Silver Pegasus Acquisition Corp. Fair Value Disclosure
NOTE 8. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets and liabilities that are measured at fair value as of December 31, 2025 and 2024, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | December
31, 2025 | December 31, 2024 | |||||||||
| Liabilities: | ||||||||||||
| Derivative liability – Private Warrants | 3 | $ | 1,557,475 | $ | ||||||||
The fair value of the Public Rights was determined using the Bifurcation Analysis. The Public Rights were accounted for as liabilities in accordance with ASC 815-40 and are presented within right liability in the accompanying balance sheet. The right liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statements of operations.
The following table presents the changes in the fair value of Level 3 public rights liabilities as of December 31, 2025:
| Fair value as of January 1, 2025 | $ | |||
| Initial Fair Value at July 16, 2025 | 1,930,850 | |||
| Change in fair value | 829,150 | |||
| Transfer of public rights to level 1 | (2,760,000 | ) | ||
| Fair value as of December 31, 2025 | $ |
During the year ended December 31, 2025, the public rights were transferred from level 3 to level 1 as the Company is utilizing the public rights trading value at the end of each reporting period to determine their fair value.
The following table presents the quantitative information regarding market assumptions used in the valuation of the public rights:
| July 16, 2025 | ||||
| Unit offering price | $ | 10.04 | ||
| Estimated probability of business combination | 17.00 | % | ||
| Right % of whole share | 10.00 | % | ||
| Implied value of Share Right | $ | 0.17 | ||
| Implied value of underlying share | $ | 9.87 | ||
The fair value of Class B.1 and Class B.2 Private Warrants was determined using the Monte Carlo Simulation Model and Black-Scholes-Merton, respectively. The Private Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability in the accompanying balance sheet. The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within the statements of operations.
| Redeemable | Non-Redeemable | |||||||
| Fair value as of January 1, 2025 | $ | $ | ||||||
| Initial Fair Value at July 16, 2025 | 532,575 | 241,900 | ||||||
| Change in fair value | 486,000 | 297,000 | ||||||
| Fair value as of December 31, 2025 | $ | 1,018,575 | $ | 538,900 | ||||
The following table presents the quantitative information regarding market assumptions used in the valuation of the private warrants:
| July 16, 2025 | December 31, 2025 | |||||||||||||||
| Class
B.1 Warrant | Class
B.2 Warrant | Class
B.1 Warrant | Class
B.2 Warrant | |||||||||||||
| Implied share price | $ | 9.87 | $ | 9.87 | $ | 10.07 | $ | 10.07 | ||||||||
| Strike price | $ | 11.50 | $ | 11.50 | $ | 11.50 | $ | 11.50 | ||||||||
| Term to end-of-search period + 5Y (years) | 6.50 | 6.50 | 6.04 | 6.04 | ||||||||||||
| Estimated volatility | 8.16 | % | 8.16 | % | 18.83 | % | 18.83 | % | ||||||||
| Term-matched risk-free rate (continuous) | 4.11 | % | 4.11 | % | 3.80 | % | 3.80 | % | ||||||||
| Redemption price | $ | 18.00 | $ | 18.00 | ||||||||||||
| Average present value of warrant | $ | 1.39 | $ | 1.90 | ||||||||||||
| BSM warrant price | $ | 1.42 | $ | 2.26 | ||||||||||||
| Estimated probability of business combination | 17.00 | % | 17.00 | % | 23.83 | % | 23.83 | % | ||||||||
| Probability-weighted BSM warrant price | $ | 0.24 | $ | 0.24 | $ | 0.45 | $ | 0.54 | ||||||||
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.