NATURAL HEALTH TRENDS CORP Fair Value Disclosure
5. FAIR VALUE MEASUREMENTS
As of December 31, 2025, cash and cash equivalents and marketable securities include the Company’s investments in money market funds, municipal debt securities and corporate debt securities. Debt securities classified as cash equivalents are required to be accounted for in accordance with FASB Accounting Standards Codification 320, Investments - Debt and Equity Securities. As such, the Company determined its investments in debt securities held at December 31, 2025 should be classified as available-for-sale and carried at fair value with unrealized gains and losses reported in stockholders’ equity. The cost of debt securities is adjusted for amortization of premiums and discounts to maturity. This amortization is included in other income and expense. Realized gains and losses, as well as interest income, are also included in other income and expense. The fair values of securities are based on quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs.
Investments by category included in cash equivalents and marketable securities at the end of each period were as follows (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Fair Value Level1 | Adjusted Cost | Gross Unrealized Losses | Fair Value | Adjusted Cost | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| Money market funds | Level 1 | $ | 581 | $ | — | $ | 581 | $ | 2,092 | $ | — | $ | 2,092 | |||||||||||||
| Municipal debt securities | Level 2 | 4,893 | (1 | ) | 4,892 | 3,458 | — | 3,458 | ||||||||||||||||||
| Corporate debt securities | Level 2 | 17,513 | (9 | ) | 17,504 | 30,491 | (26 | ) | 30,465 | |||||||||||||||||
| Total investments | $ | 22,987 | $ | (10 | ) | $ | 22,977 | $ | 36,041 | $ | (26 | ) | $ | 36,015 | ||||||||||||
1 FASB Topic 820, Fair Value Measurements, establishes a fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2018 | Apr 26, 2019 | |
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.