Company: XTKG
Filing Date: 2025-04-25
Form Type: 20-F
Source: 0001213900-25-035626
Chunk: 138

Company: X3 Holdings Co., Ltd.
Filing Date: 2025-04-25
Form: 20-F
Item: Item 5
Chunk 138
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 inputs. The three levels of inputs used to measure fair value are as follows:

  Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.  

  Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that ar...  

  Level 3 — inputs to the valuation methodology are unobservable.  

Unless otherwise disclosed,
the fair value of our financial instruments including cash, notes and accounts receivable, due from related parties, prepayments, deposits
and other current assets, notes and accounts payable, customer deposits, salaries and benefits payables, due to related party and taxes
payable approximates their recorded values due to their short-term maturities. The fair value of the long-term prepayments, deposits and
other assets and loans to third parties approximate their carrying amounts because the deposits were paid in cash.

The Company elected the fair
value option to account for its convertible loan. The Company engaged an independent valuation firm to perform the valuation. The fair
value of the convertible loans is calculated using the binomial tree model. The convertible loans are classified as level 3 instruments
as the valuation was determined based on unobservable inputs which are supported by little or no market activity and reflect our own assumptions
in measuring fair value. Significant estimates used in developing the fair value of the convertible loans include time to maturity, risk-free
interest rate, straight debt discount rate, probability to convert and expected timing of conversion. Refer to Note 9 for additional information.

As the inputs used in developing
the fair value for level 3 instruments are unobservable, and require significant management estimate, a change in these inputs could result
in a significant change in the fair value measurement.

Accounts receivable, net

Accounts receivable, net,
is stated at the original invoiced amount net of write-offs and allowance for credit losses. The Company estimated allowance for credit
losses to reserve for potentially uncollectible receivable amounts periodically, considering factors in assessing the collectability of
its accounts receivable, such as historical distribution of the age of the amounts due, payment history, creditworthiness, forward-looking
factor, historical collections data of the customers, to assess the credit risk characteristics. If there is strong evidence indicating
that the accounts receivable is likely to be unrecoverable, the Group also makes specific allowance in the period in which a loss is determined
to