SharonAI Holdings Inc. Fair Value Disclosure
Note 18. Fair Value Measurement
The Group measures the following assets and liabilities at fair value on a recurring basis:
The Group’s recurring fair value measurements include the following:
| ● | Intangible assets – indefinite-lived digital assets | |
| ● | Convertible notes – measured at fair value under the fair value option | |
| ● | Warrant liability – measured at fair value |
Fair value hierarchy
ASC Topic 820, Fair Value Measurement and Disclosures (“ASC Topic 820”) requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 established a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC Topic 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quote prices for similar assets or liabilities in active markets; quoted prices for identical assets in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The table below shows the assigned level for each asset and liability held at fair value by the Group:
| Fair value hierarchy | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| As of December 31, 2025 | ||||||||||||||||
| Recurring fair value measurements | ||||||||||||||||
| Digital Assets | ||||||||||||||||
| Convertible notes | $ | 129,017,286 | $ | 129,017,286 | ||||||||||||
| Warrant liability | $ | 890,000 | $ | 890,000 | ||||||||||||
| As of December 31, 2024 | ||||||||||||||||
| Recurring fair value measurements | ||||||||||||||||
| Digital assets | $ | 721,664 | $ | 721,664 | ||||||||||||
The Group’s assets held at fair value comprise of indefinite lived cryptocurrency (digital assets) classified at level 1. See Note 9 for support.
The Group elected the fair value option for its convertible notes. The fair value of the convertible notes is determined using valuation techniques that include significant unobservable inputs, including assumptions related to expected volatility, discount rates, and the probability and timing of conversion. Accordingly, the convertible notes are classified within Level 3 of the fair value hierarchy.
The warrants are classified within Level 1 as they are valued using quoted market prices in an active market.
There were no transfers between Levels 1, 2, or 3 during the years ended December 31, 2025 and 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.