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Note 11 - Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

11. Fair Value Measurements

 

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three and nine months ended September 30, 2024 and 2023. The carrying amount of accounts payable approximated fair value as they are short term in nature. The fair value of stock options and warrants issued for services are estimated based on the Black-Scholes model. The fair value of the convertible notes payable was estimated utilizing a Monte Carlo simulation.

 

Fair Value on a Recurring Basis

 

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. The estimated fair value of the money market account represents a Level 1 measurement. The estimated fair value of the warrant liabilities and convertible note payable represent Level 3 measurements. The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):

 

Description

 

Level

  

September 30, 2024

  

December 31, 2023

 

Assets:

     

(Unaudited)

     

Money Market Account

  1  $481  $3,874 
             

Liabilities:

            

Warrant liabilities (Note 9)

  3  $1,902  $17 

Convertible note payable - Streeterville (Note 7)

  3  $3,050  $9,161 

Convertible note payable - Anson (Note 7)

  3  $2,985  $— 

 

Convertible Note Payable - Streeterville

 

The significant inputs used in the Monte Carlo simulation to measure the Streeterville note liability that is categorized within Level 3 of the fair value hierarchy are as follows:

 

  

September 30,

  

September 30,

 
  

2024

  

2023

 

Stock price on valuation date

  *  $2.60 

Time to expiration

  *   0.59 

Note market interest rate

  *   8.9%

Equity volatility

  *   90.0%

Volume volatility

  *   365.0%

Risk-free rate

  *   5.52%

Probability of default

  *   3.2%

 

*As of September 30, 2024, the fair value was determined to be $3.1 million, reflecting the remaining obligation post-settlement. Given the short interval between the valuation dates, the impact on the fair value was deemed immaterial.

 

The following table sets forth a summary of the changes in the fair value of the Streeterville Note categorized within Level 3 of the fair value hierarchy (in thousands):

 

Fair value of the Note as of December 31, 2023

 $9,161 

Conversions and repayments of principal and interest (cash)

  (2,300)

Conversions and repayments of principal and interest (shares)

  (400)

Fair value adjustment through earnings

  318 

Fair value of the Note as of March 31, 2024

  6,779 

Fair value adjustment through earnings

  23 

Default penalty

  849 

Fair value of the Note as of June 30, 2024

 $7,651 

Conversions and repayments of principal and interest (cash)

  (2,500)

Fair value adjustment through earnings

  (2,101)

Fair value of the Note as of September 30, 2024

 $3,050 
     

Convertible note payable - current portion

 $3,050 

Convertible note payable, net of current portion

 $— 

 

Fair value of the Note as of December 31, 2022

 $10,525 

Fair value adjustment through earnings

  1,770 

Fair value adjustment through accumulated other comprehensive loss

  (106)

Fair value of the Note as of March 31, 2023

  12,189 

Conversions and repayments of principal and interest (cash)

  (88)

Conversions and repayments of principal and interest (shares)

  (200)

Fair value adjustment through earnings

  663 

Fair value adjustment through accumulated other comprehensive loss

  128 

Fair value of the Note as of June 30, 2023

 $12,692 

Conversions and repayments of principal and interest (cash)

  (2,200)

Conversions and repayments of principal and interest (shares)

  (782)

Fair value adjustment through earnings

  359 

Fair value of the Note as of September 30, 2023

 $10,069 
     

Convertible note payable - current portion

 $10,069 

Convertible note payable, net of current portion

 $— 

 

Convertible Note Payable - Anson

 

The significant inputs used in the Monte Carlo simulation to measure the Anson note liability that is categorized within Level 3 of the fair value hierarchy are as follows:

  

September 30,

  

2024

Stock price on valuation date

$

1.69

Time to expiration

 

1.12

Note market interest rate

 

12.5%

Equity volatility

 

122.0%

Risk-free rate

 

3.94%

Probability of default

 

33.6%

 

The following table sets forth a summary of the changes in the fair value of the Anson Note categorized within Level 3 of the fair value hierarchy (in thousands):

 

Fair value of the Note at issuance

 $2,941 

Conversions and repayments of principal and interest (shares)

  (702)

Fair value adjustment through earnings

  746 

Fair value of the Note as of September 30, 2024

 $2,985 
     

Convertible note payable - current portion

 $— 

Convertible note payable, net of current portion

 $2,985 

 

Warrant Liabilities

 

The Company utilizes a Black-Scholes model approach to value its liability-classified warrants at each reporting period, with changes in fair value recognized in the consolidated statements of operations. The estimated fair value of the warrant liabilities is determined using Level 3 inputs. There were no transfers between levels within the fair value hierarchy during the periods presented. Inherent in a Black Scholes options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its Common Stock based on historical volatility that matches the expected remaining life of the warrants. 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.

 

The weighted-average significant inputs used in the Black-Scholes model to measure the warrant liabilities that are categorized within Level 3 of the fair value hierarchy are as follows:

 

  

September 30,

 
  

2024

  

2023

 

Stock price on valuation date

 $1.69  $6.60 

Exercise price per share

 $3.55  $115.00 

Expected life

  4.84   3.15 

Volatility

  129.8%  175.1%

Risk-free rate

  3.6%  5.3%

Dividend yield

  0.0%  0.0%

Fair value of warrants

 $1.40  $7.93 

 

A reconciliation of warrant liabilities is included below (in thousands):

 

Balance as of December 31, 2023

 $17 

Loss upon re-measurement

  9 

Balance as of March 31, 2024

  26 

Gain upon re-measurement

  (18)

Balance as of June 30, 2024

 $8 

Initial recognition of issuance of warrants

  2,059 

Gain upon re-measurement

  (165)

Balance as of September 30, 2024

 $1,902 

 

Balance as of December 31, 2022

 $37 

Gain upon re-measurement

  (12)

Balance as of March 31, 2023

  25 

Loss upon re-measurement

  11 

Balance as of June 30, 2023

 $36 

Loss upon re-measurement

  (26)

Balance as of September 30, 2023

 $10