair value was determined using a Black Scholes model as outlined below.

 

   

Series C Preferred Stock

  

Measurement event

  

Prior to Ratchet

    

After Ratchet

  

Date

  

March 24, 2024

    

March 24, 2024

  

Total value (b)

  

$0.5 million

    

$0.9 million

  

Deemed dividend

          

$380 thousand

  
                 

Assumptions:

                

Exercise price

   $ 8.75     $ 4.90  

Market price

   $ 4.77     $ 4.77  

Volatility

     79.9 %     79.9 %

Risk-free rate

     5.51 %     5.51 %

Dividend yield

     0.0 %     0.0 %

Term (in years)

     0.1       0.1  

 

 

(a)

Adjusted for the dilutive effect of the 2023 Private Placement. See additional discussion above.
 

(b)

Includes value of incremental shares underlying preferred stock and adjusted for probability of occurrence.

 

Bifurcatable Derivatives

 

Upon issuance in March 2024, the Unsecured Convertible Notes contained a lender’s conversion option which represented an embedded call option requiring bifurcation as an embedded derivative liability at fair value (see Note 9, “Convertible Notes” for additional discussion). Fair value was determined using a Black Scholes model as outlined below.

 

   

Unsecured

Convertible

Notes derivative

    

Unsecured

Convertible

Notes derivative

  

Measurement event

  

Issuance

    

Reporting Date

  

Date

  

March 25, 2024

    

March 31, 2024

  

Total value

  

$0.2 million

    

$0.2 million

  

Gain (Loss)

          

$65 thousand

  
                 

Assumptions:

                

Exercise price

   $ 4.90     $ 4.90  

Market price

   $ 4.51     $ 3.50  

Volatility

     86.9 %     86.9 %

Risk-free rate

     4.54 %     4.59 %

Dividend yield

     0.0 %     0.0 %

Term (years)

     2.0       2.0