Note 6 - Fair Value Measurements

9 Months Ended

Sep. 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 outstanding 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 September 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 September 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	$	—	$	—	$	123,000	$	123,000
Total	$	—	$	—	$	123,000	$	123,000

	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:

	September 30, 2025			December 31, 2024
Exercise price	$	—		$	1.9445
Stock price	$	2.01		$	3.47
Expected term		4.00			4.75
Volatility		137.15	%		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 September 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 $123,000 and $16,400,000, 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 September 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 nine months ended September 30, 2025, we recognized a gain on the change in the fair value of the warrant liabilities of $8,511,000. 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		(8,511,000	)
Balance as of September 30, 2025	$	123,000