Note
5: Fair Value Measurements
Fair
Value
The
Company complies with the provisions of FASB ASC 820 “Fair Value Measurements” for its financial and non-financial assets
and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosure for each major asset
and liability category measured at fair value on either a recurring or nonrecurring basis.
The
fair values of cash and cash equivalents, other assets, accounts payable and accrued expenses approximate their carrying values due to
the short-term maturities of these items and are considered a Level 1 instrument of the fair value measurements standard. The Company
also has certain warrants with a cash settlement feature in the occurrence of a Fundamental Transaction. The fair value of the Class
A and Class B warrants (“June 2024 Warrants”) related to the Company’s June 2024 common stock and warrant issuance,
are calculated using a Black-Scholes model. The fair value of the Class C and Class D warrants (“October 2024 Warrants”)
related to the Company’s October 2024 common stock and warrant issuance, are calculated using a Black-Scholes model. The fair value
of the Class E and Class F warrants (“August 2025 Warrants”) related to the Company’s August 2025 common stock and
warrant issuance, are calculated using a Black-Scholes model.
The
Company also had certain redeemable warrants in the Rights Offering with a cash settlement feature in the occurrence of a Fundamental
Transaction. No Fundamental Transaction occurred. In March 2024, 2,050 of these warrants converted on a cashless basis and the remaining
58,300 expired.
The
Company estimated the fair value of the June 2024 Warrants, October 2024 Warrants and August 2025 Warrants using the Black-Scholes Model,
which uses multiple inputs including the Company’s stock price, the exercise price of the warrant, volatility of the Company’s
stock price, the risk-free interest rate and the expected term of the warrants.
The
Company utilized the following assumptions to estimate the fair value of the Class A Warrants:
Schedule of Assumptions to Estimate Fair Value of Warrants
| | |
June 30, | |
| | |
2024 | |
| Underlying price per share | |
$ | 35.00 | |
| Exercise price per share | |
$ | 36.30 | |
| Risk-free interest rate | |
| 4.42 | % |
| Expected holding period | |
| 5.5 years | |
| Expected volatility | |
| 110 | % |
| Expected dividend yield | |
| — | |
| Warrants measurement input | |
| — | |
The
Company utilized the following assumptions to estimate the fair value of the Class B Warrants:
| | |
June 30, | |
| | |
2024 | |
| Underlying price per share | |
$ | 35.00 | |
| Exercise price per share | |
$ | 36.30 | |
| Risk-free interest rate | |
| 4.82 | % |
| Expected holding period | |
| 2 years | |
| Expected volatility | |
| 89 | % |
| Expected dividend yield | |
| — | |
| Warrants measurement input | |
| — | |
The
Company utilized the following assumptions to estimate the fair value of the Class C Warrants:
| | |
October1, | |
| | |
2024 | |
| Underlying price per share | |
$ | 26.00 | |
| Exercise price per share | |
$ | 28.00 | |
| Risk-free interest rate | |
| 3.6 | % |
| Expected holding period | |
| 2 years | |
| Expected volatility | |
| 82 | % |
| Expected dividend yield | |
| — | |
| Warrants measurement input | |
| — | |
The
Company utilized the following assumptions to estimate the fair value of the Class D Warrants:
| | |
October 1, | |
| | |
2024 | |
| Underlying price per share | |
$ | 26.00 | |
| Exercise price per share | |
$ | 28.00 | |
| Risk-free interest rate | |
| 3.5 | % |
| Expected holding period | |
| 5.5 years | |
| Expected volatility | |
| 91 | % |
| Expected dividend yield | |
| — | |
| Warrant measurement input | |
| — | |
The
Company utilized the following assumptions to estimate the fair value of the Class E Warrants:
| | |
July 30, | | |
September 30, | |
| | |
2025 | | |
2025 | |
| Underlying price per share | |
$ | 3.05 | | |
$ | 2.74 | |
| Exercise price per share | |
$ | 4.00 | | |
$ | 4.00 | |
| Risk-free interest rate | |
| 4.0 | % | |
| 3.7 | % |
| Expected holding period | |
| 5 years | | |
| 4.83 years | |
| Expected volatility | |
| 101 | % | |
| 108 | % |
| Expected dividend yield | |
| — | | |
| — | |
| Warrant measurement input | |
| — | | |
| — | |
The
Company utilized the following assumptions to estimate the fair value of the Class F Warrants:
| | |
July 30, | | |
September 30, | |
| | |
2025 | | |
2025 | |
| Underlying price per share | |
$ | 3.05 | | |
$ | 2.74 | |
| Exercise price per share | |
$ | 4.00 | | |
$ | 4.00 | |
| Risk-free interest rate | |
| 4.0 | % | |
| 3.7 | % |
| Expected holding period | |
| 1.51 years | | |
| 1.34 years | |
| Expected volatility | |
| 142 | % | |
| 162 | % |
| Expected dividend yield | |
| — | | |
| — | |
| Warrant measurement input | |
| — | | |
| — | |
The
significant assumptions using the Black-Scholes model approach for valuation of the Warrants are:
| |
(i) |
Risk-Free Interest Rate. The risk-free interest rates
for the Warrants are based on U.S. Treasury constant maturities for periods commensurate with the remaining expected holding periods
of the warrants. |
| |
(ii) |
Expected Holding Period. The expected holding period
represents the period of time that the Warrants are expected to be outstanding until they are exercised. The Company utilizes the remaining
contractual term of the Warrants at each valuation date as the expected holding period. |
| |
(iii) |
Expected Volatility. Expected stock volatility is based
on daily observations of the Company’s historical stock values for a period commensurate with the remaining expected holding period
on the last day of the period for which the computation is made. |
| |
(iv) |
Expected Dividend Yield. The expected dividend yield
is based on the Company’s anticipated dividend payments over the remaining expected holding period. As the Company has never issued
dividends, the expected dividend yield is 0% and this assumption will be continued in future calculations unless the Company changes
its dividend policy. |
| |
(v) |
Expected Probability of a Fundamental Transaction. Put
rights arise if a Fundamental Transaction 1) is an all cash transaction; (2) results in the Company going private; or (3) is a transaction
involving a person or entity not traded on a national securities exchange. The Company believes such an occurrence is unlikely because: |
| 1. | The
Company only has one product that is FDA approved but is currently not available for commercial
sales. |
| 2. | The
Company will have to perform additional clinical trials for FDA approval of its flagship
product. |
| 3. | Industry
and market conditions continue to include uncertainty, adding risk to any transaction. |
| 4. | The
nature of a life sciences company is heavily dependent on future funding and high fixed costs,
including Research & Development. |
| 5. | The
Company has minimal revenues streams which are insufficient to meet the funding needs for
the cost of operations or construction at their manufacturing facility; and |
| 6. | The
Company’s Rights Agreement and Executive Agreements make it less attractive to a potential
buyer. |
While
the assumptions remain consistent from period to period (e.g., utilizing historical stock prices), the actual historical prices input
for the relevant period input change.
The
Company accounts for certain assets and liabilities at fair value. The hierarchy below lists three levels of fair value based on the
extent to which inputs used in measuring fair value are observable in the market. AIM categorizes each of its fair value measurements
in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These
levels are:
| 1. | Level
1 – Quoted prices are available in active markets for identical assets or liabilities
at the reporting date. Generally, this includes debt and equity securities that are traded
in an active market. |
| 2. | Level
2 – Observable inputs other than Level 1 prices such as quote prices for similar assets
or liabilities; quoted prices in markets that are not active; or other inputs that are observable
or can be corroborated by observable market data for substantially the full term of the assets
or liabilities. Generally, this includes debt and equity securities that are not traded in
an active market. |
| 3. | Level
3 – Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities
include financial instruments whose value is determined using pricing models, discounted
cash flow methodologies, or other valuation techniques, as well as instruments for which
the determination of fair value requires significant management judgment or estimation. As
of September 30, 2024, the Company has classified the warrants with cash settlement features
as Level 3. Management evaluates a variety of inputs and then estimates fair value based
on those inputs. As discussed above, the Company utilized the Black-Scholes model in valuing
the warrants. |
The
table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy
as (in thousands):
Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis
| | |
As of September 30, 2025 | |
| | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Assets: | |
| | | |
| | | |
| | | |
| | |
| Cash equivalents | |
$ | 1,764 | | |
$ | 1,764 | | |
$ | — | | |
$ | — | |
| Marketable securities | |
$ | 62 | | |
$ | 62 | | |
$ | — | | |
$ | — | |
| Liabilities: | |
| | | |
| | | |
| | | |
| | |
| Warrants | |
$ | 7,302 | | |
$ | — | | |
$ | — | | |
$ | 7,302 | |
| | |
As of December 31, 2024 | |
| | |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Assets: | |
| | | |
| | | |
| | | |
| | |
| Cash equivalents | |
$ | 51 | | |
$ | 51 | | |
$ | — | | |
$ | — | |
| Marketable securities | |
$ | 2,276 | | |
$ | 2,276 | | |
$ | — | | |
$ | — | |
|