v3.26.1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Measurements [Abstract]  
FAIR VALUE MEASUREMENTS

5 — FAIR VALUE MEASUREMENTS

 

The Company issued milestone warrant rights as part of Financing and Azora Note Exchange described in Note 4. Milestone is referred as either specified clinical development milestones, including the Company’s announcement that the first patient has been dosed in a Phase 1 clinical trial of AT177 (or IND acceptance) or a specific market milestone, the achievement of a volume-weighted average stock price equal to or greater than 400% of the purchase price ($10.9956 per share) for ten consecutive trading days within any thirty-trading-day measurement period. Regardless of whether a milestone event has occurred, each investor has the right to complete a milestone closing and receive the milestone warrants at any time following the initial closing date and prior to the date that is 30 calendar days following the milestone event notice date.

 

Because the number of shares underlying the Milestone Warrants to be issued varies based on the number of investors who wish to participate, such that the underlying number of shares is not indexed solely to the Company’s own stock, the Milestone Warrants are classified as financial liabilities under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. The liability is recorded at fair value upon issuance and remeasured at fair value at each reporting date, with changes in fair value recognized in Other income (expense), net in the Unaudited Condensed Consolidated Statements of Operation

 

The fair value of the Milestone warrant rights liability was estimated using a Monte Carlo simulation model (a Level 3 fair value measurement). A Monte Carlo model was selected because the Milestone warrant rights liability issuance and exercise depends on path-dependent variables, including:

 

● Projected timing and probability of achieving clinical development milestones.

 

● Simulated future stock price paths under a geometric Brownian motion framework over the remaining contractual term.

 

● Equity volatility and risk-free interest rates across simulated economic paths.

 

In each simulation path, if the stock price or clinical trigger conditions are satisfied prior to expiration, the mean present value is calculated and discounted back to the measurement date using a risk-adjusted discount rate reflecting the execution and market risk of the underlying milestones along with a probability percentage of the milestone event.

 

The following table summarizes the key quantitative inputs utilized in the Monte Carlo simulation to estimate the fair value of the Milestone warrant rights liability as of June 11, 2026, June 30, 2026 and December 31, 2025: 

 

Valuation Input   As of
June 11,
2026		     As of
June 30,
2026		     As of
December 31,
2025		  
Underlying Stock Price (1)     3.31     $ 2.84       —  
Exercise Price     2.7489     $ 2.7489       —  
Expected Volatility     65 %     65 %     —  
Risk-Free Interest Rate     3.78 %     3.91 %     —  
Expected Term (Years)     5       5       —  
Probability of Milestone Achievement     90 %     90 %     —  
Expected Dividend Yield     0 %     0 %     —  

 

(1)

The Company grossed up the observed closing common stock price of $2.98 and $2.56 per share as of June 11, 2026 and June 30, 2026 by the estimated 90% probability of achieving the milestone in order to estimate the implied share price under a milestone-success scenario.

 

● Expected Volatility: Derived from the historical volatility of comparable publicly traded peer companies over a period consistent with the expected remaining term.

 

● Probability of Milestone Achievement: Reflects management’s best estimate based on clinical trial progress, regulatory interactions, and historical industry success rates. An increase in the probability of milestone achievement or underlying stock price significantly increases the fair value of the warrant liability.

 

The following table presents the changes in the fair value of the Level 3 Milestone warrant rights liability for the six months ended June 30, 2026 and 2025 (in thousands):

 

Milestone Warrant rights Liability Reconciliation   2026     2025  
Balance at Beginning of Period   $ —       —  
Initial fair value of Milestone warrant rights issued     32,092       —  
Change in fair value recognized in other income (expenses)     (8,280 )     —  
Warrants exercised / settled during the period     —       —  
Balance at End of Period   $ 23,812       —  

 

As of December 31, 2025, there were no financial assets and liabilities measured at fair value. During the three and six months ended June 30, 2026 and 2025, there were no transfers between levels.