MNTN, Inc.MNTN
MNTN, Inc. Fair Value Disclosure
Fair Value Measurements
The Company’s financial liabilities measured at fair value on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Level 3 | |||||||||||
| Series D warrants | $ | — | $ | 7,882 | |||||||
| Common stock warrants | — | 10,976 | |||||||||
| Embedded derivative liabilities | — | 24,931 | |||||||||
| Contingent liabilities | 166 | — | |||||||||
| Total financial liabilities | $ | 166 | $ | 43,789 | |||||||
The Company’s financial liabilities subject to fair value procedures were comprised of the following:
•Series D warrants – These warrants were issued to noteholders in connection with the Subordinated Convertible Promissory Notes (the “Convertible Notes”) in 2023. The fair value of these warrants was estimated using the fair value of the Company’s Series D Preferred Stock adjusted for the probability that the Convertible Notes would reach maturity at each measurement date, which are unobservable inputs. The Series D warrants were recorded within warrant liabilities on the consolidated balance sheets. See Note 9, Convertible Debt and Warrant Liabilities, for details of the terms and conditions of the Series D warrants.
•Common stock warrants – These warrants were issued to a lender in connection with a bank loan facility extension in 2018. The fair value of these warrants was estimated using the fair value of the Company’s common stock at each
measurement date, which, prior to the IPO, was an unobservable input. Subsequent to the IPO, the fair value of the Company's common stock was based on the closing price of the Company's Class A common stock on the valuation date, which is an observable input. The common stock warrants were recorded within warrant liabilities on the consolidated balance sheets and were transferred from Level 3 to Level 1 on the fair value hierarchy subsequent to the IPO in May 2025. The warrants were exercised during the year ended December 31, 2025. See Note 9, Convertible Debt and Warrant Liabilities, for details of the terms and conditions of the common stock warrants.
•Embedded derivative liabilities – The embedded derivative liabilities represented the embedded features of the Convertible Notes issued in 2023. The Company estimated the fair value of the embedded derivative liabilities using a with-and-without model which compares the estimated fair value of the underlying instrument with the embedded features to the estimated fair value of the underlying instrument without the embedded features, with the difference representing the estimated fair value of the embedded derivative features. The with-and-without model includes significant unobservable inputs including the timing and probability weighting of potential liquidity events, discount rate, illiquidity discount, and expected volatility. Other assumptions used in the model that are not significant unobservable estimates are interest rate and risk-free rate. See Note 9, Convertible Debt and Warrant Liabilities, for details on the embedded derivative liabilities.
•Contingent liabilities – The Company issued contingent consideration in connection with its 2021 acquisition of Maximum Effort Marketing. The Company estimates the fair value of its contingent liabilities using a Monte Carlo simulation model. Contingent liabilities are recorded within other non-current liabilities on the consolidated balance sheets. See Note 10, Other Liabilities, for details of the terms and conditions of the contingent liabilities.
•Convertible debt – On April 1, 2025, the Company and the holders of the Convertible Notes executed an Omnibus Amendment and Note Conversion Agreement (the "Note Conversion Amendment"). As the terms of the Note Conversion Amendment were determined to be substantially different than the terms of the Convertible Notes prior to the Note Conversion Amendment, the modification was accounted for as a debt extinguishment and the modified Convertible Notes were recorded on the consolidated balance sheets at fair value. The Company estimated the fair value of the Convertible Notes using a scenario-based approach and unobservable inputs including the timing and probability weighting of potential liquidity events, discount for lack of marketability on securities, discount rate, interest rates, expected volatility, and dividend yields. See Note 9, Convertible Debt and Warrant Liabilities, for details on the terms and conditions of the modified Convertible Notes and the Company's election of the fair value option.
Any changes in these assumptions can change the valuation significantly. Changes in fair value are recognized within and on the consolidated statements of operations.
A summary of the changes in fair value of the Company’s Level 3 financial instruments for the year ended December 31, 2025 were as follows (in thousands):
| Series D Warrants | Common Stock Warrants | Embedded Derivative Liabilities | Contingent Liabilities | Convertible Debt | Total | ||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 7,882 | $ | 10,976 | $ | 24,931 | $ | — | $ | — | $ | 43,789 | |||||||||||||||||||||||
| Additions | — | — | — | — | 119,257 | 119,257 | |||||||||||||||||||||||||||||
| Extinguishments | — | — | (41,505) | — | (124,047) | (165,552) | |||||||||||||||||||||||||||||
| Change in fair value included in other expense, net | (7,882) | 711 | 16,574 | 166 | 4,395 | 13,964 | |||||||||||||||||||||||||||||
| Change in fair value included in interest income (expense), net | — | — | — | — | 395 | 395 | |||||||||||||||||||||||||||||
| Transfers out of Level 3 | — | (11,687) | — | — | — | (11,687) | |||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | — | $ | — | $ | — | $ | 166 | $ | — | $ | 166 | |||||||||||||||||||||||
The range of assumptions used to calculate the fair value of the Series D Warrants, embedded derivative liabilities, contingent liabilities, and convertible debt during the year ended December 31, 2025 were as follows:
| Series D Warrants | Embedded Derivative Liability | Contingent Liabilities | Convertible Debt | ||||||||||||||||||||
| Interest rate | - | 6.0% | - | 6.0% | |||||||||||||||||||
| Risk-free rate | 4.2% | 3.9% - 4.3% | 3.5% - 3.7% | 3.9% - 4.3% | |||||||||||||||||||
| Discount rate | - | 40.0% | - | 40.0% | |||||||||||||||||||
| Probability weight | 10.0% | 1.3% - 75.0% | - | 1.3% - 75.0% | |||||||||||||||||||
| Expected volatility | 65.0% | 65.0% | 61.0% - 70.0% | 65.0% | |||||||||||||||||||
| Expected term (years) | 0.8 | 0.3 - 2 | 1.3 - 1.8 | 0.3 - 2 | |||||||||||||||||||
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.