Akari Therapeutics Plc Fair Value Disclosure
Note 10. Fair Value Measurements
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about the Company’s financial liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy used to determine such values:
| December 31, 2025 | ||||||||||||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liability - November 2022 Peak Bio Warrants | $ | $ | $ | $ | ||||||||||||
| Warrant liability - April 2023 Peak Bio Warrants | 51 | 51 | ||||||||||||||
| Warrant liability – September 2022 Series B Warrants | 10 | 10 | ||||||||||||||
| Derivative liability - ELOC | 230 | 230 | ||||||||||||||
| Total liabilities | $ | 291 | $ | $ | $ | 291 | ||||||||||
| December 31, 2024 | ||||||||||||||||
| (In thousands) | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrant liability - November 2022 Peak Bio Warrants | $ | 95 | $ | $ | $ | 95 | ||||||||||
| Warrant liability - April 2023 Peak Bio Warrants | 736 | 736 | ||||||||||||||
| Warrant liability – September 2022 Series B Warrants | 181 | 181 | ||||||||||||||
| Total liabilities | $ | 1,012 | $ | $ | $ | 1,012 | ||||||||||
The Company’s Level 3 liabilities consist of the September 2022 Warrants, the November 2022 Peak Bio Warrants and the April 2023 Peak Bio Warrants, which were determined to be liability-classified instruments, and a derivative liability related to the ELOC Purchase Agreement (described in Note 7). There were no transfers between Level 1, Level 2, and Level 3 during the years ended December 31, 2025 and 2024.
Changes in Level 3 Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes the activity in the warrant liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) during the years ended December 31, 2025 and 2024:
| Warrant Liability | ||||||||||||||||||||
| (In thousands) | September Series A | September Series B | November Peak Bio | April 2023 Peak Bio | Derivative Liability | |||||||||||||||
| Balance, December 31, 2023 | $ | 15 | $ | 1,238 | $ | $ | $ | |||||||||||||
| Assumption of Warrants | 213 | 1,631 | ||||||||||||||||||
| Change in fair value of liability | (15 | ) | (1,057 | ) | (118 | ) | (895 | ) | ||||||||||||
| Balance, December 31, 2024 | $ | $ | 181 | $ | 95 | $ | 736 | $ | ||||||||||||
| Initial recognition of liability | 100 | |||||||||||||||||||
| Reclassification to equity | (110 | ) | ||||||||||||||||||
| Extinguishment of liability | (66 | ) | ||||||||||||||||||
| Change in fair value of liability | (105 | ) | (95 | ) | (575 | ) | 130 | |||||||||||||
| Balance, December 31, 2025 | $ | $ | 10 | $ | $ | 51 | $ | 230 | ||||||||||||
Liability-Classified Warrants
The fair value of the warrant liabilities is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the September 2022 Series A Warrants, the September 2022 Series B Warrants, the November 2022 Peak Bio Warrants and the April 2023 Bio Peak Warrants was determined using the Black-Scholes Option Pricing Model, which uses various assumptions, including (i) fair value of the Company’s ADSs, (ii) exercise price of the warrant, (iii) expected term of the warrant, (iv) expected volatility and (v) expected risk-free interest rate.
Below are the assumptions used for the fair value calculations of liability classified warrants as of December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||
September Series B | November Peak Bio Warrants | April 2023 Peak Bio Warrants | September Series B Warrants | November Peak Bio Warrants | April Peak Bio Warrants | |||||||||||||||||||
| Stock (ADS) price | $ | 0.29 | $ | 0.29 | $ | 0.29 | $ | 1.22 | $ | 1.22 | $ | 1.22 | ||||||||||||
| Exercise price | $ | 17.00 | $ | 39.18 | $ | 2.04 | $ | 17.00 | $ | 39.18 | $ | 2.04 | ||||||||||||
| Expected term (in years) | 3.7 | 1.8 | 2.3 | 4.7 | 2.8 | 3.3 | ||||||||||||||||||
| Expected volatility | 100.0 | % | 115.0 | % | 105.0 | % | 85.0 | % | 95.0 | % | 90.0 | % | ||||||||||||
| Risk-free interest rate | 3.7 | % | 3.5 | % | 3.5 | % | 4.4 | % | 4.3 | % | 4.3 | % | ||||||||||||
| Expected dividend yield | ||||||||||||||||||||||||
Derivative Liability
The derivative liability related to the ELOC Purchase Agreement (described in Note 7) is valued using the Monte Carlo simulation model and as such is considered to be a Level 3 fair value measurement, as the fair value was determined based on significant inputs not observable in the market. The significant unobservable inputs used to determine the fair value were the projected volume weighed average share price at each trading date, and the use of the maximum draw down potential. The fair value of the ELOC Purchase Agreement derivative liability at inception of the agreement was $100,000. The fair value of the ELOC Purchase Agreement on December 31, 2025 was $230,000 based on the projected stock price of $, expected volatility of 102.5%, risk-free rate of 3.46% and discounted at 71.3% for the probability of the Company timely filing all SEC documents and meeting the NASDAQ listing requirements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 30, 2026 | Showing above |
| 2024 | Apr 15, 2025 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.