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Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Measurements

Fair Value Measurements

(3) Fair Value Measurements

The Company measures certain assets and liabilities at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to

transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The guidance in ASC 820 outlines a valuation framework and creates a fair value hierarchy that serves to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, the Company maximizes the use of quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3—Valuations based on unobservable inputs and models that are supported by little or no market activity.

The following table provides the carrying value and fair value of certain financial assets and liabilities of the Company measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023:


					Fair Value Measurement at
					March 31, 2024
		Carrying Value			Level 1			Level 2			Level 3
Assets:
Cash equivalents		$	472,898		$	472,898		$	—		$	—
Total assets measured and recorded at fair value		$	472,898		$	472,898		$	—		$	—
Liabilities:
Warrant liability		$	6,297,308		$	—		$	—		$	6,297,308
Total liabilities measured and recorded at fair value		$	6,297,308		$	—		$	—		$	6,297,308


					Fair Value Measurement at
					December 31, 2023
		Carrying Value			Level 1			Level 2			Level 3
Assets:
Cash equivalents		$	5,136,677		$	5,136,677		$	—		$	—
Total assets measured and recorded at fair value		$	5,136,677		$	5,136,677		$	—		$	—
Liabilities:
Warrant liability		$	13,680,000		$	—		$	—		$	13,680,000
Total liabilities measured and recorded at fair value		$	13,680,000		$	—		$	—		$	13,680,000

The Company did not transfer any financial instruments into or out of Level 3 classification, during the three months ended March 31, 2024 and 2023.

The common stock warrants issued in connection with the Company’s equity raise in November 2023 (Canaccord Warrants) were classified as liabilities at the time of issuance due to certain cash settlement adjustment features that are outside of the Company’s control or not deemed to be indexed to the Company’s stock. The warrant liability is remeasured each reporting period with the change in fair value recorded to other income (expense) in the statement of operations until the warrants are exercised, expired, reclassified, or otherwise settled. The fair value of the warrant liability was estimated using a Monte Carlo simulation model.

The estimated fair value of the Canaccord Warrants is determined using Level 3 inputs. Inherent in a Monte Carlo simulation model with the volatility calculated by back solving in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and other inputs. The Company estimates the volatility of its warrants based on implied volatility from the Company’s traded warrants. The risk-free interest rate is

based on the market yield of U.S. Treasuries over a tenor commensurate with the remaining term to expiration. Any changes in these assumptions can change the valuation significantly.

The following table provides quantitative information regarding Level 3 fair value measurements inputs as of their measurement dates:


		March 31, 2024			December 31, 2023
Exercise price		$	9.00		$	9.00
Closing stock price		$	11.90		$	18.70
Number of warrants			1,140,000			1,200,000
Phase 3 data probability of success			60	%		60	%
Volatility			60	%		55	%
Term (time to expiration in years)			4.59			4.84
Redemption hurdle price		$	14.25		$	14.25
Risk-free rate			4.2	%		3.9	%

The Canaccord Warrants were exercisable immediately at an exercise price of $9.00 per unit, and redeemable at the Company’s option, in whole or in part, at a redemption price equal to $0.001 per Warrant upon 30 days’ prior written notice, at any time after:

●

the Company’s public announcement of Positive Topline Data (as defined in the Warrant Agreement) from its Phase 3 in patients with Parkinson’s Disease; and

●

the date on which (a) the closing price of the Company’s common stock on the principal exchange or trading facility on which it is then traded has equaled or exceeded $14.25 and (b) the average daily trading value (ADTV) of the Company’s common stock is equal to or exceeds $2,000,000, for two consecutive Trading Days.

The common stock warrants are exercisable immediately and will expire on November 2, 2028, five years from the date of issuance.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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