Put option3 Nov 2023 12:56
Vela Option Liability
The option liability was valued using public market research to determine the probability of success that similar studies in the respiratory and cardiovascular disease areas and a Monte Carlo Simulation model. In reviewing the public market research, the Company determined the phase transition success rates for trials similar to the Covid Asset from Phase I to Phase II was 52.7%. In applying this rate to the sale of future revenue consideration realized , the Company determined the total underlying Covid Asset values to be $4.6 million. The Company used the underlying Covid Asset value within a Monte Carlo Simulation model to determine the fair value was $1.5 million at June 30, 2023. The option was issued in the second quarter of 2023, and as such, did not have a fair value at December 31, 2022. In accordance with ASC 815, the fair value of the option will be remeasured at the end of each reporting period, with changes in fair value recorded to the statement of operations and total comprehensive loss. For the six months ended June 30, 2023, the Company recorded an option liability of $1.5 million on the balance sheet.
The Company entered into an Agreement with SGSC to approve an Indirect Investment from Vela Technologies PLC ("Vela”) on October 20, 2020, whereby Vela agreed to provide funding to the Company for an indirect investment in an asset related to COVID-19 (the "Covid Asset”) for use in the field in exchange for 8% of future revenue earned if the Covid Asset is commercialized (the "Vela Agreement”). Total consideration under the Vela Agreement was $2.9 million (£2.35 million), consisting of $1.6 million (£1.25 million) cash and the issuance of 1.1 billion ordinary shares in Vela, which based on the fair value of stock at the September 10, 2021, was $1.3 million. The Company received the $1.6 million (£1.25) million cash consideration during the year ended December 31, 2020. This consideration was recorded in deferred income as a liability on the balance sheet in accordance with ASC 470-10.
In April 2023, the Company entered into an agreement with Vela which granted Vela the right, but not the obligation, to sell its 8% royalty interest in the Covid Asset back to Conduit. Vela paid a one-time, non-refundable option fee to Conduit of $0.5 million (£0.4 million). Total consideration payable to Vela upon exercise of the option is $5.1 million (£4.0 million) worth of NewCo shares, following the consummation of the Merger, at a price per share equal to the volume-weighted average price per share over the ten (10) business days prior to the date of the notice of exercise. The option contains a provision stating that in no event shall the price per share for the consideration shares be lower than $5 or higher than $15. The option is exercisable in whole at any time from the close of the Merger (the "Effective Time”) until the earlier of (i) the date that is six (6) months from the Effective Tim
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