SharonAI Holdings Inc.

Current report

This quarterly report should be read in conjunction with the risk factors included in our 2025 Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 31, 2026, and those disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026. These risk factors do not identify all risks that we face — our operations could also be affected by factors that are not presently known to us or that we currently consider to be immaterial to our operations. Due to risks and uncertainties, known and unknown, our past financial results may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

Current report

We are substantially dependent on NEXTDC as our primary data center provider, and any delay, disruption or failure by NEXTDC could materially impair our ability to deliver services and generate revenue.

Current report

We have secured up to 87MW of capacity through NEXTDC and rely on NEXTDC to host substantially all of our GPU infrastructure. If NEXTDC experiences construction delays, financial difficulties, power supply issues, or fails to deliver contracted capacity on schedule, we may be unable to deploy our GPU fleet, fulfill customer contracts, or generate anticipated revenue. Our revenue projections and growth strategy are materially dependent on NEXTDC delivering capacity on time and as contracted. Any failure or delay by NEXTDC could cause us to miss revenue guidance, breach customer agreements, and suffer reputational harm, any of which could have a material adverse effect on our business, financial condition, and results of operations.

Current report

The Declining GPU Per-Hour Rate Structure in our Agreement with a Significant Customer Will Result in Materially Lower Revenues Over the Term of the Agreement, and Our Ability to Generate Sufficient Revenue From Third Party Sales to Offset This Decline Is Uncertain.

Current report

The customer price for GPU services in our agreement with a significant customer declines predictably over the six-year contract term — The business model contemplates that we will sell all or part of this compute to Third Parties, generating a revenue share with such customer on the spread. However, the Third Party market for GPU compute is highly competitive and subject to rapid price changes driven by evolving AI hardware generations, competing hyperscaler offerings, and fluctuating AI workload demand. There is no assurance that we can sustain Third Party revenues, and failure to do so will result in a material decline in revenues and profitability during the contract term.

Current report

We Face Significant Execution and Delivery Risk in Deploying a Large-Scale, Multi-Phase GPU Clusters on a Compressed Timeline, and Failure to Meet Agreed Delivery Milestones May Result in Automatic Reductions to the Applicable Service Period and May Give our Customer the Right to Terminate.

Current report

We have committed to delivering a specified numbers of GPUs as of specific dates pursuant to our various customer contracts. For each day of delay beyond the handover date, the total service period may be reduced, directly reducing lifetime revenue for that customer contract. If cluster acceptance testing cannot be completed by specified deadlines, the customer may have the right to terminate the contract. Clusters of this scale involve complex hardware procurement and multi-phase acceptance testing. Supply chain disruptions, construction delays, hardware shortages, or technical failures during testing are all realistic risks. Investors should understand that execution risk is extremely high in the critical 2026–2027 period, and that any delay directly reduces the aggregate revenue that can be generated over the life of the various customer contracts.

Current report

Our Revenue Model with Regards to our Agreement with A Significant Customer Is Dependent on Uncertain Third Party Customer Demand, and the Revenue-Sharing Mechanics May Result in Revenues Materially Lower Than Expected.

Current report

Our customer contract with a significant customer contemplates that such customer will have little to no access to or use of the services unless they are not fully utilized Third Parties. Our ability to earn revenue above the price such customer has agreed to pay — which is the basis for a Shareable Revenue split — is entirely dependent on our ability to attract Third Party customers at pricing above the price such customer has agreed to pay. Revenue share is only earned on the spread between what a Third Party pays and what such customer would have paid, and all revenue is reduced by any service credits provided to customers. At the same time, the varying contract price over the contract term means that the contract price that the Company is entitled to also varies.. We must simultaneously manage Third Party relationships, negotiate pricing, maintain SLAs for those customers, and comply with all notice obligations to NVIDIA in respect of sold services. The net revenue profile of the business is therefore highly sensitive to Third Party market conditions that we do not control, and investors should not rely on the revenue share as a predictable or stable revenue stream.

Current report

Our Australian operations are subject to export control laws that may restrict certain activities

Current report

Our Australian subsidiary, SAI AU Holding Co Pty Ltd, is subject to Australian export control laws. While Defence Export Controls (DEC) has advised that our Token-as-a-Service technology does not currently require an export permit under the Defence and Strategic Goods List, this assessment expires after 12 months. The Defence and Strategic Goods List is updated regularly, and any changes could result in our technology becoming subject to additional export control requirements. We are also independently responsible for obtaining authorizations from the Australian Department of Foreign Affairs and Trade before exporting, supplying, or brokering our technology to any sanctioned destination or entity. Failure to comply with applicable export control laws could result in penalties, reputational harm, and disruption to our business.

Current report

On: (i) June 11, 2026, SharonAI Holdings Inc. (the “Company”) issued 8,430,784 shares of its Class A Ordinary Common Stock, par value $0.0001 per share (collectively, the “Conversion Shares”) upon conversion of an aggregate principal amount of approximately US$103.6 million of unsecured, redeemable, convertible notes (the “AUS Notes”), together with US$2.08 million of accrued and unpaid interest thereon pursuant to the terms of that certain Convertible Note Agreement (the “Convertible Note Agreement”), dated December 19, 2025, by and among SharonAI, Inc., SharonAI Pty Ltd and certain investors (the “Noteholders”), as previously reported on the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 22, 2025. The Company assumed the obligations of SharonAI, Inc. under the Convertible Note Agreement promptly following the closing of the Business Combination Agreement, dated January 28, 2025.

Current report

The number of Conversion Shares issued upon conversion of the AUS Notes was calculated in accordance with the conversion formula set forth in Section 4.6 of the Convertible Note Agreement, based on the sum of the principal amount and accrued interest divided by the lower of (i) the applicable Discount Rate multiplied by the relevant transaction price and (ii) the Valuation Cap (each as defined in the Convertible Note Agreement). The conversion price per share was US$12.53.

Current report

In connection with conversion of the AUS Notes, the Company agreed to register the Conversion Shares for resale on an S-1 registration statement.

Current report

The Conversion Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and were issued in reliance on applicable exemptions from registration pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, and/or Regulation S, based on representations made by the holders of the AUS Notes, including that the holders are accredited investors acquiring the Conversion Shares for investment purposes and not with a view to distribution, and that certain of the holders of AUS Notes are not U.S. persons. The Conversion Shares may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from such registration requirements.

Current report

Dividend Restrictions

Current report

Pursuant to Section 5.14 of each of the Company’s (i) the May 2026 Indenture governing the 6% Convertible Senior Notes due 2031 and (ii) June 2026 Indenture governing 4.75% Convertible Senior Notes due 2032 for so long as any portion of the Notes remains outstanding, the Company is prohibited from paying cash dividends or distributions on any equity securities of the Company, unless the Required Holders (as defined in each of the May 2026 Indenture and the June 2026 Indenture, being the holders of at least a majority in aggregate principal amount of the 4.75% Notes due 2032 and the 6.00% Notes due 2031, as applicable, then outstanding) shall have otherwise given prior written consent.