ZEVRA THERAPEUTICS, INC.ZVRA
ZEVRA THERAPEUTICS, INC. Fair Value Disclosure
Fair Value of Financial Instruments
The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs, when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:
•Level 1: Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
•Level 2: Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
•Level 3: Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.
The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and other receivables, and accounts payable and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached regarding fair value measurements as of December 31, 2025, and 2024 (in thousands):
| Balance at December 31, 2025 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| CVR liability | $ | 1,540 | $ | — | $ | — | $ | 1,540 | |||||||||||||||
| Warrant liabilities | 9,575 | — | — | 9,575 | |||||||||||||||||||
| Total liabilities | $ | 11,115 | $ | — | $ | — | $ | 11,115 | |||||||||||||||
| Securities: | |||||||||||||||||||||||
| U.S. Treasury securities | $ | 97,132 | $ | 97,132 | $ | — | $ | — | |||||||||||||||
| Corporate bonds | 79,352 | — | 79,352 | — | |||||||||||||||||||
| Total assets | $ | 176,484 | $ | 97,132 | $ | 79,352 | $ | — | |||||||||||||||
| Balance at December 31, 2024 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| CVR liability | $ | 3,500 | $ | — | $ | — | $ | 3,500 | |||||||||||||||
| Warrant liabilities | 17,804 | — | — | 17,804 | |||||||||||||||||||
| Total liabilities | $ | 21,304 | $ | — | $ | — | $ | 21,304 | |||||||||||||||
| Securities: | |||||||||||||||||||||||
| U.S. Treasury securities | $ | 35,711 | $ | 35,711 | $ | — | $ | — | |||||||||||||||
| Corporate bonds | 6,010 | 6,010 | |||||||||||||||||||||
| Total assets | $ | 41,721 | $ | 35,711 | $ | 6,010 | $ | — | |||||||||||||||
Warrants
The common stock warrant liabilities were recorded at fair value using the BSM option pricing model. The following assumptions were used in determining the fair value of the warrant liabilities valued using the BSM option pricing model as of December 31, 2025, and 2024:
| December 31, 2025 | December 31, 2024 | ||||||||||
| Risk-free interest rate | 3.42% - 3.67% | 4.08% - 4.23% | |||||||||
| Volatility | 57.28% - 66.70% | 62.14% - 68.68% | |||||||||
| Dividend yield | — | % | — | % | |||||||
| Expected term (years) | 0.02 - 2.89 | 1.02 - 3.89 | |||||||||
| Weighted average fair value | $ | 2.38 | $ | 3.25 | |||||||
The following table is a reconciliation for the common stock warrant liabilities measured at fair value using Level 3 unobservable inputs (in thousands):
| Balance as of December 31, 2024 | $ | 17,804 | |||
| Change in fair value measurement of warrant liabilities | (218) | ||||
| Warrants exercised | (8,011) | ||||
| Balance as of December 31, 2025 | $ | 9,575 | |||
For the year ended December 31, 2025, the changes in fair value of the warrant liabilities primarily resulted from the volatility of the Company's common stock.
Contingent Consideration
Contingent consideration liabilities relate to the Company's liabilities arising in connection with the CVRs. The contingent consideration is classified as Level 3 in the fair value hierarchy. The fair value is measured based on a Monte Carlo simulation or a scenario-based method, depending on the earn-out achievement objectives, utilizing projections about future performance. Significant inputs include volatility and projected financial information, including projections representative of a market participant's view of the expected cash payments associated with the agreed upon regulatory milestones based on probabilities of technical success, timing of the potential milestone events for the compounds, and estimated discount rates.
The following table provides a reconciliation of the beginning and ending balances related to the contingent consideration liabilities for the CVRs (dollars in thousands):
| Balance as of December 31, 2024 | $ | 3,500 | |||
| Change in fair value measurement of contingent consideration liabilities | (1,960) | ||||
| Balance as of December 31, 2025 | $ | 1,540 | |||
For the year ended December 31, 2025, the changes in fair value of contingent consideration primarily resulted from changes in the discount rates.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 9, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 7, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 30, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Mar 16, 2016 | |
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.