NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and principles of consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company also consolidates certain variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements also include the Company’s discontinued operations, consisting of the Company’s Paraguay and Argentina operations.

The consolidated financial statements are presented in USD and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) including the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding financial reporting.

Additionally, since there are no differences between net income (loss) and comprehensive income (loss), all references to comprehensive income (loss) have been excluded from the consolidated financial statements.

Nature of variable interest entities (VIEs)

Certain of the Company’s wholly-owned subsidiaries are considered VIEs primarily because their equity investment at risk isn’t sufficient to permit the entities to finance their activities without additional subordinated financial support. The Company has determined that it is the primary beneficiary of each of its consolidated VIEs because it has the power to direct the activities that most significantly affect the economic performance of the VIEs and the obligation to absorb losses or the right to receive benefits that could potentially be significant. Accordingly, the assets, liabilities, revenues and expenses of these VIEs are included in the Company’s consolidated financial statements. The consolidated VIEs do not have assets that are restricted to settling the obligations of the VIEs, and creditors of the VIEs do not have recourse solely to the assets of the VIEs. As a result, separate presentation of VIE assets and liabilities on the consolidated balance sheets is not required. The Company’s maximum exposure to loss as a result of its involvement with the consolidated VIEs is reflected in the carrying amounts of the assets and liabilities included in the consolidated financial statements. The Company did not provide financial or other support to its consolidated VIEs during the periods presented that it was not previously contractually required to provide.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated balance sheets and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ materially from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s consolidated financial statements include revenue recognition; measurement of digital assets; determination of the useful lives, residual values, depreciation method and recoverability of long-lived assets; impairment analysis of property, plant and equipment; allocating the fair value of purchase consideration to assets acquired and liabilities assumed in business combinations and measurement of financial instruments.

Foreign currencies

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 measured or transacted in USD. In addition, the Company’s reporting currency is USD. Transactions in foreign currencies are initially recorded at the exchange rate in effect on the transaction date. Monetary assets and liabilities in foreign currencies are subsequently translated into the functional currency at the exchange rate in effect at each reporting date. Exchange rate differences, other than those capitalized to qualifying assets or carried to equity in hedging transactions, are included in profit or loss. Non-monetary assets and liabilities in foreign currencies stated at cost are translated at the exchange rate in effect at the transaction date. Non-monetary assets and liabilities in foreign currencies carried at fair value are translated at the exchange rate at the date on which the fair value was determined.

Business combinations

The Company first evaluates whether an acquired set of activities and assets meets the definition of a business in accordance with ASC 805, Business Combinations. If the acquired set does not meet the definition of a business, the transaction is accounted for as an asset acquisition. In an asset acquisition, the cost of the acquisition, including transaction costs, is allocated to the identifiable assets acquired and liabilities assumed based on their relative fair values at the acquisition date. No goodwill is recognized in an asset acquisition.

The Company accounts for business combinations using the acquisition method when it has obtained control. The Company measures goodwill as the fair value of the consideration transferred including the fair value of any non-controlling interest recognized, less the net recognized amount of the identifiable assets acquired and liabilities assumed, all measured at their fair value as of the acquisition date. Transaction costs, other than those associated with the issuance of debt or equity securities, that the Company incurs in connection with a business combination are expensed as incurred.

When the initial accounting for a business combination has not been finalized by the end of the reporting period in which the transaction occurs, the Company reports provisional amounts. Provisional amounts are adjusted during the measurement period, which does not exceed one year from the acquisition date. These measurement period adjustments, or recognition of additional assets or liabilities, reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date. The cumulative impact of measurement period adjustments to the provisional amounts are recognized in the period that the adjustment is determined.

Revenue recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of the revenue standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time, as appropriate.

The Company has four revenue streams: i) sale of computational power used for hashing calculations, ii) energy sales, iii) hosting agreements and iv) electrical services.

The Company has entered into arrangements with Mining pool operators, which are the Company’s customers in accordance with ASC 606, and has undertaken the single performance obligation of providing a service to perform hash calculation services in exchange for non-cash consideration in the form of Bitcoin, which is variable consideration. Providing hash calculation services to the Mining pool operators is an output of the Company’s ordinary business activities.

Bitcoin are calculated based on a formula which, in turn, is based on the hashrate contributed by the Company’s provided computing power used for hashing calculations allocated to the Mining pool operators, assessed over a 24-hour period, and distributed daily based on the FPPS formula. The Company assesses the estimated amount of the variable non-cash consideration to which it expects to be entitled for providing computational power used for hashing calculations at contract inception and subsequently determines whether it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The uncertainties regarding the daily variable consideration to which the Company is entitled for providing its computational power used for hashing calculations are no longer constrained at 23:59:59 UTC regardless of the timing of the Bitcoin received.

The amount earned is calculated based on the Company’s computing power used for hashing calculations provided to the Mining pool operators and the estimated (a) block subsidies and (b) daily average transaction fees which the Mining pool operators expect to earn, less (c) a Mining pool discount.

(a) Block subsidies refer to the block rewards that are expected to be generated on the Bitcoin network as a whole. The fee earned by the Company is first calculated by dividing (1) the total amount of hashrate the Company provides to the Mining pool operator, by (2) the total Bitcoin network’s implied hashrate (as determined by the Bitcoin network difficulty), multiplied by (3) the total amount of block subsidies that are expected to be generated on the Bitcoin network as a whole.

(b) Transaction fees refer to the total fees paid by users of the network to execute transactions. The fee paid by the Mining pool operator to the Company is calculated by dividing (1) the total amount of transaction fees that are actually generated on the Bitcoin network as a whole less the 3 largest and 3 smallest blocks, divided by (2) the total amount of block subsidies that are actually generated on the Bitcoin network as a whole less the 3 largest and 3 smallest blocks, multiplied by (3) the Company’s fee earned as calculated in (a) above. The Company is entitled to its relative share of consideration even if a block is not successfully added to the blockchain by the Mining pool.

(c) Mining pool discount refers to the discount applied to the total amount earned based on the FPPS formula otherwise attributed to computing power service providers for their sale of computing power used for hashing calculations as defined in the rate schedule of the agreement with the Mining pool operator.

The Company is entitled to the fee from the Mining pool operators as calculated above regardless of the actual performance of the Mining pool operators. Therefore, even if the Mining pool operators do not successfully add any block to the blockchain in a given contract period, the fee remains payable by the Mining pool operators to the Company. Accordingly, the Company is not sharing in the earnings of the Mining pool operators. The Company’s enforceable right to compensation begins when, and continues as long as, the Company provides its services to the Mining pool operators, and the Company decides when to provide these services under the contracts.

The Company’s agreements with the Mining pool operators provide the Mining pool operators and the Company with the enforceable right to terminate the contract at any time without substantively compensating the other party for the termination. Upon termination, the Mining pool operators are required to pay the Company the amount due related to previously satisfied performance obligations. As a result, the Company has determined that the duration of the contract is less than 24 hours and the contract is continuously renewed throughout the day. Each contract period concludes at 23:59:59 UTC. The Company has also determined that the Mining pool operators’ renewal right is not a material right as the terms, conditions, and compensation amounts are at then-current market rates.

Bitcoin earned is received in full and can be paid in fractions of cryptocurrency. Revenues from providing a service to perform hash calculations for the Mining pool operators are recognized upon delivery of the service (i.e., when the Mining pool operators obtain control of the hash calculations) over a 24-hour period. The Company updates the estimated transaction price of the non-cash consideration received at its fair market value. Management estimates fair value daily based on the quantity of Bitcoin received multiplied by the price quoted from Coinbase Inc. (“Coinbase Prime”) on the day it was received. Management considers the prices quoted on Coinbase Prime to be a Level 1 input for fair value measurement purposes.

The Company sells electrical components and provides electrician installation of those components as well as repair and maintenance services. Revenues are recognized according to the stage of completion of the transaction as of the balance sheet date. The stage of completion is estimated based on the costs incurred for the transaction compared to the total estimated cost of completion for the project. Under this input-based measure, revenues are recognized in the reporting period in which the services are provided. In the event that the outcome of the contract cannot be measured reliably, the revenues are recognized to the extent of the recoverable expenses incurred.

The Company has entered into hosting agreements under which it operates Mining-related equipment on behalf of third parties within its facilities. Revenue from hosting agreements is recognized as the Company satisfies its performance obligation of operating the hosting equipment over time.

The consideration for the Company’s hosting agreement comprises (a) the variable cost-of-power fee, denominated in cash, and (b) a portion of the Bitcoin mined by the customer’s Mining-related equipment that the Company hosts, denominated in Bitcoin. The amount of consideration does not include a significant financing component and, therefore, is not adjusted for the effects of the time value of money in determining the transaction price.

Estimates for variable cost-of-power fees and variable Bitcoin consideration are fully constrained. The Company includes these amounts in the transaction price only when it is probable that no significant revenue reversal will occur once the uncertainty is resolved. Each quarter, when uncertainty is resolved, the Company includes in the transaction price (a) the actual amount of the variable cost-of-power fee and (b) the noncash Bitcoin consideration equal to the product of (1) the Company’s share of Bitcoin Mined by customers’ hosted equipment during the period and (2) the quoted Bitcoin price in the Company’s principal market at contract inception. At the end of each reporting period, the Company also reassesses the estimated transaction price to determine whether an estimate of the variable consideration over the remaining contract term is fully constrained.

Because there is only one performance obligation to provide an integrated hosting service to the Company’s hosting customers, the entire transaction price described above is allocated to the single performance obligation and recognized over time as the integrated hosting service is provided. Since the variable consideration is fully constrained, the Company recognizes revenue based on the actual cost-of-power and Bitcoin Mining components of the transaction price each reporting period when uncertainty regarding the amount of variable consideration is resolved.

The Company operates as a market participant through the Pennsylvania, New Jersey, Maryland Interconnection (“PJM”), a Regional Transmission Organization (“RTO”) that coordinates the movement of wholesale electricity. The Company sells energy from its Panther Creek and Scrubgrass generating plants in the open market in the PJM RTO in the real-time, location marginal pricing market. Revenues from the sale of energy are recognized as the energy is delivered as a series of distinct units that are substantially the same and have the same pattern of transfer to the customer over time and are, therefore, accounted for as a distinct performance obligation. Revenue from the sale of energy is recognized over time as energy volumes are generated and delivered to the RTO (which is contemporaneous with generation), using the output method based on megawatt hours for measuring progress. The Company applies the right to invoice practical expedient in recognizing revenue from the sale of energy. Under this practical expedient, revenue from the sale of energy is recognized based on the invoiced amount which corresponds directly with the value provided to the customer for the Company’s performance obligation completed to date.

Cost of revenues

Cost of revenues include costs directly attributable to the Company’s revenue-generating activities. These costs primarily consist of electricity and energy costs used in cryptocurrency mining operations, depreciation and amortization of mining equipment and related infrastructure, hosting expenses, infrastructure operating costs, and electrical components and related salaries.

Cost of revenues may also include inventory consumption, customs duties, and other costs directly associated with the operation and maintenance of Bitcoin data centers. Certain government incentives, including renewable energy credits (“RECs”), waste tax credits (“WTCs”), and sales tax recoveries are recognized as reductions of the related expenses when earned.

Cash and cash equivalents

Cash and cash equivalents consist of deposits and short-term, highly-liquid investments with original maturities of three months or less. The Company only holds cash and maintains its cash in accounts at high-quality financial institutions that are insured by the Federal Deposit Insurance Corporation.

Rights to renewable energy credits and waste tax credits

The Company uses refuse, which is classified as a Tier II Alternative Energy Source under Pennsylvania law, to produce energy for sale. RECs are generated from renewable sources (i.e., refuse) and may be sold or traded. Government grants related to WTCs are issued by the Commonwealth of Pennsylvania.

The Company recognizes rights to RECs and WTCs as intangible assets when the underlying energy generation or waste coal consumption occurs. The quantity of RECs recognized is based on net megawatt-hour (“MWh”) generation during the period and estimated conversion rates derived from recent historical experience, while WTCs are recognized based on actual waste coal consumption multiplied by the applicable statutory credit rate.

The value of RECs recognized incorporates estimates of market prices based on recent transactions or pricing information obtained from third party brokers. RECs are generally certified by PJM approximately two months after the related generation, at which time estimates are updated as necessary. WTCs are typically certified by the Commonwealth of Pennsylvania in the year following the related waste coal consumption.

Simultaneously, as the rights to RECs and WTCs are recognized as intangible assets, a corresponding contra expense within cost of revenues is recognized to offset the fuel expenses incurred to produce energy. The Company is permitted and does sell these intangibles, recognizing a gain or loss on disposal in the consolidated statement of operations.

Income tax

Income taxes are comprised of current and deferred taxes. These taxes are accounted for using the asset and liability method. Current tax is recognized in connection with income for tax purposes, unrealized tax benefits and the recovery of tax paid in a prior period and measured using the enacted tax rates and laws applicable to the taxation period during which the income for tax purposes arose. Deferred tax is recognized on the difference between the carrying amount of an asset or a liability, as reflected in the financial statements, and the corresponding tax base used in the computation of income for tax purposes and measured using the enacted tax rates and laws as at the balance sheet date that are expected to apply to the income that the Company expects to arise for tax purposes in the period during which the difference is expected to reverse. Management assesses the likelihood that a deferred tax asset will be realized, and a valuation allowance is provided to the extent that it is more likely than not that all or a portion of a deferred tax asset will not be realized. The determination of both current and deferred taxes reflects the Company’s interpretation of the relevant tax rules and judgment.

Income taxes are recognized in the consolidated statements of operations, except when they relate to an item that is recognized in other comprehensive loss or directly in equity, in which case, the taxes are also recognized in other comprehensive loss or directly in equity respectively. Where income taxes arise from the initial accounting for a business combination, these are included in the accounting for the business combination.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures (“ASU 2023-09”), to enhance the transparency and decision usefulness of income tax disclosures by requiring disaggregated information about a reporting entity’s effective tax rate reconciliation and information on income taxes paid. The Company retrospectively adopted ASU 2023-09 in the year ended December 31, 2025. Refer to Note 19 for the required disclosures.

Digital assets

Digital assets are received as non-cash consideration for providing computational power used for hashing calculations and hosting services, in accordance with the Company’s revenue recognition policy under ASC 606. Digital assets are classified as current assets in the consolidated balance sheets as they are highly liquid, and the Company expects to realize them in cash within twelve months.

The Company adopted ASU 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”) as of January 1, 2023. As a result, digital assets are measured at fair value each reporting period, with changes in fair value recognized in the consolidated statements of operations. The fair value of digital assets is measured using the period-end closing price from the Company’s principal market, which is Coinbase Prime. When the Company sells digital assets, gains or losses from the disposal are measured as the difference between the cash proceeds and the cost basis, determined using a weighted average cost method.

Inventories

Electronic and networking components, waste coal, limestone, and fuel oil are valued at the lower of average cost or net realizable value and include all related transportation and handling costs. The Company performs periodic assessments to determine the existence of obsolete, slow-moving and unusable inventory and recognizes an allowance to reduce such inventories to net realizable value as necessary.

Assets held for sale

The Company classifies long-lived assets or an asset group to be sold as “held for sale” in the period in which all of the following criteria are met: (i) the Company is committed to their sale, (ii) the assets are available for immediate sale in their present condition, (iii) there is a program to locate a buyer, (iv) it is probable that a sale will be completed within one year from the date of classification, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. From the date of such initial classification, the assets are no longer depreciated and are presented separately as current assets at the lower of their carrying amount and fair value less costs to sell, and any related liabilities (in the asset group) are separately classified as current liabilities.

Discontinued operations

A discontinued operation is a component of the Company that has either been abandoned, sold or classified as “held for sale” and represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results.

Property, Plant and Equipment, Net

Property, plant and equipment are carried at cost, including directly attributable costs, less accumulated depreciation, accumulated impairment losses and any related investment grants, and excluding day-to-day servicing expenses. Cost includes spare parts and auxiliary equipment used in connection with plant and equipment. The cost of an item of property, plant and equipment includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which the item is located when a legal obligation exists at the time the asset is placed in service.

Interest related to construction of assets is capitalized when the financial statement effect of capitalization is material, construction of the asset has begun, and interest is being incurred. Interest capitalization ends at the earlier of the asset being substantially complete and ready for its intended use or when interest costs are no longer being incurred.

Property, plant and equipment are depreciated as follows:

The useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted for prospectively as a change in accounting estimate. Depreciation of an asset ceases at the earlier of the date that the asset is classified as “held for sale” and the date that the asset is derecognized.

Leases

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines whether an arrangement contains a lease at the inception of the arrangement in accordance with ASC 842, Leases.

The Company determines lease classification at lease commencement as either operating or finance. The Company recognizes a ROU asset and a corresponding lease liability at lease commencement for leases with a term greater than 12 months. Lease liabilities are measured at the present value of lease payments over the lease term.

The Company has elected not to recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less that do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company continues to recognize the lease payments associated with these leases as expenses as incurred over the lease term.

The Company generally uses its incremental borrowing rate to determine the present value of lease payments as the rate implicit in the lease is not readily determinable.

Additional quantitative information regarding the Company’s leases, including lease costs and maturity analyses of lease liabilities are disclosed in Note 18.

For finance leases, lease liabilities are increased to reflect the accretion of interest and reduced for the lease payments made. ROU assets are depreciated over the shorter of the lease term and the estimated useful lives of the assets, as follows:

For operating leases, the lease expense is recognized on a straight-line basis over the lease term and is included in cost of revenues and general and administrative expenses in the consolidated statements of operations, depending on the nature of the asset.

Variable lease payments are generally expensed as incurred and include certain index-based changes in rent, certain performance or usage-based payments, and other charges included in the lease.

Intangible assets

Intangible assets consist of acquired software and access rights to electricity with finite useful lives. Intangible assets acquired separately are initially measured at cost plus direct acquisition costs. Intangible assets acquired in business combinations are measured at their fair value as of the acquisition date.

Intangible assets are amortized as follows:

The amortization period and the amortization method for an intangible asset are reviewed at least each year end and any changes are accounted for prospectively as a change in accounting estimate.

Impairment of long-lived assets

The Company’s long-lived assets (including property, plant and equipment, right-of-use assets and intangible assets with finite useful lives) are assessed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“asset group”). When indicators of potential impairment are present, the Company prepares a projected undiscounted cash flow analysis for the respective asset or asset group over the remaining useful life of the asset or asset group. If the sum of the undiscounted cash flow is less than the carrying amount of the asset or asset group, an impairment loss is recognized equal to the excess of the carrying amount over the fair value of the asset or asset group, if any. Fair value is generally determined using discounted cash flow techniques or other valuation methods consistent with the market participant assumptions, as applicable. Impairment losses are recognized in the consolidated statements of operations in the period in which the impairment is identified and are not reversed in subsequent periods.

Impairment of financial assets

The Company recognizes an allowance for potentially uncollectable accounts under the current expected credit loss (“CECL”) impairment model in accordance with ASC 326, Financial Instruments – Credit Losses, for all financial assets measured at amortized cost, including accounts receivable and refundable deposits. The CECL impairment model requires an estimate of expected credit losses measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions. Based on this model the Company considers many factors, including the aging of the balances, collection history, the counterparty’s credit rating, current economic conditions, and reasonable and supportable forecasts, among other factors. The allowance is estimated as the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive, which may be discounted at the original effective interest rate (“EIR”), when the effect of discounting is material. Bad debts are written off against the allowance after all collection efforts have ceased.

Non-hedge derivative instruments

The Company enters into Bitcoin option contracts to reduce the risk of variability of cash flows resulting from the fluctuations in the Bitcoin price that impact future sales of digital assets. In addition, the Company entered into contracts and earned premiums by agreeing to sell Bitcoin if the price reached specific targets (“Bitcoin call option’’) to reduce the risk of variability of cash flows. These derivatives are not designated for hedge accounting under ASC 815, Derivatives and Hedging and are accounted for at fair value upon initial recognition and at each balance sheet date with changes in fair value recognized as gain or loss on derivative assets and liabilities within other income (expense) in the consolidated statement of operations.

Convertible debt

Upon issuance, the Company assesses the various terms and features of the convertible debt instruments to determine whether there are any embedded derivatives that are required to be accounted for separately from the host contract that do not qualify for a scope exception under ASC 815, Derivatives and Hedging (“ASC 815”) and recognized on the consolidated balance sheets at fair value. The fair value of bifurcated derivative liabilities, if any, are required to be revalued at each balance sheet date, with corresponding changes in fair value recognized in the consolidated statements of operations.

Convertible debt instruments that do not require bifurcation are accounted for as a single liability measured at amortized cost. The Convertible debt instruments are initially recorded at principal amount, net of issuance costs. Debt issuance costs are presented as a direct deduction from the carrying amount of the debt and are amortized to interest expense over the contractual term using the effective interest method. Interest expense includes the contractual coupon and amortization of issuance costs.

The fair value of the Convertible debt instruments is disclosed in accordance with ASC 825, Financial Instruments. Fair value is estimated using a discounted cash flow model based on the Company’s current borrowing rate for similar instruments and is classified within Level 2 of the fair value hierarchy under ASC 820, Fair Value Measurement.

Capped Call Transactions

Capped call transactions entered into in connection with convertible debt issuances are evaluated under ASC 815-40 to determine whether they qualify for equity classification. Instruments that do not qualify for equity classification are recognized as derivative assets or liabilities and measured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations.

Fair value is determined using a monte carlo option pricing model that incorporates relevant market-based inputs, including the Company’s share price, expected volatility, risk-free interest rate, expected term and contractual terms of the instruments. The fair value measurement is classified within the appropriate level of the fair value hierarchy under ASC 820 based on the nature of the inputs used.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value measurement assumes that the transaction to sell the asset occurs in the principal market or, in the absence of a principal market, in the most advantageous market. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. For liabilities, fair value measurement reflects the effect of nonperformance risk, including the Company’s own credit risk.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Fair value measurement of long-lived assets takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The fair values are measured using the cost, market or income approaches. Assets and liabilities measured at fair value, or whose fair value is disclosed, are classified into categories within the fair value hierarchy based on the lowest level input that is significant to the overall fair value measurement. The determination of the level in the fair value hierarchy requires judgment, including the assessment of the significance of a particular input to the overall fair value measurement.

Stock-based compensation

Compensation expense for stock-based awards granted to employees and board members is measured at the grant-date fair value of the equity instruments. The fair value of stock options (“Options”) is determined using the Black-Scholes option pricing model. Restricted share units (“RSUs”) are measured based on the grant-date fair value of the Company’s common shares. The fair value of performance share units (“PSUs”) is determined using a Monte Carlo valuation model. Stock-based awards granted to non-employees are measured based on the fair value of the equity instruments expected to be issued in exchange for goods or services received.

Stock-based compensation expense is recognized within general and administrative expenses in the consolidated statement of operations, with a corresponding increase in additional paid-in capital, over the requisite service period. The Company has elected to account for forfeitures of awards as they occur.

Options and RSUs are service-based awards that vest in installments. The Company recognizes stock-based compensation expense using the graded vesting attribution method over the requisite service period.

PSUs are performance-based awards granted to senior management as part of the Company’s long-term incentive plan. PSUs entitle participants to receive a specified number of common shares of the Company, subject to the achievement of predetermined market and service conditions over a defined vesting period. PSUs vest in a single tranche at the end of the performance cycle, contingent upon the attainment of certain corporate performance objectives. The number of common shares issued upon vesting is subject to a performance multiplier based on the level of achievement of the performance objectives and may range from 0% to 200% of the target award. The likelihood of achieving the market condition is incorporated into the fair value of the PSUs and compensation expense will be recognized if the requisite service period is fulfilled even if the market condition is never satisfied.

Warrants

The Company accounts for warrants issued by the Company by first assessing whether the warrants meet all of the requirements for equity classification, including whether the warrants are indexed to the Company’s own shares of common stock and whether the warrant holders could require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment is conducted at the time of issuance of the warrants and reassessed as of each subsequent balance sheet date while the warrants are outstanding. For issued warrants that do not meet all the criteria for equity classification, such warrants are required to be classified as liabilities initially at their fair value on the date of issuance and subsequently remeasured to fair value on each balance sheet date thereafter. Changes in the estimated fair value of liability-classified warrants are recognized in Other (expense) income within the consolidated statements of operations.

Earnings per share

Earnings per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period. Potential common shares are included in the calculation of diluted earnings per share if their effect dilutes earnings per share from continuing operations. Potential common shares that were converted during the period are included in diluted earnings per share only up to the conversion date, and from that date are included in basic earnings per share.

Segment reporting

Operating segments are identified based on the manner in which the Company’s Chief Executive Officer (“CEO”) as its chief operating decision maker (“CODM”) reviews financial information, evaluates operating performance, and allocates resources. Operating segments are defined as components of the Company that engage in business activities from which they may earn revenues and incur expenses, whose operating results are regularly reviewed by the CODM, and for which discrete financial information is available. The Company operates multiple Bitcoin data centers, each of which constitutes an operating segment. The Company aggregates operating segments into a single operating segment when the segments have similar economic characteristics and meet the aggregation criteria prescribed by ASC 280, Segment Reporting. The Company has aggregated all of its mining operating segments into a single operating segment, which is the Company’s only reportable segment, Cryptocurrency Mining, as the operating segments have similar economic characteristics. The CODM evaluates segment performance based on net income (loss). Refer to Note 24 for the Company’s segment and geographical disclosures.

Recently issued accounting pronouncements

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal Use Software (“ASU 2025-06”). ASU 2025-06 eliminates the distinction between software project development stages and clarifies the threshold applied to begin capitalizing costs. The new standard is effective for the Company for its annual and interim periods beginning January 1, 2028, and permits prospective, modified prospective, retrospective or early adoption. The Company is currently evaluating the impact of adopting the standard.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides an optional practical expedient when applying the guidance related to the estimate of expected credit losses for current accounts receivable and current contract assets resulting from transactions arising from contracts with customers. The new standard is effective for the Company for its annual and interim periods beginning January 1, 2026, with early adoption permitted. The Company is evaluating the impact of adopting the standard.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU 2025-03”), which amends the guidance for identifying the accounting acquirer in transactions involving the acquisition of a variable interest entity that meets the definition of a business. The guidance is intended to reduce diversity in practice and improve consistency in the application of acquisition accounting. The new standard is effective for the Company for its annual periods beginning January 1, 2027, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

In March 2025, the FASB issued ASU No. 2025-02, Liabilities (Topic 405): Amendments to SEC Paragraph Pursuant to SEC Staff Accounting Bulletin No. 122 (“ASU 2025-02”). ASU 2025-02 amends the Accounting Standard Codification to remove the text of SEC Staff Accounting Bulletin (“SAB”) 121, as rescinded by SAB 122. The new standard is effective immediately and did not have a material impact on the Company’s Consolidated Financial Statements.

In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”). ASU 2024-04 clarifies the accounting for induced conversions of convertible debt instruments and improves the consistency of accounting for settlements of convertible debt that occur at terms different from those specified in the original contract. The new standard is effective for the Company for its annual and interim periods beginning January 1, 2026, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosures of certain expenses in the notes of the financial statements, to provide enhanced transparency into the expense captions presented on the Consolidated Statements of Operations. Additionally, in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”), to clarify the effective date of ASU 2024-03. The new standard is effective for the Company for its annual periods beginning January 1, 2027 and for interim periods beginning January 1, 2028, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.