NOTE 14. FAIR VALUE MEASUREMENTS

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

The Company had cash and cash equivalents of £2.5m as of December 31, 2023. The cash and cash equivalents are carried at fair value due to the liquid nature of the instruments and are measured in Level 1.

In addition, the Company also had numerous outstanding warrants that were classified in Level 2 due to our use of implied volatility in determining the expected volatility input for purposes of determining the instruments fair value via the Black-Scholes valuation model. The details of the issued warrants were as follows:

On February 10, 2022, the Company completed its IPO and issued ADSs and listed warrants to buy ADSs. The ADSs and warrants are considered two freestanding financial instruments because each can be traded separately. The exercise price of the Warrants is $4,250 per ADS (on a post-split basis) and will expire on the sixth anniversary of the date of issuance. The exercise price is subject to standard anti-dilutive adjustments in the event of certain stock splits, stock combinations, stock dividends or recapitalizations, and it is also subject to adjustment in certain events specified in the warrant agreement.

On November 27, 2022, the Company entered into the First Purchase Agreement with Investors as purchasers. Pursuant to the First Purchase Agreement, the Company sold, and the Investors purchased in a private placement an aggregate of 7,750 ADSs, pre-funded warrants to purchase up to 65,750 ADS (the “Pre-Funded Warrants”), Series A purchase warrants to purchase up to 73,500 ADSs (the “Series A Ordinary Warrants”) and Series B purchase warrants to purchase up to 73,500 ADSs (the “Series B Ordinary Warrants” and together with the Series A Ordinary Warrants, the “Ordinary Warrants”) for aggregate gross proceeds of $7,350,000, excluding any proceeds that may be received upon exercise of the Ordinary Warrants. In addition, the Company also issued placement agent warrants to purchase 5,513 ADSs. The purchase price for each ADS and associated Ordinary Warrants is $100 (on a post-split basis) and the purchase price per each Pre-Funded Warrant and associated Ordinary Warrants is $99.98 (on a post-split basis).

On March 27, 2023, the Company, entered into a Second Securities Purchase Agreement with Investors, pursuant to which the Company agreed to issue and sell an aggregate of 10,750 ADSs, pre-funded warrants to purchase up to 161,125 Pre-Funded Warrants, and Series C purchase warrants to purchase up to 171,875 ADSs Securities. In addition, the Company also issued placement agent warrants to purchase 12,891 ADSs. The purchase price for each ADS and associated Ordinary Warrants was $32 (on a post-split basis) and the purchase price per each Pre-Funded Warrant and associated Ordinary Warrants was $31.98 (on a post-split basis). The Ordinary Warrants were immediately exercisable, expire five (5) years from the date of issuance and the Pre-Funded Warrants may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

On July 10, 2023, the Company entered into a warrant amendment with an existing investor pursuant to which the Company and the investor agreed that certain Series A and Series B warrants to purchase 140,000 ADSs of the Company that were previously issued on November 30, 2022 (the “November 2022 Warrants”) and certain Series C warrants to purchase 171,875 ADSs of the Company that were previously issued on March 30, 2023 (the “March 2023 Warrants,” and together with the November 2022 Warrants, the “Existing Warrants”) would be amended as follows: (i) amend the current exercise price on all Existing Warrants so that it is now equal to £7.00, (ii) extend the termination date on 50% of the November 2022 Warrants and all of the March 2023 Warrants until May 30, 2028 and (iii) amend to the definition of “Black Scholes Value” included in Section 3(e) of the Existing Warrants. As a result of the amendments to the related warrants (Series A, Series B and Series C) they were reclassified to equity as they no longer contained a strike price denominated in a foreign currency. Further, the Series A, B and C warrants were also re-measured to a fair value of $6.40 per warrant as of the modification date using the Black-Scholes model with the following inputs:

SCHEDULE OF WARRANT USING BLACK-SCHOLES MODEL INPUTS

On August 30, 2023, the Company entered into an agreement with its Series A and B warrant holders whereby it induced 70,000 and 70,000 of the outstanding warrants, respectively. In addition, the Company also entered into an agreement with its Series C warrant holders to induce all of the outstanding warrants (171,875). The inducement resulted in gross proceeds to the Company of approximately $2.8 million. In order to incentivize the inducement, the Company issued 623,750 Series D warrants to the Series, A, B and C warrant holders. In addition, the Company also issued placement agent warrants to purchase 23,391 ADSs. The Ordinary Warrants were immediately exercisable and expire five 5.5 years from the date of issuance.

On December 18, 2023, the Company, entered into a Securities Purchase Agreement with Investors, pursuant to which the Company agreed to issue and sell an aggregate of 75,000 ADSs, pre-funded warrants to purchase up to 1,675,000 Pre-Funded Warrants, and Series C purchase warrants to purchase up to 1,750,000 ADSs Securities. The offering resulted in gross proceeds of $3.5 million. In addition, the Company also issued placement agent warrants to purchase 131,250 ADSs. The purchase price for each ADS and associated Ordinary Warrants was $2.00 and the purchase price per each Pre-Funded Warrant and associated Ordinary Warrants was $1.99. The Ordinary Warrants were immediately exercisable, expire five (5) years from the date of issuance and the Pre-Funded Warrants may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

While the Series D and Series E warrants are equity classified, there are remaining IPO, Series A and Series B warrants that are still liability classified. However, as a result of being significantly out of the money, the fair value of the liability classified warrants was not material as of December 31, 2023.

Unlisted warrants in issue

Series A warrants

The fair value of each of the warrants was approximately $0.37 and $51.60 as of December 31, 2023 and 2022, respectively.

The inputs associated with calculating the fair value of the warrants are considered to be Level 2 and were valued using a Black-Scholes valuation model. The inputs were as follows:

SCHEDULE OF FAIR VALUE ASSETS AND LIABILITIES MEASURED ON RECURRING AND NON RECURRING BASIS 

Series B warrants

The fair value of each of the warrants was approximately $0.01 and $36.80 as of December 31, 2023 and 2022, respectively.

Series A-B placement agent warrants

The fair value of each of the warrants was $0.31 and $51.20 as of December 31, 2023 and 2022, respectively.

Series C warrants

The fair value of each of the warrants was $21.63 as of March 30, 2023 (issuance date). The warrants were induced during August of 2023 (further information is included in Note 12).

Series C placement agent warrants

The fair value of each of the warrants was $0.69 as of December 31, 2023 and $21.09 as of March 30, 2023 (issuance date), respectively.

Series D warrants

The fair value of each of the warrants was $8.46 as of the August 30, 2023 issuance date. As the warrants were equity classified, they were not re-measured to fair value as of December 31, 2023.

Series D placement agent warrants

The fair value of each of the warrants was $8.20 as of the August 30, 2023 issuance date. As the warrants were equity classified, they were not re-measured to fair value as of December 31, 2023.

Series E warrants

The fair value of each of the warrants was $1.97 as of the December 18, 2023 issuance date. As the warrants were equity classified, they were not re-measured to fair value as of December 31, 2023.

Series E placement agent warrants

The fair value of each of the warrants was $1.89 as of the December 18, 2023 issuance date. As the warrants were equity classified, they were not re-measured to fair value as of December 31, 2023.