NOTE 6 – FAIR VALUE MEASUREMENTS 

Fair value measurements affect the Company’s accounting for certain of its financial assets. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and is measured according to a hierarchy that includes:

As of December 31, 2024, and 2023, the Company used Level 1 quoted prices in active markets to value cash equivalents which were de minimis for both periods presented. The Company did not have any Level 2 or Level 3 assets or liabilities as of December 31, 2024. As of December 31, 2023, Level 3 liabilities included a portion of the Series D Warrants and all Series C Warrants issued in December 2023, which did not meet the criteria for equity classification due to insufficient authorized shares to settle the instruments and were therefore accounted for as liabilities at fair value from the issuance date to January 25, 2024, the date the Company received stockholder approval to increase the number of authorized shares.

Additionally, during the year ended December 31, 2024, Level 3 liabilities included a portion of the Company’s outstanding August 2023 Warrants, Series A Warrants, Series B Warrants, Series C Warrants, and Series D Warrants (collectively, the “Existing Warrants”), as a result of certain Warrant Amendments executed on April 1, 2024, which provided for potential adjustments to the exercise prices of the Existing Warrants that were contingent on stockholder approval. As such, the Existing Warrants classified as liabilities from April 1, 2024, through May 22, 2024, the date the Company received stockholder approval to fix the exercise prices at $1,056.00 per share.

The Company uses the Black-Scholes option pricing model to estimate the fair value of warrant liabilities as of the respective issuance dates or reclassification dates, as applicable, using significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. For periods prior to the initial exercise date of the warrants, an additional discount for lack of marketability (“DLOM”) was applied. For the Existing Warrants, the Black-Scholes option pricing model was probability weighted for different exercise price scenarios, as applicable.

The following table summarizes the range of significant assumptions used in determining the fair value of liability-classified warrants for the years ended December 31, 2024, and 2023: 

A reconciliation of the beginning and ending balances for the liability-classified warrants measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the year ended December 31, 2024:

A reconciliation of the beginning and ending balances for the liability-classified warrants measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the year ended December 31, 2023:

Changes in the fair value of the liability-classified warrants are recognized as a separate component of income and expense in the consolidated statement of operations.