GCT Semiconductor Holding, Inc. Fair Value Disclosure
5. Fair Value of Measurements
Recurring Fair Value Measurements
The following financial instruments are measured at fair value on a recurring basis (in thousands):
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December 31, 2025 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Liabilities: |
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Convertible promissory notes |
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$ |
— |
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|
$ |
— |
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|
$ |
6,046 |
|
|
$ |
6,046 |
|
Warrant liabilities |
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|
1,380 |
|
|
|
— |
|
|
|
1,490 |
|
|
|
2,870 |
|
Common stock forward liability |
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|
— |
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|
|
— |
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|
|
3 |
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3 |
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|
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December 31, 2024 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Liabilities: |
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Convertible promissory notes |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,947 |
|
|
$ |
4,947 |
|
Warrant liabilities |
|
|
2,330 |
|
|
|
— |
|
|
|
1,420 |
|
|
|
3,750 |
|
Common stock forward liability |
|
|
— |
|
|
|
— |
|
|
|
315 |
|
|
|
315 |
|
Valuation Techniques and Inputs
The table below presents valuation techniques and inputs used in the fair value measurement categorized within Level 3 of the fair value hierarchy (in thousands):
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Valuation techniques |
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Inputs |
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December 31, 2025 |
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|
December 31, 2024 |
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Convertible promissory notes, net of current |
|
Binomial Lattice Model (“BLM”) |
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Stock price, volatility, remaining term, risk-free rate, credit spread |
|
$ |
4,939 |
|
|
$ |
4,947 |
|
Convertible promissory notes, net of current |
|
Discounted Cash Flow (“DCF”) |
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Discount rate, risk-free rate, credit spread, contractual cash flows |
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|
1,107 |
|
|
|
— |
|
Warrant liabilities associated with Private Warrants |
|
Black Scholes Merton |
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Exercise price, term to expiration, volatility, risk-free rate |
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|
1,490 |
|
|
|
1,420 |
|
Common stock forward liability |
|
DCF |
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Various utilization scenarios, risk-free rate, remaining term |
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|
3 |
|
|
|
315 |
|
As of December 31, 2025, the key inputs for the convertible promissory notes using the BLM were as follows: stock price of $1.20, implied volatility of 94.0%, remaining term of 2.2 years, risk-free rate of 3.48%, and credit spread of 5.80%.
As of December 31, 2025, the key inputs for the Indigo convertible promissory note using the DCF model were as follows: a remaining term of 0.04 years, risk-free rate of 3.74%, and credit spread of 5.80%.
The Public Warrants were initially classified within Level 3 of the fair value hierarchy due to the use of unobservable inputs. As of December 31, 2025, the Public Warrants were reclassified to Level 1 due to the increased availability of quoted prices in an active market for identical instruments.
As of December 31, 2025, the key inputs used to measure the private placement warrants using the BSM were as follows: exercise price of $11.50 per share, term to expiration of 3.2 years, volatility of 94.0%, and a risk-free rate of 3.54%. As of December 31, 2025, the key inputs for the other warrant liabilities using the BSM were as follows: an exercise price of $10.00 per share, or $18.75 per share, term to expiration ranging from 0.2 years to 0.8 years, volatility ranging from 65.0% to 71.4%, and a risk-free rate ranging from 3.49% to 3.68%.
As of December 31, 2025, the key inputs for the common stock forward valuation using the DCF model were as follows: a remaining term of 0.4 years and future risk-free rate estimates ranging from 3.63% to 3.74% for this period.
The following table sets forth a summary of the changes in the fair value of the convertible promissory notes (in thousands):
As of December 31, 2024 |
|
$ |
4,947 |
|
Borrowing |
|
|
1,860 |
|
Conversion |
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|
(1,097 |
) |
|
|
336 |
|
|
As of December 31, 2025 |
|
$ |
6,046 |
|
The following table sets forth a summary of the changes in the fair value of the warrant liabilities (in thousands):
As of December 31, 2024 |
|
$ |
3,750 |
|
Change in fair value |
|
|
(880 |
) |
As of December 31, 2025 |
|
$ |
2,870 |
|
The following table sets forth a summary of the changes in the fair value of the common stock forward liability (in thousands):
As of December 31, 2024 |
|
$ |
315 |
|
Change in fair value |
|
|
(312 |
) |
As of December 31, 2025 |
|
$ |
3 |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 25, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2023 | Mar 8, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Mar 18, 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.