Aterian, Inc. Fair Value Disclosure
| 6. | FAIR VALUE MEASUREMENTS |
The following tables summarize the fair value of the Company’s financial assets that are measured at fair value as of December 31, 2025 and December 31, 2024 (in thousands):
| December 31, 2025 | ||||||||||||
| Fair Value Measurement Category | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Liabilities: | ||||||||||||
| Fair value of warrant liabilities | — | — | — | |||||||||
| December 31, 2024 | ||||||||||||
| Fair Value Measurement Category | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Liabilities: | ||||||||||||
| Fair value of warrant liabilities | — | — | 109 | |||||||||
The following table summarizes the Company's warrant activity during the year ended December 31, 2025 (in thousands):
| December 31, 2025 | ||||
| Warrants liabilities as of January 1, 2025 | $ | 109 | ||
| Change in fair value of warrants | (109 | ) | ||
| Warrants liabilities as of December 31, 2025 | $ | — | ||
The fair value of the stock purchase warrants issued in connection with the Company’s common stock offering on March 1, 2022 were measured using the Black-Scholes model. Inputs used to determine the estimated fair value of the warrant liabilities include the fair value of the underlying stock at the valuation date, the term of the warrants, and the expected volatility of the underlying stock. The significant unobservable input used in the fair value measurement of the warrant liabilities is the estimated term of the warrants. Upon the issuance of the stock purchase warrants, the Company evaluated the terms of each warrant to determine the appropriate accounting and classification pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and FASB Accounting Standards Codification Topic 815, Derivatives and Hedging (“ASC 815”). Based on the Company’s evaluation and due to certain terms in the warrant agreements, it concluded the stock purchase warrants should be classified as liability with subsequent remeasurement as long as such warrants continue to be classified as liabilities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 23, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2023 | Mar 19, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 16, 2022 | |
| 2019 | Mar 30, 2020 | |
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.