Decoy Therapeutics Inc. Fair Value Disclosure
NOTE 7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, are used to measure fair value:
Level 1-Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2-Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3-Significant unobservable inputs including Decoy’s own assumptions in determining fair value.
The Company issued preferred stock as part of the consideration transferred in its asset acquisition with a fair value of $4,302,000 as of November 12, 2025. This fair value is measured on a non-recurring basis. The valuation was estimated using a Monte Carlo simulation model and is classified as a level 3 measurement within the fair value hierarchy, primarily due to the use of significant unobservable inputs. The key inputs and assumptions used in the various scenarios for the fair value measurement are below:
Inputs and assumptions |
|
Term |
0.5-4.5 years |
Risk-free rate |
3.6% |
Estimated volatility |
120.0% |
Discount for lack of marketability |
18.0%-32.0% |
The Company believes the recorded values of its financial instruments, including cash and cash equivalents, accounts payable, preferred stock issued to Legacy Decoy debtholder and note payable approximate their fair values due to the short-term nature of these instruments.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 21, 2025 | |
| 2023 | Mar 22, 2024 | |
| 2022 | Mar 27, 2023 | |
| 2021 | Mar 25, 2022 | |
| 2020 | Mar 18, 2021 | |
| 2019 | Mar 23, 2020 | |
| 2018 | Mar 6, 2019 | |
| 2017 | Mar 7, 2018 | |
| 2016 | Mar 8, 2017 | |
| 2015 | Mar 8, 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.