How does Exit calculate the gain to be recognized upon the sale of digital assets?

According to Exit's 2025 Franchise Disclosure Document, the company calculates the gain recognized upon the sale of digital assets by determining the difference between the sales price and the carrying value of the digital assets immediately before the sale. This gain is presented net of any impairment losses for the same digital assets held.

Exit accounts for digital assets as indefinite-lived intangible assets, initially recorded at cost. These assets are subsequently remeasured on the consolidated balance sheets at cost, net of any impairment losses since acquisition. The fair value of Exit's digital assets is determined based on quoted prices on active exchanges, considered Level 1 inputs, according to ASC 820, Fair Value Measurement.

At year-end, Exit analyzes whether events or changes in circumstances indicate that the digital assets are impaired, primarily focusing on decreases in quoted prices on active exchanges. If the carrying value of a digital asset exceeds its fair value, an impairment loss is recognized, reducing the asset's value to its fair value. This new cost basis will not be adjusted upward for any subsequent increase in fair value.

Impairment losses are shown on the consolidated statements of income in the period they are identified. Gains are not recorded until realized upon sale, ensuring that the financial statements reflect a conservative approach to digital asset valuation and income recognition.