Quarterly report [Sections 13 or 15(d)]

Note 4 - Fair Value Measurements

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Note 4 - Fair Value Measurements
 3 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

Note 4 – Fair Value Measurements

 

ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

 

The three levels of the fair value hierarchy are as follows:

 

Level 1 – Quoted prices for identical instruments in active markets.

 

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

 

Level 3 – Instruments with primarily unobservable value drivers.

 

As of December 31, 2025 and September 30, 2025, the Company has investments in equity securities consisting of 3,125 shares of Series D Convertible Preferred Stock (the “ONCO Series D Preferred Stock”) of Onconetix, Inc. (“ONCO”) and a warrant to purchase 846,975 shares of common stock of ONCO (the “ONCO Warrant”). The ONCO Series D Preferred Stock and the ONCO Warrant were received on September 22, 2025 as a settlement of the ONCO Promissory Notes. See Note 15 for additional information. The Company has elected to measure the ONCO Series D Preferred Stock and the ONCO Warrant at fair value in accordance with ASC 825. The investments in the ONCO Series D Preferred Stock and the ONCO Warrant are classified within Level 3 of the fair value hierarchy because there is no market for these types of securities and the fair value is determined using significant unobservable inputs. The fair value of the ONCO Series D Preferred Stock and the ONCO Warrant have been determined using a Monte Carlo simulation model. This valuation model incorporates the contractual terms of the instruments and assumptions including the stock price of ONCO Common Stock, expected volatility, and a selected discount rate. Additionally, the ONCO Series D Preferred Stock and the ONCO Warrant were issued by ONCO as part of a Securities Purchase Agreement, which included the sale of 16,099 shares of Series D convertible preferred stock and warrants to purchase 4,362,827 shares of ONCO Common Stock to eleven institutional investors, for an aggregate purchase price of $12.9 million. The valuation of the ONCO Series D Preferred Stock and ONCO Warrant includes a calibration discount to the proceeds of the original transaction, which was done at arms’ length. The assumptions used in calculating the fair value of the financial instruments represent the Company’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, the use of different estimates or assumptions would result in a higher or lower fair value and different amounts being recorded in the Company’s financial statements. Material changes in any of these inputs could result in a significantly higher or lower fair value measurement at future reporting dates, which could have a material effect on our results of operations. The following table summarizes the significant unobservable inputs used in the Monte Carlo Simulations as of December 31, 2025 and September 30, 2025:

 

Significant Unobservable Input

  

December 31, 2025

    

September 30, 2025

  

ONCO Series D Preferred Stock

                

Simulation Term (Years)

     1.2       1.5  

Expected Volatility

     68.5 %     72.5 %

Discount Rate

     25.0 %     25.0 %

Calibration Discount

     40.6 %     48.6 %

ONCO Warrant

                

Simulation Term (Years)

     2.7       3.0  

Equity Volatility

     70.7 %     68.6 %

Calibration Discount

     40.6 %     48.6 %

 

The following table provides a reconciliation of the beginning and ending balance associated with the ONCO Series D Preferred Stock and the ONCO Warrant measured at fair value for the three months ended December 31, 2025 and 2024, which are presented as investments in equity securities on the accompanying consolidated balance sheet:

 

   

Three Months Ended

  
   

December 31,

  
   

2025

    

2024

  

ONCO Series D Preferred Stock

                

Beginning balance

   $ 1,764,318     $ —  

Additions

     —       —  

Change in fair value of equity securities

     205,097       —  

Ending balance

   $ 1,969,415     $ —  

ONCO Warrant

                

Beginning balance

   $ 760,987     $ —  

Additions

     —       —  

Change in fair value of equity securities

     (325,175 )     —  

Ending balance

   $ 435,812     $ —  

 

The Company also had an investment in equity securities consisting of 142,749 shares of common stock of ONCO (the “ONCO Common Stock”), which were sold during the three months ended December 31, 2024 for net proceeds of $0.4 million. The Company recognized a loss from the change in fair value of equity securities related to the ONCO Common Stock of $0.3 million during the three months ended December 31, 2024.