Quarterly report [Sections 13 or 15(d)]

Fair Value Measurements

v3.25.1
Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 5 - Fair Value Measurements

 

The Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below:

 

● Level 1 – Quoted prices for identical assets or liabilities in active markets.
   
● Level 2 – Quoted prices for identical or similar assets and liabilities in markets that are not active; or other model-derived valuations whose inputs are directly or indirectly observable or whose significant value drivers are observable.
   
● Level 3 – Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable and for which assumptions are used based on management estimates.

 

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as counterparty credit risk in its assessment of fair value.

 

The carrying amounts of cash equivalents, current portion of restricted cash, prepaid expenses and other current assets, accounts payable, current portion of lease liabilities and accrued expenses approximate fair value due to the short-term nature of these instruments.

 

  

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows:

 

 Schedule of Assets and Liabilities Carried at Fair Value

March 31, 2025   Total     (Level 1)     (Level 2)     (Level 3)  
          Fair Value Hierarchy  
March 31, 2025   Total     (Level 1)     (Level 2)     (Level 3)  
Liabilities                                
Warrant liability     1,333       —       —       1,333  
Total   $ 1,333     $ —     $ —     $ 1,333  

 

The Company did not have any financial assets or liabilities that were carried at fair value using the hierarchy as of December 31, 2024.

 

The table below presents a summary of changes in fair value of the Warrant liability that is measured at fair value on a recurring basis:

 

      Warrant Liability  
Balance at January 31, 2025     —  
Issuance of Warrants reported at fair value     1,627  
Change in fair value     (294 )
Balance at March 31, 2025     1,333  

 

On February 13, 2025, the Company entered into a securities purchase agreement with certain investors and, pursuant to an initial closing of the agreement issued and sold the investors (i) 1,650 shares of convertible preferred stock and (ii) warrants to purchase up to an aggregate of 5,631,404 shares of the Company’s common stock (see Note 9).

 

The Company determined that the warrants do not satisfy the conditions to be accounted for as equity instruments as the warrants are not considered indexed to the Company’s own stock. The Company classified the warrants as a liability upon issuance. Accordingly, proceeds from the transaction are first allocated to the warrants which are recorded at fair value at issuance, and any residual value allocated to preferred stock. Subsequent changes in fair value of the warrants are recognized in the Company’s condensed consolidated statements of operations and comprehensive loss until either exercised or expired.

 

The Company’s warrant liability is measured at fair value each reporting period utilizing a Monte Carlo simulation model, which requires assumptions including the value of the stock on the measurement date, exercise price, expected term, expected volatility, and the risk-free interest rate. Certain assumptions, including the expected term and expected volatility, are subjective and require judgment to develop. As a result, if factors or expected outcomes change and the Company uses significantly different assumptions or estimates, the warrant liability could be materially different.

 

The warrant liability was valued on the date of issuance and March 31, 2025 using the following range of assumptions:

 

Expected volatility     54.0% - 56.0 %
Risk-free interest rate     3.95% - 4.39 %
Stock price on valuation date   $ 0.52 - 0.60  
Exercise price   $ 0.64  
Dividend yield     0.00 %
Expected term     4.9 - 5.0 years