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Fair Value
 12 Months Ended
Dec. 31, 2024
Fair Value Disclosures [Abstract]  
Fair Value

3. Fair Value

 

During the period ended December 31, 2024, there were no transfers between Level 1 and Level 2, nor into or out of Level 3. The following table presents as of December 31, 2024 the Company’s assets and liabilities subject to measurement at fair value on a recurring basis (in thousands):

 

   Fair Value Measurements as of December 31, 2024 
   Level 1   Level 2   Level 3   Total 
Assets:                    
Cash equivalents  $192   $-   $-   $192 
Total Assets  $192   $-   $-   $192 
                     
Liabilities:                    
Convertible notes payable at fair value  $-   $-   $5,856   $5,856 
Liability Classified Warrants   -    0    138    138 
Total Liabilities  $-   $-   $5,994   $5,994 

 

The following table presents as of December 31, 2023 the Company’s liabilities subject to measurement at fair value on a recurring basis (in thousands):

 

   Fair Value Measurements as of December 31, 2023 
   Level 1   Level 2   Level 3   Total 
Liabilities:                    
Liability Classified Warrants  $-   $142   $-   $142 
Total Liabilities  $-   $142   $-   $142 

 

Cash equivalents consist of highly liquid money market funds with maturities of three months or less and are reflected in the Consolidated Balance Sheets at carrying value, which approximates fair value due to their short-term nature.

 

The following table presents additional information about the Convertible Notes Payable subject to measurement at fair value on a recurring basis and warrant liabilities, for which the Company used significant unobservable inputs (Level 3) (in thousands):

  

Convertible Notes

Payable

   Liability Classified Warrants 
Balance as of December 31, 2023  $-   $- 
Fair value at Issuance   7,899    229 
Conversion of convertible note   (92)   - 
Change in fair value   (1,951)   (91)
Balance as of December 31, 2024  $5,856   $138 

 

Convertible Notes Payable

 

As discussed in Note 7, during on October 31, 2024, the Company and Nirland agreed to amend the August 2024 Nirland Note, whereby the August 2024 Nirland Note was amended to provide for the conversion of the August 2024 Nirland Note into shares of common stock, at Nirland’s discretion, in a multiple of any unpaid amounts, if not otherwise previously paid, pursuant to the conversion rate contained therein. The August 2024 Nirland Note was then amended for a second time on November 22, 2024.Additionally, as discussed in Note 7, during November 2024, the Company issued to A.G.P. a convertible promissory note (the “A.G.P. Convertible Note”) in the principal amount of $5.7 million to evidence the A.G.P.’s currently owed deferred commission payable. The Company elected to account for the August 2024 Nirland Note and A.G.P. Convertible Note (collectively the “Convertible Notes Payable”) at fair value. The fair value of the Convertible Notes Payable is estimated each period using a binomial lattice model. Significant estimates in the binomial lattice model include the Company’s stock price, volatility, risk-free rate, corporate bond yield, credit spread, probability of default, and recovery upon default.

 

The fair value of the August 2024 Nirland Note and A.G.P. Convertible Note as of December 31, 2024 were estimated using a binomial lattice model.

 

The following table outlines the range of significant unobservable inputs used in calculating the fair value of the August 2024 Nirland Note as of the dates noted below:

   

October 31,

2024

    

November 22,

2024

   

December 31,

2024

 
Stock Price   $ 9.10     $ 10.40    $6.90 
Term (years)    

0.8

       0.7     0.6 
Corporate bond yield     9.1 %     8.7 %   11.4%
Credit Spread     15.9 %     15.9 %   15.9%
Probability of default   40%   40%   40%
Recovery upon default   20%   20%   20%
Volatility     103.2 %     96.5 %   123.7%

 

The following table outlines the range of significant unobservable inputs used in calculating the fair value of the A.G.P. Convertible Note as of the dates noted below:

   

November 25,

2024

   

December 31,

2024

 
Stock Price   $ 9.10    $6.90 
Term (years)     1     0.9 
Corporate bond yield     8.8 %   9.0%
Credit Spread     26.2 %   26.2%
Probability of Default     40 %   40%
Recovery upon default     0 %   0%
Volatility     108.7 %   101.6%

 

 

Liability Classified Warrants

 

The PIPE Warrants, A.G.P. Warrants, and A.G.P. 2024 Warrants, as defined in Note 18, are accounted for as liabilities in accordance with ASC 815-40 and are presented within Warrant liabilities in the consolidated balance sheets. Warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within other income (expense), net in the consolidated statements of operations and comprehensive income (loss).

 

The measurement of the PIPE Warrants and the measurement of the A.G.P warrants are classified as Level 2 fair value measurements due to the use of an observable market quote for the Company’s publicly traded warrants, which are considered to be a similar asset in an active market.

 

The PIPE Warrant and A.G.P. Warrant liabilities are calculated by multiplying the quoted market price of the Company’s publicly traded warrants by the number of liability classified warrants.

 

On December 11, 2024, the Company amended the exercise price of the PIPE Warrants to be $8.83, at which time all PIPE Warrants were exercised. As the exercise price was amended on the same date that the PIPE Warrants were exercised, the Company remeasured the warrant liability immediately before exercise based on the difference between the closing stock price of the Company’s common stock on December 11, 2024, and the amendment exercise price of the PIPE Warrants, resulting in a gain on the change in fair value of warrant liability of approximately $12 thousand. Refer to Note 18 for additional information. Upon exercise of the PIPE Warrants, less than $1 thousand of Level 2 liability classified warrants remain on the consolidated balance sheet as of December 31, 2024.

 

The measurement of the A.G.P. 2024 Warrants is classified as Level 3 due to the use of an option-pricing model that utilizes unobservable inputs and requires significant judgement. The Company estimated the fair value of the warrants issued as the issuance date, October 29, 2024, and as of December 31, 2024, using a Black-Scholes option-pricing model utilizing the following assumptions:

    October 29, 2024    December 31, 2024 
Closing stock price   $ 10.48    $6.90 
Contractual exercise price   $ 10    $10.00 
Risk-free rate     4.11 %   4.38%
Estimated volatility     98.4 %   98.6%
Time period to expiration (in years)     5.2     5.0