SPRUCE BIOSCIENCES, INC. Fair Value Disclosure
3. Fair Value Measurements
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company classifies money market funds as Level 1 investments as the Company uses quoted prices in active markets for identical assets to determine the fair value. The Company classified its previous warrant liability as a Level 3 instrument as it was valued using the Black-Scholes option pricing model.
The following table summarizes the Company's financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):
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December 31, 2025 |
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Total |
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Level 1 |
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Level 2 |
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Level 3 |
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Financial assets: |
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|
|
|
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Cash equivalents: |
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|
|
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Money market funds |
|
$ |
48,458 |
|
|
$ |
48,458 |
|
|
$ |
— |
|
|
$ |
— |
|
Total |
|
$ |
48,458 |
|
|
$ |
48,458 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
December 31, 2024 |
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Total |
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Level 1 |
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|
Level 2 |
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Level 3 |
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Financial assets: |
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Cash equivalents: |
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|
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Money market funds |
|
$ |
37,802 |
|
|
$ |
37,802 |
|
|
$ |
— |
|
|
$ |
— |
|
Total |
|
$ |
37,802 |
|
|
$ |
37,802 |
|
|
$ |
— |
|
|
$ |
— |
|
The Company did not have any financial liabilities recorded at fair value on a recurring basis as of December 31, 2025 and 2024.
HBM Warrant Liability
In January 2025, the Company issued pre-funded warrants that in total were to be equal to 4.99% of the Company's issued and outstanding common stock as of the date of exercise of such pre-funded warrants. See Note 8 “License and Purchase Agreements — HBM Alpha Therapeutics, Inc.” for further discussion regarding such pre-funded warrants. In June 2025, the Company amended these pre-funded warrants to extend the exercise period to December 31, 2025. In December 2025, these pre-funded warrants were fully exercised.
These pre-funded warrants were accounted for as liabilities under ASC 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”), as these pre-funded warrants provided for a settlement provision that did not meet the requirements of the indexation guidance under ASC 815-40. These pre-funded warrants were recorded at fair value as a liability. The change in fair value of the warrant liability is included on the face of the statement of operations and comprehensive loss.
These pre-funded warrants were measured using a Black-Scholes option pricing model with the following inputs as of issuance and exercise:
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Grant Date |
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Exercise Date |
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Exercise price |
|
$ |
0.75 |
|
|
$ |
0.75 |
|
Expected term (in years) |
|
|
0.5 |
|
|
0.0 - 0.1 |
|
|
Risk-free interest rate |
|
|
4.3 |
% |
|
3.7% - 3.8% |
|
|
Expected dividend rate |
|
|
0.0 |
% |
|
|
0.0 |
% |
Expected stock price volatility |
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|
65.8 |
% |
|
75.2% - 132.6% |
|
|
The following table provides a roll forward of the aggregate fair value of the Company’s warrant liability (in thousands):
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|
Warrant Liability |
|
|
Fair value as of December 31, 2024 |
|
$ |
— |
|
Grant date fair value |
|
|
748 |
|
Change in fair value |
|
|
3,500 |
|
Reclass to additional paid-in capital upon exercise |
|
|
(4,248 |
) |
Fair value as of December 31, 2025 |
|
$ |
— |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 9, 2026 | Showing above |
| 2024 | Apr 15, 2025 | |
| 2023 | Mar 18, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 22, 2021 | |
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.