AIM ImmunoTech Inc. Fair Value Disclosure

 

(15)	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-Merton pricing 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-Merton pricing 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-Merton pricing 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-Merton pricing 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:

 

		October 1, 2025
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, 2025
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, 2025				December 31, 2025
Underlying price per share		$	3.05			$	1.13
Exercise price per share		$	4.00			$	1.44
Risk-free interest rate			4.0	%			3.7	%
Expected holding period			5 years				4.58 years
Expected volatility			101	%			106	%
Expected dividend yield			—				—

 

The Company utilized the following assumptions to estimate the fair value of the Class F Warrants:

 

		July 30, 2025				December 31, 2025
Underlying price per share		$	3.05			$	1.13
Exercise price per share		$	4.00			$	1.44
Risk-free interest rate			4.0	%			3.5	%
Expected holding period			1.51 years				1.09 years
Expected volatility			142	%			168	%
Expected dividend yield			—				—
Warrant measurement input			—				—

 

The significant assumptions using the Black-Scholes-Merton pricing 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.

 

 

With the above factors utilized in analysis of the likelihood of the Put’s potential Liability, the Company estimated the range of probabilities related to a Put right being triggered as:

Schedule of Range of Probabilities 

Range of Probability		Probability
Low			0.5	%
Medium			1.0	%
High			5.0	%

 

The Black-Scholes-Merton pricing model has incorporated a 5.0% probability of a Fundamental Transaction to date for the life of the securities.

 

	(vi)	Expected Timing of Announcement of a Fundamental Transaction. As the Company has no specific expectation of a Fundamental Transaction, for reasons elucidated above, the Company utilized a discrete uniform probability distribution over the Expected Holding Period to model in the potential announcement of a Fundamental Transaction occurring during the Expected Holding Period.
	(vii)	Expected 100 Day Volatility at Announcement of a Fundamental Transaction. An estimate of future volatility is necessary as there is no mechanism for directly measuring future stock price movements. Daily observations of the Company’s historical stock values for the 100 days immediately prior to the Warrants’ grant dates, with a floor of 100%, were utilized as a proxy for future volatility estimates.
	(viii)	Expected Risk-Free Interest Rate at Announcement of a Fundamental Transaction. The Company utilized a risk-free interest rate corresponding to the forward U.S. Treasury rate for the period equal to the time between the date forecast for the public announcement of a Fundamental Transaction and the Warrant expiration date for each simulation.
	(ix)	Expected Time Between Announcement and Consummation of a Fundamental Transaction. The expected time between the announcement and the consummation of a Fundamental Transaction is based on the Company’s experience with the due diligence process performed by acquirers and is estimated to be six months. The Black-Scholes-Merton pricing model approach incorporates this additional period to reflect the delay Warrant Holders would experience in receiving the proceeds of the Put.

 

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 December 31, 2025, 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-Merton pricing 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 December 31, 2025
		Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	931			$	931			$	—			$	—
Marketable securities		$	62			$	62			$	—			$	—
Liabilities:
Warrant liability		$	8,244			$	—			$	—			$	8,244

 

		As of December 31, 2024
		Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	51			$	51			$	—			$	—
Marketable securities		$	2,276			$	2,276			$	—			$	—