FEMASYS INCFEMY
FEMASYS INC Fair Value Disclosure
(3)
Fair Value of Financial Instruments
The following
fair value hierarchy table presents information about the Company’s assets and
liabilities measured at fair value on a recurring basis:
|
Fair value measurement at
Reporting Date |
||||||||||||
| (Level 1) | (Level 2) | (Level 3) | ||||||||||
|
As of December 31, 2025
|
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|
Liabilities:
|
||||||||||||
|
AMPA liability
|
$ | - | ||||||||||
|
Conversion Option liability
|
$ | 2,014,000 | ||||||||||
|
Warrants liabilities
|
$ | 4,943,000 | ||||||||||
The fair value of the AMPA
(see Note 9(f)) was measured at inception and at the December 31, 2025
reporting period using
Level 3 inputs. The fair value was deemed de minimis at both date of
issuance date and as of the December 31, 2025 reporting period.
The fair value of the
Conversion Option liability and Warrants liabilities related to the 2025 Notes
(see Note 7b) were measured at inception and at the December 31, 2025 reporting
period. The change in fair value between the periods was recognized as gains in
other (expense) income in the statements of comprehensive loss and are
summarized below:
|
Fair Value of Conversion Option Liability |
Fair Value of Warrants Liabilities | |||||||
| Fair value at issuance | $ | 2,517,000 | $ | 5,674,000 | ||||
| Change in fair value (gain) | (503,000 | ) | (731,000 | ) | ||||
| Balance at December 31, 2025 | $ | 2,014,000 | $ | 4,943,000 |
The December 31, 2025 fair
value of the Conversion Option liability and Warrants liabilities were
estimated using the Black-Scholes option pricing model Level 3 inputs, with the
following assumptions:
| Conversion Option Liability | Warrants Liabilities | |||||||
| Expected term (in years) | 2.84 | 2.84 | ||||||
| Risk‑free interest rate | 3.41 | % | 3.41 | % | ||||
| Dividend yield | — | % | — | % | ||||
| Expected volatility | 20 | % | 20 | % | ||||
| Exercise price | $ | 0.73 | $ | 0.81-1.10 | ||||
| Stock price | $ | 0.58 | $ | 0.58 | ||||
| Black-Scholes value | $ | 0.047 | $ | 0.005-0.030 |
The valuations of the
Conversion Option liability and Warrants liabilities at issuance were
calibrated such that the aggregate fair values of all instruments issued
together (including the 2025 Notes which are not subsequently remeasured at
fair value) equaled total gross proceeds received of $12 million in the
November 2025 Financing (see Note 7). This calibration resulted in an expected
volatility assumption of 20% which was also used in the valuation as of
December 31, 2025. If the Company used the historical volatility of its common
stock as the expected volatility assumption, the estimated value of the
Conversion Option liability and Warrants liabilities would be higher. Similarly, the expected terms of the
Conversion Option and Warrants were based on the Company’s option to mandate
conversion of the Notes upon achieving certain milestones (see Note 7) as well
as the expectation that the Warrants will be exercised upon a significant
increase in the price of the Company’s common stock. If the Company used the contractual term of
the Conversion Option and Warrants as the expected term, the estimated value of
the Conversion Option liability and Warrants liabilities would be higher.
We review the fair value hierarchy classification of our applicable assets and liabilities on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. During the year ended December 31, 2025, there were no transfers between Level 1, Level 2 and Level 3.
The carrying amounts of cash and cash
equivalents, accounts receivable, customer deposits, accounts payable and
accrued expenses approximate fair value due to their short-term nature. As of
December 31, 2025, the fair value of the 2025 notes (excluding the conversion
option, see Note 7b), calculated using a discounted cash flow analysis using
Level 3 inputs, was approximately $3.8 million. As of December 31, 2024, the
fair value of the Company’s 2023 Notes (see Note 7a), calculated using a discounted
cash flow analysis using Level 3 inputs, was approximately $6.5 million. The
Company uses a Black-Scholes option valuation model to determine the grant date
fair value of employee stock options which uses Level 2 inputs. See Note 10 for
a description of inputs used.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Mar 24, 2022 | |
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.