Kodiak AI, Inc.KDK
Kodiak AI, Inc. Fair Value Disclosure
5. Fair Value Measurements
The carrying amounts of the Company’s financial instruments, including accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities and the current portion of operating lease liabilities approximate their fair value due to the short-term nature of those instruments. The Company elected the fair value option for the second lien loans. The fair value of the Company’s other borrowings approximates their carrying value, or amortized cost, due to the short-term nature of the obligations or the relevant prevailing market rate of interest.
The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
| December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Money market funds | $ | 33,320 | $ | — | $ | — | $ | 33,320 | |||||||||||||||
U.S. Treasury securities | — | 69,908 | — | 69,908 | |||||||||||||||||||
| Total assets measured at fair value | $ | 33,320 | $ | 69,908 | $ | — | $ | 103,228 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Common stock warrants | |||||||||||||||||||||||
| PIPE Warrants | $ | — | $ | — | $ | 110,881 | $ | 110,881 | |||||||||||||||
| NRA Warrants | — | — | 47,465 | 47,465 | |||||||||||||||||||
| Second lien loan | — | — | 10,872 | 10,872 | |||||||||||||||||||
| Total liabilities measured at fair value | $ | — | $ | — | $ | 169,218 | $ | 169,218 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Money market funds | $ | 9,439 | $ | — | $ | — | $ | 9,439 | |||||||||||||||
| Total assets measured at fair value | $ | 9,439 | $ | — | $ | — | $ | 9,439 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| SAFEs | $ | — | $ | — | $ | 59,301 | $ | 59,301 | |||||||||||||||
| Redeemable convertible preferred stock warrant liabilities | — | — | 1,619 | 1,619 | |||||||||||||||||||
| Total liabilities measured at fair value | $ | — | $ | — | $ | 60,920 | $ | 60,920 | |||||||||||||||
All of the Company’s money market funds and U.S. Treasury securities are highly liquid and actively traded marketable securities that generally transact at a stable $1.00 net asset value representing its estimated fair value.
The Company measures its warrant liabilities (see Note 11), second lien loans (see Note 8), and SAFEs (see Note 9) at fair value based on significant inputs not observable in the market and therefore represent Level 3 inputs.
The valuations of the warrant liabilities, second lien loans, and future equity obligations use assumptions and estimates the Company believes would be made by a market participant in making the same valuation. Changes in the fair value of these instruments were recognized in other (expenses) income in the Company’s consolidated statements of operations and comprehensive loss.
Warrant Liabilities - PIPE Warrants and NRA Warrants
The Company determined the fair value of each of its PIPE Warrants and NRA Warrants using a Monte Carlo simulation model, applying the following key assumptions for the period from the issuance date of September 24, 2025 to December 31, 2025: a risk-free rate of 3.8% and volatility of 55.0%. Upon issuance, the fair values of the PIPE Warrants and NRA Warrants were recorded under loss on issuance of equity instruments in the consolidated statements of operations and comprehensive loss. Subsequent changes in the fair value were recorded under change in fair value of common stock warrants in the consolidated statements of operations and comprehensive loss.
Second Lien Loans
At the Closing, all then outstanding second lien loans, excluding the $10.0 million SAFE from an affiliate of AACT that was exchanged for a second lien loan, were converted into Kodiak common stock (see Note 8). Immediately prior to such conversion, the aggregate principal amount of the second lien loans that converted was $43.9 million and had an estimated fair value of $67.4 million, which was determined based on the opening price of the Company's common stock on the first day of trading following the consummation of the Merger.
The Company determined the fair value of the outstanding second lien loans with a principal amount of $10.0 million using a pay-off-to-maturity method, with an implied discount rate of 23.7% as the key valuation assumption for the period from exchanged to December 31, 2025.
Simple Agreements for Future Equity
At the Closing, all outstanding SAFEs were converted into shares of Kodiak common stock (see Note 9). Immediately prior to such conversion, the SAFE obligations were remeasured to a fair value of $263.0 million, which was determined based on the opening price of the Company's common stock on the first day of trading following the consummation of the Merger. Accordingly, no SAFEs remained outstanding as of December 31, 2025.
Legacy Kodiak Warrant Liabilities - Redeemable Convertible Preferred Stock Warrants
At the Closing, certain redeemable convertible preferred stock warrants were automatically net exercised (see Note 11). The remaining outstanding redeemable convertible preferred stock warrants were assumed by Kodiak to become warrants to purchase shares of its common stock, which were remeasured to fair value on the Closing Date and reclassified to equity as they met the conditions for equity classification (see Note 13). The Company determined the fair value of its redeemable convertible preferred stock warrants as of the Closing Date by using a Black-Scholes option-pricing model with key assumptions as follows: exercise price range of $0.01 to $3.54, expected term range of 0.0 years to 4.8 years, risk-free rate range of 3.6% to 3.9%, and volatility of 55.0%.
Fair Value Remeasurement
The following table summarizes changes in the estimated fair values of these liabilities (in thousands):
| PIPE Warrants | Non-Redemption Warrants | Second Lien Loans | SAFE | Legacy Kodiak Redeemable Convertible Preferred Stock Warrants | |||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | — | $ | — | $ | — | $ | 10,000 | $ | 2,045 | |||||||||||||||||||
| Issuance during the year | — | — | — | 45,192 | — | ||||||||||||||||||||||||
| Fair value remeasurement | — | — | — | 4,109 | (426) | ||||||||||||||||||||||||
| Balance as of December 31, 2024 | — | — | — | 59,301 | 1,619 | ||||||||||||||||||||||||
| Issuance during the year | 86,359 | 36,968 | 43,865 | 23,660 | — | ||||||||||||||||||||||||
| Exchange of SAFE for second lien loan | — | — | 10,000 | (10,000) | — | ||||||||||||||||||||||||
| Reclassification of Assumed Kodiak Warrants | — | — | — | — | (3,842) | ||||||||||||||||||||||||
| Fair value remeasurement | 24,522 | 10,497 | 24,387 | 190,075 | 7,272 | ||||||||||||||||||||||||
| Settlement via conversion or exercise | — | — | (67,380) | (263,036) | (5,049) | ||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | 110,881 | $ | 47,465 | $ | 10,872 | $ | — | $ | — | |||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 11, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
| 2023 | Feb 28, 2024 | |
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.