NOTE 13. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

ATLASCLEAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Unaudited)

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2026 and June 30, 2025, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

SCHEDULE OF FAIR VALUE HIERARCHY OF THE VALUATION INPUTS

Winston & Strawn Agreement

On February 9, 2024, the Company entered into the Winston & Strawn Agreement, as described in Note 9.

The Winston & Strawn Agreement is considered a variable-share obligation under ASC Topic 480 (“Distinguishing Liabilities from Equity”). The Winston & Strawn Agreement meets the requirements for classification under ASC 480 and as a result is required to be accounted for as a liability under ASC 480 and is presented as such on the Condensed Consolidated Balance Sheets. The Company will record a change in fair value on each reporting period until settlement in its Condensed Consolidated Statement of Operations. See Note 9 for further discussion.

As of March 31, 2026 the Company entered into a settlement agreement Winston & Strawn Agreement and, as such, the Company derecognized the carrying value of the agreement and recognized a loss on settlement of $570,300.

The key inputs into the Monte Carlo model for the Winston & Strawn Agreement were as follows:

SCHEDULE OF FAIR VALUE MEASUREMENT INPUTS AND VALUATION

ATLASCLEAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Unaudited)

Warrant Liability

The private placement warrants originally issued by Quantum and assumed by the Company in connection with the Business Combination (the “Private Warrants”) were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the consolidated statements of operations.

The Private Warrants were, initially and as of the end of each subsequent reporting period, valued using a lattice model, specifically a Black-Scholes model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Private Warrants is the expected volatility of the Company’s Common Stock. The expected volatility of the Company’s Common Stock was determined based on the implied volatility of the publicly traded Public Warrants.

Earnout Liability

The liability associated with the Earnout Shares was, initially as of February 9, 2024, valued using a Monte Carlo simulation to determine if and when the revenue hurdles would be achieved. The revenue volatility and revenue to equity correlation was based upon the same guideline public companies. As of March 31, 2026, the Company revised when revenue hurdles would be achieved, as a result of the delay in financing and implementation of the Commercial Bancorp acquisition. Revenue targets were deemed less likely to be reached and as such, this resulted in a significant decrease in the value of the Earnout liability. The Monte Carlo simulation was performed simultaneously on both the share price and revenue to account for the correlation between revenue and equity.

Convertible Note Derivatives

The conversion derivatives associated with Short-Term Notes, Long-Term Notes and the Chardan Note were accounted for as a liability in accordance with ASC 815-40. The conversion derivative liabilities were measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of conversion derivative liability in the consolidated statements of operations. The convertible note derivatives are made up of the fair value of the embedded conversion option included in the Long-Term Notes and the Chardan Note, which each had fair value as of March 31, 2026 of $0. The fair value of the embedded conversion option included in the Long-Term Notes and the Chardan Note had a fair value as of June 30, 2025 of $103,185 and $0, respectively, totaling $103,185.

ATLASCLEAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Unaudited)

Long-Term Notes

As of June 30, 2025 the conversion feature was valued using Monte Carlo model resulting in the fair value of the conversion option included in the Long-Term Notes at $103,185. During the nine-months ended March 31, 2026 the Long-Term Notes were settled in full and, as such, the derivative was settled in full with a zero value as of March 31, 2026.

The key inputs into the Monte-Carlo model for the conversion derivative as of June 30, 2025 were as follows:

Secured Convertible Note

On October 8, 2025, the Company entered into the Restated SPA with Funicular. The Restated Note issued pursuant to the Restated SPA is convertible, in whole or in part, into shares of the Company’s Common Stock at the election of the holder at any time at an initial Conversion price of $0.75 per share. The Conversion Price is subject to adjustment if the Company issues or is deemed to issue shares of Common Stock at a price below the then-current Conversion Price (subject to certain exceptions), and is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like. The Company elected to apply the Fair Value Option (FVO) under ASC 825-10 to the Restated Note. Under ASC 825-10-15-4 and 825-10-25-4, the Restated Note qualifies as an eligible financial liability because it is recognized upon initial issuance and not within any of the prohibited categories. The election was made at initial recognition and applies to the entire instrument, with upfront fees and costs expensed as incurred. As a result, the Restated Note is measured at fair value with changes recognized in earnings each reporting period, and the Company separately presents in other comprehensive income the portion of fair value changes attributable to instrument-specific credit risk, consistent with ASC 825-10-45-5.

As of March 31, 2026 and October 8, 2025, the Restated Note was valued using Black-Scholes model combined with the discounted cash flow model, resulting in the fair value of the Restated Note of $11,706,148 and $14,585,961, respectively.

Merger Financing Note

As of June 30, 2025 the conversion feature was valued using Monte Carlo model resulting in the fair value of the conversion option included in the Merger Financing Note of $63,696. During the nine-months ended March 31, 2026, the Merger Financing Note was settled in full and, as such, the derivative was settled in full with a zero value as of March 31, 2026.

ATLASCLEAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Unaudited)

Tau Agreement

As discussed in Note 9, the Tau Agreement no longer has shares available to utilize and management does not intend to utilize the ELOC. As such as of March 31, 2026 the fair value of the Tau Agreement was deemed to be zero. As of June 30, 2025 the Tau Agreement and the related Commitment Fee was valued using Monte Carlo model resulting in the fair value of $539,448 and $337, respectively.

Debenture Derivative

On August 4, 2025 the Company issued the Debenture as discussed in Note 9. The Company determined that the conversion feature was required to be bifurcated under ASC 815 and, as such, the Company fair valued the embedded derivative. As of March 31, 2026 the Debenture was valued using a Black-Scholes model and as of August 4, 2025, the issuance date, the Debenture was valued using Scenario Based Methodology model resulting in the fair value of the conversion option included in the Debenture embedded derivative at $346,585 and $352,067, respectively. See Note 9 for additional information.

Convertible Note Derivative

On September 16, 2025 the Company issued Convertible Notes as discussed in Note 9. The Company determined that the conversion feature was required to be bifurcated under ASC 815 and, as such, the Company fair valued the embedded derivative. As of September 16, 2025, the issuance date, the Convertible Notes derivative was valued using a Scenario Based methodology model resulting in the fair value of the embedded derivatives included in the Convertible Notes of $5,382,154, of which at $382,154 was allocated to the embedded derivative. On October 8, 2025 in connection with the Equity SPA, the Company repaid the Convertible Note in full; as such as of March 31, 2026 the derivative was derecognized. See Note 9 for additional information.

ATLASCLEAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Unaudited)

2025 Warrant Liability- Equity SPA

On October 8, 2025, the Company entered into the Equity SPA pursuant to which the Company agreed to issue and sell, in a private placement, 16,666,666 Units for a purchase price of $0.60 per Unit. Each Unit consists of one share of the Company’s Common Stock and one 2025 Warrant. In addition, 1,005,000 of 2025 Warrants were issued to the placement agent as transaction cost. The 2025 Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liability in the consolidated statements of operations. The fair value of all 2025 Warrants issued at issuance was $5,874,061 ($5,539,999 for the warrants included in the units and $334,062 for the warrants issued to placement agents).

The 2025 Warrants were, initially and as of the end of each subsequent reporting period, valued using a lattice model, specifically a Black-Scholes model, which is considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the 2025 Warrants is the expected volatility of the Company’s Common Stock.

The following table presents the changes in the fair value of the following:

 SCHEDULE OF CHANGES IN THE FAIR VALUE

ATLASCLEAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Unaudited)

ATLASCLEAR HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2026

(Unaudited)

There were no transfers between levels during the three and nine-months ended March 31, 2026 and 2025.