Note 3 - Fair Value Measurements

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 3. FAIR VALUE MEASUREMENTS

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 (in thousands):

			Fair Value Measurements Using
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
	Balance at		Identical		Observable		Unobservable
	June		Items		Inputs		Inputs
	30, 2024		(Level 1)		(Level 2)		(Level 3)
Assets
Restricted cash held as a certificate of deposit	$	476	$	476	$	—	$	—

			Fair Value Measurements Using
			Quoted
			Prices in
			Active
			Markets		Significant
			for		Other		Significant
	Balance at		Identical		Observable		Unobservable
	December		Items		Inputs		Inputs
	31, 2023		(Level 1)		(Level 2)		(Level 3)
Assets
Restricted cash held as a certificate of deposit	$	476	$	476	$	—	$	—
Liabilities
Warrant liabilities	$	334	$	—	$	334	$	—

The Company’s 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.

The Secured Convertible Notes (see Note 10, “Convertible Notes”) are carried at proceeds, net of discounts, which management believes approximates fair value. As a result of certain call and put options within the Secured Convertible Notes, the Company recorded an embedded derivative liability on its condensed consolidated balance sheet with a corresponding debt discount which is netted against the face value of the Secured Convertible Notes. The fair value of the May 2023 Warrants issued in conjunction with the 2023 Private Placement as well as the accounting for the warrant amendment and preferred stock conversion price adjustments that resulted from the 2023 Private Placement used the same stock price and were classified within Level 3.

The Unsecured Convertible Notes (see Note 10, “Convertible Notes”) are carried at proceeds, net of discounts, which management believes approximates fair value. As a result of certain call and put options within the Unsecured Convertible Notes, the Company recorded an embedded derivative liability on its unaudited condensed consolidated balance sheet with a corresponding debt discount which is netted against the face value of the Unsecured Convertible Notes.

The fair value of the December 2023 Warrants issued in conjunction with the 2023 Warrant Reprice Transaction as well as the accounting for the warrant amendment and preferred stock conversion price adjustments that resulted from the 2023 Warrant Reprice Transaction were classified within Level 2.

See Note 11, “Common Stock Warrants”, subheading “Summary of Common Stock Warrant Liabilities”, for a reconciliation of the beginning and ending balances for the warrant liabilities measured at fair value on a recurring basis using significant other observable inputs (Level 2) during the three and six months ended June 30, 2024 and 2023.

There were no transfers in or out of Level 1, Level 2 or Level 3 assets and liabilities for the three and six months ended June 30, 2024 and 2023.

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 13, “Equity-Based Compensation” for related Black Scholes valuation assumptions.

Warrant Liabilities

Various of the Company’s warrants have been, or are, 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 11, “Common Stock Warrants” for additional information and the definitions of the Company’s warrants.

	May 2023 Warrants					May 2023 Warrants					December 2023 Warrants			December 2023 Warrants
Measurement event	Issuance					Stockholder Approval					Reporting Date			Stockholder Approval
Date	May 1, 2023					June 9, 2023					December 31, 2023			May 28, 2024
Total Value	$1.6 million					$1.4 million					$0.3 million			$0.2 million
Gain (Loss)	not applicable					$0.2 million					$56 thousand			$(51 thousand)
Assumptions:
Exercise price	$	45.50				$	45.50				$	8.75		$	8.75
Market price	$	25.20			(a)	$	23.80				$	7.14		$	4.94
Volatility		80.1			%		77.6			%		79.3	%		83.9	%
Risk-free rate		3.60	-	4.04	%		3.92	-	4.59	%		3.85	%		4.56	%
Dividend yield		0.0			%		0			%		0	%		0	%
Term (years)		2.1	-	5.1	%		2.0	-	5.0			5.5			5.1

	March			March
	2024			2024
	Warrant			Warrant
Measurement event	Reporting Date			Stockholder Approval
Date	March 31, 2024			May 28, 2024
Total Value	$0.1 million			$0.1 million
Gain (Loss)	$21 thousand			$(28 thousand)
Assumptions:
Exercise price	$	4.90		$	4.90
Market price	$	3.66		$	4.94
Volatility		86.9	%		83.9	%
Risk-free rate		4.21	%		4.56	%
Dividend yield		0	%		0	%
Term (years)		5.5			5.3

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

Warrant Modifications

Amendments to warrant terms are recorded as a non-cash gain (or loss) on modification of common stock warrants. The gain or loss represents the decrease or increase in the fair value of the amended warrants when comparing the value immediately before and after amendment using the Black Scholes option pricing model. Fair value was determined using a Black Scholes model as outlined below.

	July 2020, November 2021, September 2022 & November 2022 Warrants
Measurement event	Prior to amendment					After amendment
Date	April 27, 2023					April 27, 2023
Total Value	$0.3 million					$0.5 million
Loss	not applicable					$0.2 million
Assumptions:
Exercise price	$	220.50				$	52.50
Market price	$	25.20			(a)	$	25.20			(a)
Volatility		80.1			%		80.1			%
Risk-free rate		3.59	-	4.73	%		3.59	-	4.73	%
Dividend yield		0.0			%		0.0			%
Term (years)		1.1	-	5.6			1.1	-	5.6

	May 2023 Warrants
Measurement event	Prior to amendment					After amendment
Date	December 21, 2023					December 21, 2023
Total Value	$56 thousand					$0.2 million
Loss	not applicable					$0.1 million
Assumptions:
Exercise price	$	45.50				$	8.75
Market price	$	8.07				$	8.07
Volatility		79.3			%		79.3			%
Risk-free rate		3.92	-	4.62	%		3.92	-	4.62	%
Dividend yield		0.0			%		0.0			%
Term (years)		1.5	-	4.5			1.5	-	4.5

	September 2022, November 2022, & May 2023 Warrants
Measurement event	Prior to amendment					After amendment
Date	June 14, 2024					June 14, 2024
Total Value	$66 thousand					$0.1 million
Loss	not applicable					$70 thousand
Assumptions:
Exercise price	$	8.75	-	52.50		$	2.50
Market price	$	2.51				$	2.51
Volatility		89.3			%		89.3			%
Risk-free rate		4.27	-	5.08	%		4.27	-	5.08	%
Dividend yield		0.0			%		0.0			%
Term (years)		1.0-4.4					1.0	-	4.4

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

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 12, “Stockholders’ (Deficit) Equity”). The applicable Ratchet provisions of the Company’s outstanding Preferred Stock terminated during the quarter ended March 31, 2024. When a conversion price 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 anti-dilution protection feature) and (2) the fair value of the Preferred Stock immediately after the conversion price adjustment (but without the anti-dilution protection feature). Fair value was determined using a Black Scholes model as outlined below.

	Series B & C Preferred Stock
Measurement event	Prior to Ratchet			After Ratchet
Date	April 27, 2023			April 27, 2023
Total value (b)	$9.6 million			$11.6 million
Deemed dividend	not applicable			$2.0 million
Assumptions:
Exercise price	$	220.50		$	45.50
Market price	$	25.20	(a)	$	25.20	(a)
Volatility		80.1	%		80.1	%
Risk-free rate		4.91	%		4.91	%
Dividend yield		0.0	%		0.0	%
Term (in years)		0.8			0.8

	Series B & C Preferred Stock
Measurement event	Prior to Ratchet			After Ratchet
Date	December 21, 2023			December 21, 2023
Total value (b)	$1.7 million			$6.8 million
Deemed dividend	not applicable			$5.1 million
Assumptions:
Exercise price	$	45.50		$	8.75
Market price	$	8.07		$	8.07
Volatility		79.3	%		79.3	%
Risk-free rate		5.43	%		5.43	%
Dividend yield		0.0	%		0.0	%
Term (years)		0.3			0.3

	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	not applicable			$0.4 million
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 10, “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			Shareholder Approval
Date	March 25, 2024			May 28, 2024
Total value	$0.2 million			$0.2 million
Gain (Loss)	not applicable			$(82 thousand)
Assumptions:
Exercise price	$	4.90		$	4.90
Market price	$	4.51		$	4.94
Volatility		86.9	%		83.9	%
Risk-free rate		4.54	%		4.94	%
Dividend yield		0.0	%		0.0	%
Term (years)		2.0			1.8

Upon issuance in May 2023, the Secured 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 10, “Convertible Notes” for additional discussion). Fair value was determined using a Black Scholes model as outlined below.

	Secured Convertible Notes derivative			Secured Convertible Notes derivative
Measurement event	Issuance			Shareholder Approval
Date	April 27, 2023			June 9, 2023
Total value (b)	$0.2 million			$0.2 million
Gain	not applicable			$40 thousand
Assumptions:
Exercise price	$	45.50		$	45.50
Market price	$	25.20	(a)	$	23.80
Volatility		80.1	%		76.9	%
Risk-free rate		4.88	%		5.41	%
Dividend yield		0.0	%		0.0	%
Term (years)		0.8			0.7

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

(b) Adjusted for probability of occurrence.