USBC, Inc. Fair Value Disclosure
4. FAIR VALUE MEASUREMENTS
The Company’s assets and liabilities recorded at fair value measured on a recurring basis consist of investments in digital assets and derivative assets and liabilities.
In determining the fair value of its digital assets, the Company is able to cite quoted prices as determined by the Company’s principal market. As such, the Company’s digital assets which consist entirely of Bitcoin were determined to be Level 1 assets.
In estimating the fair value of its derivative assets and derivative liabilities, the Company uses a market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities found on derivative exchanges. The Company determined that the derivative assets and liabilities are Level 2. Determining which category an asset or liability falls within the hierarchy requires significant judgement.
The Company has a money market account which is considered a Level 1 asset. The balance as of September 30, 2025 and September 30, 2024 was $8,699,085 and $2,941,616, respectively.
There were no transfers in or out of Level 3 or between levels throughout the year.
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.