What level of assumptions are the volatility and discount rates primarily considered in The Standardx's valuation methodology for the UVC transaction?

According to The Standardx's 2025 Franchise Disclosure Document, the volatility and discount rates used in the valuation methodology for the UVC transaction are primarily considered Level Three assumptions. This classification relates to how The Standardx determines the fair value of its retained investment in the entity. Specifically, the fair value was determined using a Black-Scholes-Merton option-pricing model of common shares in the entity.

Level Three assumptions typically involve significant management judgment and estimation. These are unobservable inputs, meaning they are not based on market data but rather on the company's own assumptions about what market participants would use in pricing the asset or liability. For a prospective franchisee, this indicates that the valuation is highly dependent on The Standardx's internal assessments and models, which may not be easily verifiable or comparable to external benchmarks.

The use of Level Three assumptions introduces a higher degree of uncertainty and potential variability in the reported fair value. This is because these assumptions are subjective and can be influenced by various factors, including the company's expectations, historical data, and market conditions. Therefore, the valuation could change significantly if different assumptions were used.

For a potential franchisee, understanding that these valuations rely on Level Three assumptions is crucial. It highlights the importance of carefully reviewing the underlying assumptions and judgments made by The Standardx, as well as considering the potential impact of changes in these assumptions on the overall financial picture. It would be prudent to seek clarification from The Standardx regarding the specific inputs and methodologies used in these valuations to fully assess the associated risks and uncertainties.