v3.26.1
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
 12 Months Ended
Dec. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 17 — DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

 

The Company is party to certain contracts and instruments that are accounted for as derivatives under ASC 815, Derivatives and Hedging. The objective of the disclosures in this note is to enable users of the consolidated financial statements to understand (i) how and why the Company uses derivative instruments, (ii) how the Company accounts for derivative instruments under ASC 815, and (iii) how derivative instruments affect the Company’s financial position, financial performance, and cash flows.

 

The Company does not designate any derivative instruments as hedging instruments for accounting purposes and does not apply hedge accounting.

 

 

Derivative instruments

 

The Company’s derivative instruments during the year ended December 31, 2025 primarily consisted of:

 

  ● Exchangeable Shares issued by ExchangeCo in connection with the acquisition of Streamex Exchange, which were classified as a derivative liability prior to stockholder approval due to an exercise contingency and other settlement features evaluated under ASC 815-40.
     
  ● Embedded conversion features within the Company’s secured convertible debentures issued to Yorkville, which require bifurcation and recognition as an embedded derivative liability measured at fair value.
     
  ● Certain warrants that, upon the occurrence of a “Fundamental Transaction,” provided holders with a right to require cash settlement based on Black-Scholes value. Upon occurrence of such cash-settlement features, the affected warrants were evaluated for classification under ASC 815-40 and, reclassified as liability-classified derivative instruments and measured at fair value through settlement, which all affect warrants were settled during the period.

 

As of December 31, 2025, the Company’s only derivative instrument recognized on the Consolidated Balance Sheets was an embedded derivative liability related to the bifurcated conversion option within the Company’s secured convertible debentures issued to Yorkville. The embedded derivative liability was recorded at fair value of approximately $1.7 million as of December 31, 2025. As of December 31, 2024, the Company had no derivative instruments recognized on the Consolidated Balance Sheets.

 

See Note 15, Convertible Debentures and Note 12, Fair Value Measurements for additional information regarding the embedded derivative liability and related fair value measurements.

 

The Exchangeable Shares derivative liability was reclassified to permanent equity upon stockholder approval on November 4, 2025. The Company’s warrants with Fundamental Transaction cash settlement features were repurchased for cash during the fourth quarter of 2025. See the cross-referenced notes below for additional information.

 

The following table presents the impact of the Company’s derivative instruments on earnings for the year ended December 31 (in thousands):

 

SCHEDULE OF DERIVATIVE INSTRUMENTS ON EARNINGS 

       
   For the Year Ended December 31, 
   2025   2024 
Change in fair value of derivative liability  $(389,680)  $- 
Change in fair value of embedded derivative   7,015    - 
Total gain/loss) included in Other income (expense), net  $(382,665)  $- 

 

The change in fair value amounts above are included in Other income (expense), net in the Consolidated Statements of Operations.

 

Fair value measurements

 

Derivative liabilities are measured at fair value. Prior to stockholder approval, the Exchangeable Shares derivative liability was measured using valuation techniques with significant unobservable inputs and classified within Level 3 of the fair value hierarchy. The embedded derivative liabilities related to the Convertible Debentures are measured at fair value and include inputs that may be classified within Level 3, as applicable. See Note 12, Fair Value Measurements.

 

 

Cross-references to related disclosures

 

Derivative-related qualitative, quantitative, and tabular disclosures are included in more than one note to the consolidated financial statements. Accordingly, the Company provides the following cross-references:

 

  ● Note 3 — Summary of Significant Accounting Policies (derivative accounting policies, Exchangeable Shares derivative liability policy, and embedded derivative bifurcation policy)
     
  ● Note 7 — Stockholder Equity (Exchangeable Shares and Special Voting Preferred Stock; reclassification to equity)
     
  ● Note 8 — Options, Restricted Stock Units and Warrants (warrant terms and Fundamental Transaction cash settlement / repurchase activity)
     
  ● Note 11 — Business Acquisition (Exchangeable Shares issued as consideration and related acquisition disclosures)
     
  ● Note 12 — Fair Value Measurements (fair value hierarchy and valuation inputs for Level 3 instruments, as applicable)
     
  ● Note 15 — Convertible Debentures (embedded derivative liability amounts and related debenture disclosures)