Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item. However, in light of our recent acquisition of a controlling interest in Fusion Five Continents Securities Limited (“Fusion Five”) on June 1, 2026, we are providing the following supplemental disclosures.
Digital Asset Risk
We hold digital assets, principally USDT, a U.S. dollar-denominated stablecoin, both for our own general corporate purposes and, through Fusion Five, on behalf of Fusion Five’s clients. As of June 30, 2026, the fair value of our own digital assets was $1,000,000, and digital assets held on behalf of Fusion Five’s clients had a fair value of $409,340. USDT is designed to maintain a stable value of $1.00 per token; however, there can be no assurance that this peg will be maintained. A significant decline in the value of USDT, or in the credit standing of its issuer, could adversely affect the value of our digital assets and our liquidity.
Foreign Currency Risk
Fusion Five’s functional currency is the New Zealand dollar. Fluctuations in the exchange rate between the New Zealand dollar and the U.S. dollar affect the U.S. dollar value of Fusion Five’s assets, liabilities, revenues, and expenses as translated into our reporting currency. We do not currently use derivative financial instruments to hedge our foreign currency exposure. A hypothetical 10% adverse movement in the NZD/USD exchange rate as of June 30, 2026 would not have had a material effect on our consolidated financial statements, given the current size of Fusion Five’s net asset position relative to our total assets; however, this exposure may become more significant as Fusion Five’s operations grow or as we complete the remaining closings of the Fusion Five acquisition.
Interest Rate Risk
Our $40,000,000 of promissory notes bear interest at a fixed rate of 6.0% per annum and are not subject to interest rate fluctuation risk with respect to our required interest payments. However, changes in prevailing market interest rates could affect the fair value of the Notes and our ability to refinance this or other indebtedness on favorable terms in the future.
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