NOTE 22: FINANCIAL INSTRUMENTS

The following table presents the fair values of the Company’s financial instruments and their level within the fair value hierarchy:

There were no transfers between Level 1, 2 or 3 of the fair value hierarchy during the years ended December 31, 2025 and 2024.

In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also measures certain assets and liabilities at fair value on a non-recurring basis. The Company’s long-lived assets, including intangible assets, operating lease right-of-use assets, and property, plant and equipment, are measured at fair value when there is an indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows. These assets are measured at fair value only when an impairment loss is recognized.

The carrying amounts of cash, restricted cash, accounts receivable, net, other receivables, security deposits for energy, Refundable Hosting Deposits, other refundable deposits, receivable from disposal of business and accounts payable and accrued expenses presented in the table above are a reasonable approximation of their fair value due to their short-term maturity or they are valued using the income approach valuation technique.

Derivatives assets and liabilities

The fair value of derivatives is categorized as Level 2 as applicable, in the fair value hierarchy and is presented under derivative assets and liabilities in the consolidated balance sheets when there is an outstanding contract at period end. The derivatives are measured at fair values on a recurring basis. Refer to Note 10 for more details.

Fair value of derivative financial instruments generally reflects the estimated amounts that the Company would receive or pay, taking into consideration the counterparty credit risk or the Company’s credit risk at each reporting date. The Company uses market data such as Bitcoin option futures to estimate the fair value of option contracts at each reporting date. Refer to Note 10 for more details.

The purchase order agreements explained in Note 10 provide the Company with the option to redeem the Bitcoin Pledged at a market price determined when the Bitcoin was first pledged (“Agreed Bitcoin Price”).

The right to redeem the Bitcoin Pledged meets the definition of an embedded derivative as the derivative that is embedded in the non-financial contract is not closely related to the economic characteristics and risks of the host non-financial contract. The fair value of the embedded derivative is determined using a combination of the Monte Carlo simulation model to simulate future Bitcoin prices based on probability factors and the Black-Scholes Model to estimate the value of each Bitcoin Redemption Option.

At each reporting date, the fair value is determined by multiplying the number of redeemable Bitcoin pledged by the present value of the difference between the Agreed Bitcoin Price and the simulated spot price of Bitcoin while considering the likelihood of exercising the quarterly installments. Change in fair value is recognized in Other expense.

In October 2025, the Company entered into capped call transactions in connection with the issuance of Convertible Notes. The fair value of the capped call transactions is determined using an option pricing model that incorporates observable market inputs, including the Company’s share price, expected volatility, risk-free interest rate, expected term and contractual terms of the instruments. As the valuation primarily incorporates observable inputs, the fair value measurement is classified within Level 2 of the fair value hierarchy. The most significant input in the model is the Company’s share price and expected volatility. Due to the decline in the share price from the inception date to December 31st, there was a loss of $63,890 during the year ended December 31, 2025, presented within (loss) gain from derivative assets and liabilities in the statement of operations.

Refundable deposits

The refundable deposits are measured at amortized cost using the effective interest rate (“EIR”) method and are classified as Level 2 according to the Company’s fair value hierarchy. Their fair values are a recurring measurement. The valuation technique used is the income approach (discounted future cash flows). Refer to Note 15 for more details.

Prior to the Stronghold Transaction completed on March 14, 2025, the Refundable Hosting Deposits were accounted for as financial assets and measured at fair value on initial recognition based on the contractual right to receive the principal amount of each refundable hosting deposit plus interest at the end of the contractual term.

The valuation technique used is the income approach (discounted future cash flows) with an initial EIR higher than the SOFR + 1% rate specified in the Hosting Agreements. As a result, the Panther Creek Refundable Deposit and the Scrubgrass Refundable Deposit were initially recognized at a fair value of $7,125 and $7,542, respectively, which were lower than the $7,800 principal amount of each deposit. Upon initial recognition of the Refundable Deposits, the difference between the fair value and principal of $675 and $258, respectively, were recognized as a loss in Other expense during the year ended December 31, 2024. The EIR applicable as of December 31, 2024 was 12% and 9%, respectively.

The total interest income of $364 was recognized in Other expense during the year ended December 31, 2024. In addition, the Company recognized a total CECL of $815 in Other expense. Refer to Note 15 for more details.

Following the acquisition of Stronghold on March 14, 2025, the Panther Creek and the Scrubgrass Hosting Agreements were terminated, resulting in the settlement of the Refundable Hosting Deposits.

The security deposits for energy consumption is related to the operational Paso Pe and in-construction Yguazu Bitcoin data centers in Paraguay. The valuation technique used was the income approach (discounted future cash flows) with an EIR of 6% over an estimated term of 3 years.

Following the disposal of the Yguazu Bitcoin data center on March 17, 2025 and the classification of the Paso Pe Bitcoin data center operation in Paraguay as assets “held for sale”, the security deposits for energy were derecognized and amounted to nil as of December 31, 2025.

The following table details the movement in the refundable deposits:

The Company is exposed to foreign currency risk, credit risk, counterparty risk, liquidity risk and concentration risk. The Company’s senior Management monitors these risks.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s functional currency is the USD as all of its cryptocurrency Mining revenues, most of its capital expenditures and most of its financing are primarily measured or transacted in USD. The Company is exposed to variability in the CAD and ARS to USD exchange rates when making expenditures payable in CAD and ARS. The Company funds foreign currency transactions by buying the foreign currencies at the spot rate when required. A 5% increase or decrease in the USD/CAD and USD/ARS exchange rates may have an impact of an increase or decrease of $1,095 on retained earnings at December 31, 2025 (December 31, 2024: $15).

Amounts denominated in CAD and ARS included in the consolidated balance sheets, presented in thousands of USD, are as follows:

Credit risk and counterparty risk

Credit risk is the risk of an unexpected loss if a third party fails to meet its contractual obligations, including those related to cash and cash equivalents. The Company mitigates credit risk related to cash by holding the majority of its cash with a Canadian chartered bank.

The Company is exposed to counterparty risk primarily through the significant deposits placed with suppliers of Mining hardware to secure orders and delivery dates, deposits made in relation with HPC/AI expansion plans, as well as deposits placed with construction companies and suppliers of electrical components and construction materials. A failure by a supplier to meet its contractual obligations may result in delayed deliveries or long-term deposits and equipment and construction prepayments that are not realized. The Company seeks to mitigate this risk by procuring Mining hardware from larger and more established suppliers and by transacting with counterparties with whom the Company has established relationships and knowledge of their reputation in the market as well as by insuring deposits placed for construction work and materials.

Credit risk related to accounts receivable arises from Stronghold energy sales and sales to Volta’s third-party customers. The Company performs ongoing credit evaluations of its customers and maintains an allowance for expected credit losses to cover the estimated amount of receivables that may be uncollectible. The allowance for expected credit losses is based on Management’s assessment of a customer’s credit quality as well as subjective factors and trends, including the aging of receivable balances.

Liquidity risk

Liquidity risk is a risk that the Company will not be able to meet its financial obligations as they become due. The Company manages liquidity risk by monitoring its cash balances and forecasted cash flows generated from operations to ensure that sufficient liquidity is maintained to meet projected financial liabilities.

The Company’s operations are capital-intensive, and its liquidity is affected by a combination of factors, including the market price of Bitcoin, network difficulty rates, energy costs, and the timing of capital expenditures related to the Company’s planned strategic transition toward HPC infrastructure development. As of December 31, 2025, the Company had cash of $573,462 and Bitcoin of $180,285. Management has evaluated the Company’s liquidity position, including forecasted cash flows from Bitcoin Mining operations, anticipated expenditures associated with HPC infrastructure development, and contractual obligations due within 12 months from the date the financial statements are issued.

Based on this evaluation, the Company believes that existing cash and Bitcoin, expected cash inflows from Mining operations, and the Company’s ability to manage the timing of expenditures will be sufficient to meet its obligations as they become due for at least the next twelve months. The Company will require additional funds to complete expansion plans into HPC infrastructure development.

As of December 31, 2025, the Company is committed to purchase $129,662 of property, plant and equipment in the next 12 months. Refer to Note 27 for more details.

The following table presents the future principal capital payment of long-term debt and the future minimum lease payments required under non-cancellable leases as of December 31, 2025:

Concentration risk

Concentration risk arises from exposures that are concentrated within the same category, such as geographical location, product type, industry sector or counterparty type. The cryptocurrency Mining and hosting industry is highly volatile and subject to significant inherent risk. During the year ended December 31, 2025, the Company earned 88% (2024: 95% and 2023: 96%) of its revenues from one Mining pool operator. The Company has the ability to switch Mining Pools or to mine independently at any time. The Company also holds a portion of its working capital in Bitcoin.

A significant decline in the market prices of cryptocurrencies, an increase in the difficulty of cryptocurrency Mining, changes in the regulatory environment and adverse changes in other inherent risks can significantly negatively impact the Company’s operations and the carrying value of its assets.

The Company purchased Bitcoin option contracts that provide it with the right, but not the obligation, to sell digital assets at a fixed price. Option contracts are used to mitigate the risk of Bitcoin price volatility and reduce the variability of cash flows associated with future sales of digital assets. Refer to Note 10 for more details.