CISO Global, Inc. Fair Value Disclosure
NOTE 15 – FAIR VALUE MEASUREMENT
The estimated fair value of the conversion feature of the derivative liability was based on Monte Carlo simulations, a valuation model. The derivative liability component of the convertible notes was classified as Level 3 due to significant unobservable inputs.
During the year ended December 31, 2025, the derivative liability was derecognized following the conversion of the convertible notes into shares of Common Stock.
The following table sets forth as of December 31, 2024 the carrying value of the derivative liability that was measured and recorded at fair value on a recurring basis:
| December 31, 2024 | ||||||||||||
| Quoted
prices in active markets for identical assets (Level 1) | Significant
other observable inputs (Level 2) | Significant
unobservable inputs (Level 3) | ||||||||||
| Current liabilities | ||||||||||||
| Derivative liability | $ | $ | $ | 2,102,927 | ||||||||
| Total liabilities measured at fair value | $ | $ | $ | 2,102,927 | ||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 30, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
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.