Armata Pharmaceuticals, Inc. Fair Value Disclosure
4. Fair Value Measurements
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following three levels:
| ● | Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. |
| ● | Level 2: Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. |
| ● | Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
December 31, 2025 | |||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||
Investments in money market fund – financial assets, included in cash and cash equivalents | $ | 4,218 | $ | 4,218 | $ | — | $ | — | |||
Convertible Loan– financial liabilities | 153,860 | — | — | 153,860 | |||||||
December 31, 2024 | |||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||
Investments in money market fund – financial assets, included in cash and cash equivalents | $ | 4,955 | $ | 4,955 | $ | — | $ | — | |||
Convertible Loan– financial liabilities | 32,897 | — | — | 32,897 | |||||||
The Company’s Convertible Loan (Note 7) is measured at fair value and remeasured at each measurement period, with changes in fair value recorded as other income (expense) in the consolidated statement of operations. The Company estimates the fair value of its Convertible Loan using a weighted probability model of various debt settlement scenarios during its term discounted to the reporting date. Conversion option scenarios are valued using option pricing models with assumptions and estimates such as volatility, expected term and risk-free interest rates. Level 3 fair value inputs include probability and timing of various settlement scenarios and selection of comparable companies.
The Company estimated the fair value of its Convertible Loan using the following inputs during the years ended December 31, 2025 and 2024, respectively:
December 31, 2025 | December 31, 2024 | ||||
Discount rate | 18.43%-24.37% | 15.67%-28.28% | |||
Probabilities of settlement scenarios | 0%-100% | 0%-75% | |||
Volatility | 76.40%-101.30% | 83.30%-111.60% | |||
Expected term (in years) | 0.20-1.00 | 0.10-1.20 | |||
Risk-free rate | 3.63%-4.19% | 4.08%-5.33% |
The following table presents a summary of the changes in the fair value of its Convertible Loan for the years ended December 31, 2025 and 2024 (in thousands):
Year Ended December 31, | |||||
2025 | 2024 | ||||
Convertible Loan at the beginning of the period | $ | 32,897 | $ | 58,633 | |
Change in fair value | 120,963 |
| (31,399) | ||
— | 5,663 | ||||
Convertible Loan at the end of the period | $ | 153,860 | $ | 32,897 | |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Mar 21, 2025 | |
| 2023 | Mar 21, 2024 | |
| 2020 | Mar 18, 2021 | |
| 2019 | Mar 19, 2020 | |
| 2018 | Mar 25, 2019 | |
| 2017 | Mar 14, 2018 | |
| 2016 | Mar 27, 2017 | |
| 2015 | Mar 30, 2016 | |
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.