Hyperscale Data, Inc. Fair Value Disclosure
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy at December 31, 2025 (no material financial instruments were measured at fair value on a recurring basis at December 31, 2024):
| Fair Value Measurement at December 31, 2025 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| Embedded conversion feature liabilities | $ | $ | $ | $ | 1,576,000 | |||||||||||
The Company assesses the inputs used to measure fair value using the three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market. For investments where little or no public market exists, management’s determination of fair value is based on the best available information which may incorporate management’s own assumptions and involves a significant degree of judgment, taking into consideration various factors including earnings history, financial condition, recent sales prices of the issuer’s securities and liquidity risks.
The changes in Level 3 fair value hierarchy during the years ended December 31, 2025 and 2024 were as follows:
| Level 3 Balance at Beginning of Period | Fair Value Adjustments | Sales and Settlement | Grants | Level 3 Balance at End of Period | ||||||||||||||||
| Year ended December 31, 2025 | ||||||||||||||||||||
| Embedded conversion feature liabilities | $ | $ | (3,180,000 | ) | $ | (3,492,000 | ) | $ | 8,248,000 | $ | 1,576,000 | |||||||||
| Level 3 Balance at Beginning of Period | Fair Value Adjustments | Sales and Settlement | Grants | Level
3 Balance at End of Period | ||||||||||||||||
| Year ended December 31, 2024 | ||||||||||||||||||||
| Embedded conversion feature liabilities | $ | 910,000 | $ | (910,000 | ) | $ | $ | $ | ||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 15, 2026 | Showing above |
| 2024 | Apr 15, 2025 | |
| 2023 | Apr 16, 2024 | |
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.