Note 5 - Fair Value Measurements

9 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Fair Value Disclosures [Text Block]

Note 5 – Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

● Level 1 – Quoted prices in active markets for identical assets and liabilities.

● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Fair Value on a Recurring Basis

The tables below categorize assets and liabilities measured at fair value on a recurring basis for the periods presented:

	Fair Value			Fair value measurement using
	September 30,
(in thousands)	2025			Level 1		Level 2		Level 3
Assets:
Money market funds	$	57		$	57	$	-	$	-
Total Assets	$	57		$	57	$	-	$	-
Liabilities:
Convertible notes payable	$	(2,590	)	$	-	$	-	$	(2,590	)
Derivative liability - ELOC commitment note		(5,089	)						(5,089	)
Common stock warrant liability		(2	)		-		-		(2	)
Total Liabilities	$	(7,681	)	$	-	$	-	$	(7,681	)

	Fair Value			Fair value measurement using
	December 31,
(in thousands)	2024			Level 1		Level 2		Level 3
Assets:
Money market funds	$	598		$	598	$	-	$	-
Total Assets	$	598		$	598	$	-	$	-
Liabilities:
Derivative liability - ELOC commitment note	$	(299	)	$	-	$	-	$	(299	)
Common stock warrant liability		(305	)		-		-		(305	)
Total Liabilities	$	(604	)	$	-	$	-	$	(604	)

The money market funds were classified as cash and cash equivalents on the consolidated balance sheets and were within Level 1 of the fair value hierarchy. The aggregate fair value of the Company’s money market funds approximated amortized cost.

The fair value of the convertible notes payable is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The following table provides a summary of the change in the estimated fair value of the convertible notes payable:

	Nine Months Ended September 30, 2025
Issuance of convertible notes payable		8,566
Principal payments		(2,200	)
Change in fair value		(3,776	)
Balance at September 30, 2025	$	2,590

In determining the initial fair value of the convertible notes payable at their respective issuance dates as well as for the subsequent remeasurement at September 30, 2025, we used a Black Scholes pricing model.  The following table provides a summary of the significant inputs used in these valuations:

	June 5, 2025 Issuance Date			September 30, 2025
Fair value of underlying equity	$	0.59		$	0.07
Conversion price	$	0.59		$	0.59
Volatility		198.8	%		244.4	%
Risk-free interest rate		4.1	%		3.8	%
Expected term (in years)		1.0			0.9
Discounting factor		0.842			0.899

The fair value of the common stock warrant liability is based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The following table provides a summary of the change in the estimated fair value of the common stock warrant liability:

	Nine Months Ended September 30, 2025
Balance at December 31, 2024	$	305
Change in fair value		(292	)
Settlement of common stock warrant liability		(20	)
Deemed dividend		9
Balance at September 30, 2025	$	2

In determining the initial fair value of the common stock warrants at their respective issuance dates as well as for the subsequent remeasurement at September 30, 2025, we used a Black Scholes pricing model.  For the measurement at December 31, 2024, we used a Monte Carlo simulation.  The following table provides a summary of the significant inputs used in these valuations:

	September 30, 2025			December 31, 2024
Fair value of underlying equity	$	0.07		$	0.35
Exercise price	$	0.30		$	1.28
Volatility		161.6	%		n/a
Risk-free interest rate		3.7	%		4.4	%
Expected term (in years)		4.3			5.1
Discounting factor		n/a			0.81

The fair value of the derivative liability - ELOC commitment note is also based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. The following table provides a summary of the change in the estimated fair value of the derivative liability:

	Nine Months Ended September 30, 2025
Balance at December 31, 2024	$	299
Change in fair value of June 2024 ELOC commitment note		(188	)
Extinguishment of derivative of June 2024 ELOC commitment note		(111	)
Initial recognition of derivative liability of July 2025 ELOC commitment note		5,702
Change in fair value of July 2025 ELOC commitment note		(613	)
Balance at September 30, 2025	$	5,089

In determining the initial fair value of the derivative liability and for the subsequent measurement at September 30, 2025, we used a Monte Carlo simulation.  The following table provides a summary of the significant inputs used in these valuations:

	September 30, 2025
Fair value of underlying equity	$0.32-$0.35
Volatility		240.2%-252.0%
Risk-free interest rate		4.2	%
Conversion price discount		20.0	%
Discounting period (in years)		0.5
Discount rate		9.1	%
Discounting factor		0.96

Fair Value on a Non-Recurring Basis

Certain of our assets were measured at fair value on a non-recurring basis during the nine months ended September 30, 2025 and during the year ended December 31, 2024. The IPR&D intangible asset related to our rostafuroxin drug candidate was recorded at its estimated fair value as a result of the impairment tests performed during 2024. There was no indication of impairment as of September 30, 2025. (See the section titled, “Note 4 – Summary of Significant Accounting Policies – Intangible Assets”). The table below categorizes assets measured at fair value on a non-recurring basis for the periods presented:

	Fair Value		Fair value measurement using
	December 31,
(in thousands)	2024		Level 1		Level 2		Level 3
Intangible assets:
Rostafuroxin drug candidate	$	1,790	$	-	$	-	$	1,790

Significant factors considered in estimating the fair value of the IPR&D intangible asset related to our rostafuroxin drug candidate include the risks inherent in the development process, including the likelihood of achieving commercial success and the cost and related time to complete the remaining development. Future cash flows for the IPR&D intangible asset were estimated based on forecasted revenue and costs, taking into account the expected product life cycle, market penetration, and growth rates. Other significant estimates and assumptions inherent in this approach include (i) the amount and timing of the projected net cash flows associated with the IPR&D intangible asset; (ii) the discount rate, which seeks to reflect the various risks inherent in the projected cash flows; and (iii) the tax rate, which considers geographic diversity of the projected cash flows. Quantitative information about the significant unobservable inputs used in the fair value measurement of the IPR&D intangible asset included a discount rate of 20.0% and a tax rate of 30.0% for 2024. While we use the best available information to prepare our cash flows and discount rate assumptions, actual future cash flows could differ significantly based on the commercial success of the related drug candidate and market conditions which could result in future impairment charges related to the indefinite-lived intangible asset balance.