6. Fair Value Measurements

Fair Value of Aevitas

The Company valued its retained investment in Aevitas, as part of the deconsolidation of its holdings (see Note 3) in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, and estimated the fair value to be $2.6 million based on a per share value of $0.328. The following inputs were utilized to derive the value: risk free rate of return of 3.7%, volatility of 80% and a discount for lack of marketability of 39.7%.

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Common Stock Warrant Liabilities

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Checkpoint

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On December 16, 2022, Checkpoint closed on an offering for the sale of shares of its common stock and pre-funded warrants as part of a registered direct offering (the “December 2022 Registered Direct Offering”). The common stock and the pre-funded warrants were sold together with December 2022 Common Stock Warrants and placement agent warrants. Net proceeds to Checkpoint from the December 2022 Registered Direct Offering were $6.7 million after deducting commissions and other transaction costs (see Note 13).

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Checkpoint deemed the December 2022 common warrants and placement agent warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control. The common warrants and placement agent warrants were recorded at the time of closing at a fair value, determined by using the Black-Scholes model. As the total fair value of the common stock warrant liability exceeded the total net proceeds, no proceeds were allocated to the common stock and pre-funded warrants issued as part of this transaction. Checkpoint revalued the December 2022 common warrants and placement agent warrants at December 31, 2022 resulting in a fair value of $11.2 million. Checkpoint also revalued the December 2022 Common Stock Warrants and December 2022 Placement Agent Warrants at each reporting period in 2023, resulting in gains throughout the year.

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In February 2023, Checkpoint closed on an offering for the sale of shares of its common stock and pre-funded warrants as part of a registered direct offering (the “February 2023 Registered Direct Offering”).  The common stock and pre-funded warrants were sold together with February 2023 Common Stock Warrants and placement agent warrants (collectively, the “February 2023 Common Stock Warrants”). The total gross proceeds from the February 2023 Registered Direct Offering were approximately $7.5 million with net proceeds of approximately $6.7 million after deducting approximately $0.8 million in commissions and other transaction costs. The February 2023 Common Stock Warrants and placement agent warrants met the criteria for equity classification.

In October 2023, Checkpoint entered into an inducement offer letter agreement (the “October 2023 Inducement”) with a holder of certain of its existing warrants to exercise for cash an aggregate of 6,325,354 shares of the Checkpoint’s common stock at a reduced exercise price of $1.76 per share. The exercised warrants included the December 2022 Common Stock Warrants with an original exercise price of $4.075 per share and the February Common Stock Warrants with an original exercise price of $5.00 per share. These warrants were issued as part of the December 2022 Registered Direct Offering and February 2023 Registered Direct Offering. As part of the October 2023 Inducement, Checkpoint agreed to issue new unregistered Series A Warrants to purchase up to 6,325,354 shares of Common Stock and new unregistered Series B Warrants to purchase up to 6,325,354 shares of Common Stock (the October 2023 Common Stock Warrants”). Checkpoint also issued the placement agent warrants to purchase up to 379,521 shares of common stock with an exercise price of $2.20 per share. The total gross proceeds from the October 2023 Inducement were approximately $11.1 million with net proceeds of approximately $10.0 million after deducting approximately $1.1 million in commissions and other transaction costs.  The October 2023 Common Stock Warrants and placement agent warrants met the criteria for equity classification.

The December 2022 Common Stock Warrants, which were liability classified, were revalued on October 4, 2023 using Black-Scholes Model to calculate the difference in fair value as a result of the change in exercise price. The difference in fair value of $1.2 million was recorded as a loss on common stock warrant liabilities in the Consolidated Statements of Operations. The issuance of the October 2023 Common Stock Warrants was also considered as part of the cost of the inducement and were valued using Black-Scholes Model and allocated between the December 2022 Common Stock Warrants and The February 2023 Common Stock Warrants on a weighted basis.  The approximately $7.7 million allocated to the December 2022 Common Stock Warrants was recorded as loss on common stock warrant liabilities in the Consolidated Statements of Operations with a corresponding offset to additional paid-in-capital.

The February 2023 Common Stock Warrants, which were equity classified and treated under ASC 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity, were revalued using Black-Scholes Model to calculate the difference in fair value as a result of the change in exercise price. The difference in fair value of $1.1 million was deemed to be a dividend and recorded to additional paid-in-capital by Checkpoint because Checkpoint had an accumulated deficit on the exercise date. The approximately $6.3 million allocated to the February 2023 Common Stock Warrants from the issuance of the October 2023 Common Stock Warrants was also deemed to be a dividend and recorded to additional paid-in-capital by Checkpoint because Checkpoint had an accumulated deficit on the exercise date.

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A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

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Avenue

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Avenue issued freestanding warrants to purchase shares of its common stock in connection with financing activities in October 2022 (the “October 2022 Warrants”) and January 2023 (the “January 2023 Warrants”, collectively the “Avenue Warrants”) (see Note 13).  The Avenue Warrants are classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside of its control. The October 2022 Warrants were valued using the Monte Carlo simulation approach. In connection with the Avenue January 2023 Registered Direct Offering (see Note 13) in January 2023, the down-round price protection feature was triggered and the exercise price for the October 2022 Warrants was permanently adjusted to $1.55, which was the offering price for the Avenue Registered Offering in January 2023. The Black-Scholes model was used to value the October 2022 Warrants and January 2023 Warrants as of December 31, 2023.

For the year ended December 31, 2023, the decrease in the fair value of the Avenue Warrants resulted in a decrease in common stock warrant liabilities of $4.3 million, with an offsetting gain recorded in the Statements of Operations.

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A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Avenue warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

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Urica

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Urica’s contingently issuable placement agent warrants were issued in connection with Urica’s first close of their preferred offering in December 2022 (see Note 9).  A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Urica’s warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:

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At December 31, 2023 and 2022, the value of Urica’s contingent payment warrant was $0.2 million and $0.1 million, respectively, and was recorded on the consolidated balance sheet.