Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
($ presented in 000's, except for bitcoin price)
The following discussion and analysis of our financial condition and results of operations should be read together with the interim Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in the Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in other parts of this Quarterly Report on Form 10-Q, as well as those identified in the “Risk Factors” section of our Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. See “Forward-Looking Statements.”
Company Overview
We are a data center developer, until recently focused exclusively on bitcoin mining. We focus on providing scalable, energy-efficient digital infrastructure across the United States. We independently own, lease and operate a large portfolio of data centers and power assets with locations in Georgia, Tennessee, Mississippi and Wyoming for a total contracted power capacity of approximately 1,809 megawatts (“MW”) as of March 31, 2026. In February 2026 and October 2025, we acquired properties and related power agreements in Texas to support the development of a next-generation data center campus. In February 2026, we acquired property in Tennessee, and, in December 2025, we acquired property in South Dakota with intentions to build out infrastructure at these sites. We intend to continue our growth in these regions and are actively developing plans for additional capacity in these states and other regions. We have no intention to mine, purchase or hold any crypto assets other than bitcoin at this time or in the foreseeable future, and we did not hold any other crypto asset as of March 31, 2026.
We design our infrastructure to responsibly secure and support both bitcoin mining and AI and HPC workloads. We cultivate trust and transparency among our employees and the communities where we operate.
Bitcoin Mining
Bitcoin mining has historically been our principal revenue generating business activity. Factors such as access to specialized mining servers, energy, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. As of March 31, 2026, our operating mining units produced an average computing power of 47.3 exahash per second (“EH/s”), following our achievement of a peak hashrate of 50 EH/s during fiscal year 2025. In bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the bitcoin network. We expect to continue increasing our computing power through 2026 and beyond as we expand infrastructure at our owned sites in Tennessee, Georgia, Mississippi, and Wyoming, while also pursuing regional expansion opportunities and evaluating strategic acquisition targets. A company’s computing power, measured in hashrate, is a significant driver of its bitcoin mining revenue, and when compared to the global hashrate, determines the company’s market share, making hashrate one of the most important metrics for evaluating bitcoin mining companies.
We owned approximately 326,885 miners, of which approximately 224,473 were in service as of March 31, 2026. The remainder primarily consists of new machines that are ready for installation at expansion sites, are under evaluation for relocation, or are awaiting repair. Our miners range in age from 1-63 months and have an average age of approximately 20 months. We estimate the useful lives of our miners to be three years. We do not have scheduled downtime for our miners; however, we periodically perform unscheduled maintenance and curtailments on our miners, but such downtime has not historically been significant. When performing unscheduled maintenance, we will typically replace the miner with a substitute miner to limit overall downtime. The miners in service as of March 31, 2026 had a range of energy efficiency (joules per terahash – “J/TH”) of 13.5 to 29.5 J/TH with an average operating energy efficiency of 16.2 J/TH.
We obtain bitcoin from our mining operations by contributing all of our computing power to a single mining pool operator, which is currently our sole customer under a contract terminable at any time by either party. In exchange, we earn variable consideration in the form of bitcoin rewards, determined daily using a predetermined formula based on our contributed computing power. The consideration is included in revenue once it is no longer constrained, when we can reasonably estimate the rewards and determine a significant reversal is unlikely, and our sole performance obligation of providing computing power is satisfied. Revenue is not disaggregated into block rewards and transaction fees. From time to time, we sell bitcoin to support operations and strategic growth, and we may also use bitcoin as collateral for lending arrangements. In April 2025, we launched an institutional-grade in-house trading function as we shift to a balanced approach between monetizing new production and building long-term holdings, and we plan to continue to integrate these strategies into our regular treasury management activities. As part of this strategy, we began entering into bitcoin-linked derivative contracts to economically hedge the volatility of bitcoin prices and to generate liquidity in support of core operating activities. These contracts serve as a strategic alternative to selling bitcoin directly and are intended to monetize our bitcoin holdings while managing exposure to adverse price movements. The types of derivatives utilized for this purpose may include bitcoin forwards, options, and other structured instruments. These contracts are typically short-term in nature and may be cash-settled or settled in-kind. Treasury management activities may serve cash management, strategic growth, or bitcoin balance hedging, incremental other income or other general corporate purposes. Currently, we do not employ a fixed formula for when or how much bitcoin to sell, and decisions are made by management based on working capital needs, real-time market conditions, risk management objectives, and broader strategic considerations.
The value of bitcoin has historically been subject to wide swings. The following table provides a range of intraday low and intraday high bitcoin prices between October 1, 2024 through March 31, 2026.
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Range of intraday bitcoin prices |
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Quarterly Reporting Periods Ended |
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Minimum Price |
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Maximum Price |
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December 31, 2024 |
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$ |
58,864 |
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|
$ |
108,389 |
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March 31, 2025 |
|
|
76,555 |
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|
|
109,358 |
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June 30, 2025 |
|
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74,421 |
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|
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112,000 |
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September 30, 2025 |
|
|
105,120 |
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|
|
124,533 |
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December 31, 2025 |
|
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80,525 |
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|
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126,296 |
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March 31, 2026 |
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60,000 |
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|
|
97,964 |
|
As of March 31, 2026, we held approximately 11,920 bitcoins and had a receivable for 1,641 bitcoin that was posted as collateral and recorded on our Condensed Consolidated Balance Sheets as Receivable for bitcoin collateral. The fair value of our bitcoin as of March 31, 2026 was $813,221 on our Condensed Consolidated Balance Sheets and the fair value of our Receivable for bitcoin collateral was $111,940. The fair value of bitcoin for each reporting period reflects the price of one bitcoin quoted on the active exchange, Coinbase, at the end of the reporting period. Therefore, decreases in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our bitcoin.
As of March 31, 2026 and September 30, 2025, the Company did not hold any other cryptocurrency of value other than bitcoin.
AI and HPC Hosting
Leveraging our power optimization, land acquisition, engineering, operations and construction expertise, we have been actively pursuing opportunities to develop portions of our sites and power pipeline for AI, HPC and other advanced data-center hosting and leasing applications. The expansion of AI technologies and the increasing electricity requirements of AI and HPC workloads have positioned our infrastructure as a competitive platform for hyperscalers, cloud service providers and AI and HPC companies seeking reliable and energy-efficient capacity. As of March 31, 2026 and September 30, 2025, we had earned no revenues from our AI and HPC services business.
We are evaluating existing properties for potential conversion or dual-use development to support AI and HPC tenants and are advancing design and permitting activities for greenfield data-center sites. On February 27, 2026, we acquired property in Brazoria County, Texas and secured a framework for approximately 300 megawatts for power capacity, with potential expansion to approximately 600 megawatts, to support the development of a next-generation data center campus. On October 27, 2025, we acquired property in Austin County, Texas and secured approximately 285 megawatts of planned power capacity to support a similar purpose. These transactions mark the Company’s entry into the Texas market and have expanded our portfolio of land and power-related infrastructure for future AI and HPC development.
We maintain real property holdings through our wholly owned and consolidated subsidiaries.
Results of Operations for the three and six months ended March 31, 2026 and 2025
($ presented in 000's, except for per share amounts, bitcoin price and information set forth under the heading “Bitcoin Mining Operations”)
Bitcoin Mining Operations
Overview
We operate a fleet of servers commonly known as miners or ASICs (Application-Specific Integrated Circuits), which are computer chips customized for a specific use. In the case of bitcoin mining, ASICs calculate the SHA-256 algorithm as efficiently and quickly as possible in order to compete with other miners to solve blocks. Each calculation is a hash, and each machine’s computational power is measured in terahash processed per second. One terahash is equal to 1 trillion hashes. The more terahash we produce and contribute into the mining pool, the higher our percentage of the blockchain reward.
There are a variety of factors that influence our ability to mine bitcoin profitability. Our ability to mine profitability is dependent on successfully navigating these fluctuating variables, which include bitcoin’s value in USD (the volatility of which is described above), mining difficulty, block rewards and halving, global hashrate, power prices, fleet energy efficiency, data center energy efficiency and other factors.
The energy efficiency of a mining fleet helps drive profitability, because the most significant direct expense for bitcoin mining is power. We measure efficiency by the joules (or watts) of energy required to produce each terahash of processing power. We believe we operate a highly efficient fleet of miners.
The table below describes our fleet as of March 31, 2026 and 2025 and our miner efficiency and computing power as compared to the global computing power.
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As of March 31, |
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Combined facilities |
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2026 |
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2025 |
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Global hashrate (in terms of EH/s) (1) |
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1,016 |
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835 |
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Miner efficiency (J/TH) (2) |
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16.2 |
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17.0 |
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CleanSpark average hashrate (in terms of EH/s) (3) |
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47.3 |
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42.4 |
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CleanSpark percentage of total global hashrate |
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4.66 |
% |
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5.08 |
% |
(1) Total global hashrate was obtained from Hashrate index (https://data.hashrateindex.com/network-data/network).
(2) Joules of energy required to produce each terahash of processing power, based on the Company’s miner fleet operating at period end.
(3) The average hashrate was calculated from operating activity for the final month of each respective reporting period.
As of March 31, 2026, our operating hashrate was approximately 4.66% of the total global hashrate, and we received approximately the same percentage of the global blockchain rewards, which, as of that date, equaled approximately 20-21 bitcoin per day, excluding the bitcoin earned from network transaction fees. Ultimately, in order to mine profitably, we work to ensure that these mining rewards cover our direct operating costs.
The table below describes the average cost of mining each bitcoin for the three and six months ended March 31, 2026 and 2025 and the total energy usage and cost per each kilowatt hour (“kWh”) utilized within our owned facilities.
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Cost of Revenues - Analysis of costs to mine one bitcoin |
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For the three months ended March 31, |
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For the six months ended March 31, |
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(per bitcoin amounts are actual) |
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2026 |
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2025 |
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2026 |
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2025 |
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Cost of Mining - Owned Facilities |
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Cost of energy per bitcoin mined |
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$ |
45,387 |
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$ |
42,664 |
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$ |
48,946 |
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$ |
38,437 |
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Other direct costs of mining - non energy utilities per bitcoin mined |
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24 |
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3 |
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36 |
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41 |
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Cost to mine one bitcoin - direct energy cost - Owned facilities |
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$ |
45,411 |
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$ |
42,667 |
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$ |
48,982 |
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$ |
38,478 |
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Miner depreciation per bitcoin mined |
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58,029 |
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35,056 |
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55,098 |
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33,552 |
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Financing costs per bitcoin mined |
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— |
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60 |
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— |
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78 |
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Direct cost to mine including non-cash depreciation and financing costs - Owned facilities |
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$ |
103,440 |
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$ |
77,783 |
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$ |
104,080 |
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$ |
72,108 |
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Average revenue of each bitcoin mined (1) |
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$ |
75,827 |
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$ |
92,811 |
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$ |
87,733 |
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$ |
88,529 |
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Direct cost to mine one bitcoin as % of average bitcoin mining revenue - Including direct energy cost only |
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59.9 |
% |
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46.0 |
% |
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55.8 |
% |
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43.5 |
% |
Direct cost to mine one bitcoin as % of average bitcoin mining revenue - Including miner depreciation expense |
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136.4 |
% |
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83.8 |
% |
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118.6 |
% |
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81.5 |
% |
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Statistics |
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Owned Facilities |
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Total bitcoin mined at owned facilities (2) |
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1,799 |
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1,938 |
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3,620 |
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3,755 |
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Bitcoin mining revenue - owned facilities - ($ in thousands) |
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$ |
136,408 |
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$ |
179,834 |
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$ |
317,588 |
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$ |
332,394 |
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Total miners in service in owned facilities |
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224,473 |
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205,412 |
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224,473 |
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205,412 |
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Total kWh utilized |
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1,555,406,974 |
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1,368,226,176 |
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3,275,784,307 |
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2,620,155,193 |
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Total energy expense - ($ in thousands) |
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$ |
81,648 |
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$ |
82,668 |
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$ |
177,184 |
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$ |
144,316 |
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Cost per kWh |
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$ |
0.052 |
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$ |
0.060 |
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$ |
0.054 |
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$ |
0.055 |
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Energy expense
as a percentage of bitcoin mining revenue, net |
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59.9 |
% |
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46.0 |
% |
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55.8 |
% |
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43.4 |
% |
Other direct costs of mining - non energy utilities
($ in thousands) |
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$ |
44 |
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$ |
5 |
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$ |
129 |
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$ |
155 |
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Depreciation expense - miners only - ($ in thousands) |
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$ |
104,392 |
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$ |
67,925 |
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$ |
199,451 |
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$ |
125,977 |
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Direct miner financing costs - ($ in thousands) |
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$ |
— |
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$ |
116 |
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$ |
— |
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$ |
295 |
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(1) Average revenue of each bitcoin mined is calculated by dividing the sum of bitcoin mining revenue for our owned facilities by the total number of bitcoin mined by our owned facilities during the respective periods. We have determined that Coinbase is the principal market for valuing bitcoin transactions and use the closing price of bitcoin at 23:59:59 UTC as the source of recording revenue. See the table “Range of intraday bitcoin prices” for information on the range of intraday bitcoin prices for quarterly periods between October 1, 2024 and March 31, 2026.
(2) Includes mining rewards and transaction fees but excludes the reduction for pool operator fees.
Power prices are the most significant cost driver for our wholly owned locations, and energy expense represented 59.9% and 46.0% as expressed as a percentage of bitcoin mining revenues during the three months ended March 31, 2026 and 2025, respectively, and 55.8% and 43.4% as expressed as a percentage of bitcoin mining revenues during the six months ended March 31, 2026 and 2025, respectively.
Energy prices can be highly volatile and global events can impact energy rates. We have a diverse portfolio of power contracts across our sites in the states of Georgia, Mississippi, Tennessee and Wyoming. These contracts are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs. Such prices are governed by power purchase agreements which vary by location, and said prices can change hour to hour. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms, polar vortices and hurricanes, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates. The average power prices we paid under our power contracts at our owned facilities were $0.052 and $0.060 per kWh for the three months ended March 31, 2026 and 2025, respectively, and were $0.054 and $0.055 per kWh, for the six months ended March 31, 2026 and 2025, respectively.
The management team makes real-time determinations on the need and timing during which we should curtail our operations. We curtail when power prices exceed the value we would receive for the corresponding fixed bitcoin reward. This means if bitcoin’s value decreases or energy prices increase, our curtailment will increase; likewise, when bitcoin’s value increases and energy prices decrease, our curtailment will decrease. The management and operations teams manage these decisions on an hour-by-hour basis across all our sites. The Company did not have significant curtailment and maintained an average uptime greater than 90% during the six months ended March 31, 2026. A large portion of the curtailment during the first quarter related to Hurricane Helene which affected our Georgia sites at the end of September 2024 to the beginning of October 2024. The southeast Georgia sites were shut down as the hurricane began impacting the region, thus at the beginning of the October 2024, these sites were operating on approximately 200 MW which gradually increased during the same week to their full 365 MW capacity when utility service was restored to the communities.
The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners’ expected useful life. Such non-cash depreciation amounts are recorded within the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income as Depreciation and amortization. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a “per bitcoin” basis, calculated by dividing miner depreciation expense in our owned facilities by the number of bitcoin mined in the owned facilities. On a “cost per bitcoin” ratio, miner depreciation expense was $55,098 and $33,552 for the six months ended March 31, 2026 and 2025, respectively.
In the prior period ended March 31, 2025, we had financing costs for a limited number of miners in our miner fleet, and such costs were recorded within Interest expense in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The table above presents financing costs per bitcoin calculated by dividing direct interest expense on our miner financing agreement by the number of bitcoin mined in our owned facilities. On a cost per bitcoin ratio, for the three and six months ended March 31, 2025 the financing costs per bitcoin mined was $60 and $78, respectively.
A total of 147 bitcoin were mined at hosted facilities during the six months ended March 31, 2025. As of March 31, 2025, the Company had exited all bitcoin mining operations conducted at hosted facilities and since then conducts mining exclusively at owned and leased facilities. Accordingly, no bitcoin were mined at hosted facilities during the comparable periods in the current year. Management no longer evaluates operating performance using hosted-facility metrics, and current-period disclosures reflect only the cost structure and operating statistics of owned and leased mining locations. Prior-year hosted-facility results are discussed only to the extent necessary to explain period-over-period changes.
Results of Operations for the three months ended March 31, 2026 and 2025
($ presented in 000's, except for average bitcoin price)
Bitcoin mining revenue
We earned $136,408 in bitcoin mining revenue during the three months ended March 31, 2026, which was a decrease of $45,304, or 25%, as compared to $181,712 for the three months ended March 31, 2025. Bitcoin mining revenues are recorded net of bitcoin mining fees charged by our sole mining pool operator (Foundry) that equaled approximately 0.21% of gross bitcoin mining revenues for the three months ended March 31, 2026, and are determined by two main drivers: quantity of bitcoin mined and the price of bitcoin on the date the bitcoin is mined. During the three months ended March 31, 2026, we mined 1,795 bitcoin with an average bitcoin price of $75,989 as compared to 1,957 bitcoin with an average bitcoin price of $92,870 during the three months ended March 31, 2025. The decrease in bitcoin mining revenue for the three months ended March 31, 2026 was attributable to the decrease in the average bitcoin price combined with a decrease in total bitcoin mined during the period as compared to the three months ended March 31, 2025. Although the number of our miners in operation increased to 224,473 as of March 31, 2026 from 205,412 as of March 31, 2025, global hashrate grew more rapidly over the same period, increasing competition across the blockchain network. As a result, our relative share of total network computational power declined, which contributed to the decrease in bitcoin mined during the three months ended March 31, 2026.
Cost of revenues (exclusive of depreciation and amortization expense)
Our cost of revenues was $81,691 for the three months ended March 31, 2026, which represents a decrease of $3,733, or 4%, as compared with $85,424 for the three months ended March 31, 2025. This decrease in costs was primarily related to energy costs to operate the miners within our owned facilities, which were $81,648 for the three months ended March 31, 2026, a decrease of $1,020, or 1%, as compared to $82,668 for the three months ended March 31, 2025. Energy costs were generally consistent in comparison, with the slight decrease reflecting normal changes in our operating footprint and power utilization across owned facilities, partially offset by the increase in miners operating at those locations. Additionally, we continually evaluate energy and bitcoin prices and periodically will curtail our mining operations when it is advantageous to do so.
Professional fees
Professional fees, which consisted primarily of legal, accounting and consulting fees, were $9,652 for the three months ended March 31, 2026, an increase of $6,669, or 224%, from $2,983 for the three months ended March 31, 2025. This increase was primarily attributable to higher consulting and other professional fees of $7,330 for the three months ended March 31, 2026, as compared to $1,942 for the three months ended March 31, 2025. These costs were incurred in connection with evaluating and developing our HPC and AI initiatives.
Payroll expenses
Payroll expenses were $24,922 for the three months ended March 31, 2026, an increase of $9,667, or 63%, from $15,255 for the three months ended March 31, 2025. Our payroll expenses include all compensation-related expenses for our employees and mainly include salaries, wages, payroll-related taxes and benefits and non-cash stock-based compensation. Payroll expenses, excluding non-cash stock-based compensation, were $13,785 for the three months ended March 31, 2026, representing an increase of 13% from $12,154 for the three months ended March 31, 2025, and were mainly attributed to increased headcount due to expansion of operational locations.
Stock-based awards granted to certain employees are a significant portion of our payroll-related costs. Stock-based compensation for employees, which is a non-cash expense, was $11,137 for the three months ended March 31, 2026, an increase of $8,036, or 259%, from $3,101 for the three months ended March 31, 2025. The lower overall stock-based compensation for the three months ended March 31, 2025 was due to that lack of a formal grant date or service inception date under the 2025 LTIP as of March 31, 2025 and accordingly there was no expense recognized under this plan over that prior year period.
General and administrative expenses
General and administrative expenses increased to $16,105 for the three months ended March 31, 2026 from $11,736 for the three months ended March 31, 2025, representing an increase of $4,369 or 37%. This increase was primarily attributable to increases in corporate overhead, including, but not limited to, property taxes, rent, and maintenance expenses due to the increase in owned assets.
Loss (gain) on fair value of bitcoin, net
Loss on fair value of bitcoin, net for the three months ended March 31, 2026 and 2025 was $224,107 and $127,667, respectively, a total variance of $96,440. We measured crypto assets at fair value and included the gains and losses from remeasurement in net income. The loss for the three months ended March 31, 2026 is attributable to the change in bitcoin’s fair value from approximately $87,500 per bitcoin on December 31, 2025 to approximately $68,200 per bitcoin on March 31, 2026. The loss for the three months ended March 31, 2025 pertains to the change in bitcoin’s fair value from approximately $93,400 per bitcoin on December 31, 2024 to $82,500 per bitcoin on March 31, 2025.
Depreciation and amortization
Depreciation and amortization expense increased to $115,881 for the three months ended March 31, 2026, from $78,901 for the three months ended March 31, 2025, an increase of $36,980, or 47%. Depreciation expense increased by $37,332, or 48%, during the three months ended March 31, 2026, to $115,265 from $77,933, mainly due to an increase in miners and mining-related equipment being in service during the comparative period.
Amortization expense for the three months ended March 31, 2026 was $616, a decrease of $351, or 36%, from $967 for the three months ended March 31, 2025. The decrease in amortization expense is primarily due to some of the Company’s intangible assets aging off of the balance sheet.
Other (expense) income
Other expense was $42,555 and $3,811 for the three months ended March 31, 2026 and 2025, respectively, which represents a change of $38,744.
The loss on bitcoin collateral was the primary reason for the increase in other expense since in the prior year there was no collateral held by Coinbase or other counterparties. The loss in the fair value of collateral of $38,838 for the three months ended March 31, 2026 is attributable to the change in the underlying collateral that was posted while bitcoin’s fair value fell during the period from approximately $87,500 per bitcoin on December 31, 2025 to approximately $68,200 per bitcoin on March 31, 2026.
Interest income in the three months ended March 31, 2026 increased by $1,058 to $3,072 from $2,014 for the three months ended March 31, 2025 due to greater balance of cash retained in short-term interest-bearing accounts.
Interest expense in the three months ended March 31, 2026 increased by $787 to $2,054 from $1,267 for the three months ended March 31, 2025 due to the amortization of deferred issuance costs from the convertible notes and the lines of credit which the company had a limited volume of outstanding amounts during the comparative period.
Net (loss) income
Net loss for the three months ended March 31, 2026 and 2025 was $378,343 and $138,792, respectively, an increase in net loss of $239,551 due to the reasons stated above.
Results of continuing operations for the six months ended March 31, 2026 and 2025
($ presented in 000's, except for average bitcoin price)
Bitcoin mining revenue
We earned $317,588 in bitcoin mining revenue during the six months ended March 31, 2026, which was a decrease of $26,430, or 8%, as compared with $344,018 for the six months ended March 31, 2025. Bitcoin mining revenues are recorded net of bitcoin mining fees charged by our sole mining pool operator (Foundry) that equaled approximately 0.20% of gross bitcoin mining revenues for the six months ended March 31, 2026, and are determined by two main drivers: quantity of bitcoin mined and the price of bitcoin on the date the bitcoin is mined. During the six months ended March 31, 2026, we mined 3,612 bitcoin with an average bitcoin price of $87,916 as compared to 3,902 bitcoin with an average bitcoin price of $88,170 during the six months ended March 31, 2025. The decrease in bitcoin mining revenue for the six months ended March 31, 2026 was attributable to the decrease in the average bitcoin price combined with a decrease in total bitcoin mined during the period as compared to the six months ended March 31, 2025. Although the number of our miners in operation increased to 224,473 as of March 31, 2026 from 205,412 as of March 31, 2025, global hashrate grew more rapidly over the same period, increasing competition across the blockchain network. As a result, our relative share of total network computational power declined, which contributed to the decrease in bitcoin mined during the six months ended March 31, 2026.
Cost of revenues (exclusive of depreciation and amortization expense)
Our cost of revenues was $177,312 for the six months ended March 31, 2026, which represents an increase of $21,598, or 14%, as compared with $155,714 for the six months ended March 31, 2025. These costs were primarily related to energy costs to operate the miners within our owned facilities, which were $177,184 for the six months ended March 31, 2026, an increase of $31,442 or 22% as compared to $145,742 for the six months ended March 31, 2025. The increase in energy costs was due to the expansion of our operations since March 31, 2025 and the increase in the volume of miners operating in our owned locations. We continually evaluate energy and bitcoin prices and periodically will curtail our mining operations when it is advantageous to do so.
Professional fees
Professional fees, which consisted primarily of legal, accounting and consulting fees, were $15,058 for the six months ended March 31, 2026, an increase of $8,190, or 119%, from $6,868 for the six months ended March 31, 2025. This increase was primarily attributable to higher consulting and other professional fees of $10,002 for the six months ended March 31, 2026, as compared to $4,382 for the six months ended March 31, 2025. These costs were incurred in connection with evaluating and developing our HPC and AI initiatives.
Payroll expenses
Payroll expenses were $48,707 for the six months ended March 31, 2026, an increase of $12,583, or 35%, from $36,124 for the six months ended March 31, 2025. Our payroll expenses include all compensation-related expenses for our employees and mainly include salaries, wages, payroll-related taxes and benefits and non-cash stock-based compensation. Payroll expenses, excluding non-cash stock-based compensation, were $26,486 for the six months ended March 31, 2026, representing a decrease of 12% from $30,002 for the six months ended March 31, 2025, and were mainly attributed to changes in the composition and timing of payroll costs during the period, partially offset by increased headcount associated with the expansion of operational locations.
Stock-based awards granted to certain employees are a significant portion of our payroll-related costs. Stock-based compensation, which is a non-cash expense, was $22,221 for the six months ended March 31, 2026, an increase of $16,099, or 263%, from $6,122 for the six months ended March 31, 2025. The lower overall stock-based compensation for the six months ended March 31, 2025 was due to that lack of a formal grant date or service inception date under the 2025 LTIP as of March 31, 2025, and accordingly there was no expense recognized under this plan.
General and administrative expenses
General and administrative expenses increased to $31,547 for the six months ended March 31, 2026 from $21,790 for the six months ended March 31, 2025, representing an increase of $9,757 or 45%. This increase was primarily attributable to increases in corporate overhead, including, but not limited to, property taxes, rent, and maintenance expenses due to the increase in owned assets.
Loss (gain) on fair value of bitcoin, net
Loss on fair value of bitcoin, net for the six months ended March 31, 2026 was $470,939 as compared to a gain on fair value of bitcoin of $90,539 for the six months ended March 31, 2025, a total variance of $561,478. The loss for the six months ended March 31, 2026 pertains to the change in bitcoin’s fair value from approximately $114,100 per bitcoin on September 30, 2025 to approximately $68,200 per bitcoin on March 31, 2026. The gain for the six months ended March 31, 2025 pertains to the change in bitcoin’s fair value from approximately $63,300 per bitcoin on September 30, 2024 to $82,500 per bitcoin on March 31, 2025.
Depreciation and amortization
Depreciation and amortization expense increased to $222,192 for the six months ended March 31, 2026, from $145,130 for the six months ended March 31, 2025, a increase of $77,062 or 53%. Depreciation expense increased by $77,575, or 54%, during the six months ended March 31, 2026, from $143,058 to $220,633, mainly due to an increase in miners and mining-related equipment being in service during the comparative period.
Amortization expense for the six months ended March 31, 2026 was $1,559, a decrease of $513, or 25%, from $2,072 for the six months ended March 31, 2025. The decrease in amortization expense is primarily due to some of the Company’s intangible assets aging off of the balance sheet.
Other (expense) income
Other expense was $136,127 for the six months ended March 31, 2026, compared with other income of $42,221 for the six months ended March 31, 2025, which is change of $178,348.
The $142,458 loss on bitcoin collateral was the primary reason for the increase in other expense compared to a prior year gain on bitcoin collateral of $42,493. The loss in the fair value of collateral for the six months ended March 31, 2026 is attributable to the change in the underlying bitcoin posted as collateral’s fair value during the period from approximately $114,100 per bitcoin on September 30, 2025 to approximately $68,200 per bitcoin on March 31, 2026. The gain for the six months ended March 31, 2025 pertains to the change in bitcoin’s fair value from approximately $63,300 per bitcoin on September 30, 2024 to $82,500 per bitcoin on March 31, 2025.
Interest income in the six months ended March 31, 2026 increased to $5,257 from $3,490 for the six months ended March 31, 2025, an increase of $1,767 due to greater balance of cash retained in short-term interest-bearing accounts.
Interest expense in the six months ended March 31, 2026 increased by $2,924 to $5,750 from $2,826 for the six months ended March 31, 2025 due to the amortization of deferred issuance costs from the convertible notes and the lines of credit which the company had a limited volume of outstanding amounts during the comparative period.
Net (loss) income
Net loss for the six months ended March 31, 2026 was $757,054, as compared to net income of $107,999 for the six months ended March 31, 2025, due to the reasons stated above.
Non-GAAP Measure
We present Adjusted EBITDA, which is not a measurement of financial performance under GAAP. Our non-GAAP “Adjusted EBITDA” excludes (i) impacts of interest, taxes, and depreciation; (ii) our share-based compensation expense, unrealized gains/losses on securities, and changes in the fair value of contingent consideration with respect to previously completed acquisitions, all of which are non-cash items that we believe are not reflective of our general business performance, and for which the accounting requires management judgment, and the resulting expenses could vary significantly in comparison to other companies; (iii) non-cash impairment losses related to long-lived assets; (iv) realized gains and losses on sales of equity securities, the amounts of which are directly related to the unrealized gains and losses that are also excluded; (v) legal fees related to litigation and various transactions, which fees management does not believe are reflective of our ongoing operating activities; (vi) gains and losses on disposal of assets, the majority of which are related to obsolete or unrepairable machines that are no longer deployed; (vii) gains and losses related to discontinued operations that would not be applicable to our future business activities; and (viii) severance expenses.
Management believes that providing this non-GAAP financial measure that excludes these items allows for meaningful comparisons between the Company’s core business operating results and those of other companies, and provides the Company with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time. In addition to management’s internal use of non-GAAP Adjusted EBITDA, management believes that Adjusted EBITDA is also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis. Management believes the foregoing to be the case even though some of the excluded items involve cash outlays and some of them recur on a regular basis (although management does not believe any of such items are normal operating expenses necessary to generate our bitcoin-related revenues). For example, we expect that share-based compensation expense, which is excluded from Adjusted EBITDA, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers and directors.
The Company’s Adjusted EBITDA measure may not be directly comparable to similar measures provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. The Company’s Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to operating (loss) income or any other measure of performance derived in accordance with GAAP. Although management utilizes internally and presents Adjusted EBITDA, we only utilize that measure supplementally and do not consider it to be a substitute for, or superior to, the information provided by GAAP financial results.
Accordingly, Adjusted EBITDA is not meant to be considered in isolation of, and should be read in conjunction with, the information contained in our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP.
The following is a reconciliation of our non-GAAP Adjusted EBITDA to its most directly comparable GAAP measure (i.e., net (loss) income) for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
For the three months ended March 31, |
|
|
For the six months ended March 31, |
|
Reconciliation of non-GAAP Adjusted EBITDA |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
Net (loss) income |
|
$ |
(378,343 |
) |
|
$ |
(138,792 |
) |
|
$ |
(757,054 |
) |
|
$ |
107,999 |
|
Depreciation and amortization |
|
|
115,881 |
|
|
|
78,901 |
|
|
|
222,192 |
|
|
|
145,130 |
|
Share-based compensation expense |
|
|
12,055 |
|
|
|
3,101 |
|
|
|
24,186 |
|
|
|
6,122 |
|
(Loss) gain on derivative securities, net |
|
|
4,840 |
|
|
|
4,741 |
|
|
|
(6,955 |
) |
|
|
1,119 |
|
Interest income |
|
|
(3,072 |
) |
|
|
(2,014 |
) |
|
|
(5,257 |
) |
|
|
(3,490 |
) |
Interest expense |
|
|
2,054 |
|
|
|
1,267 |
|
|
|
5,750 |
|
|
|
2,826 |
|
Other income |
|
|
(105 |
) |
|
|
(183 |
) |
|
|
131 |
|
|
|
(183 |
) |
Loss (gain) on disposal of assets |
|
|
3,990 |
|
|
|
(2,230 |
) |
|
|
3,767 |
|
|
|
(3,021 |
) |
Fees related to financing & business development transactions |
|
|
5,068 |
|
|
|
258 |
|
|
|
5,270 |
|
|
|
631 |
|
Litigation & settlement related expenses |
|
|
715 |
|
|
|
193 |
|
|
|
2,460 |
|
|
|
541 |
|
Severance and other |
|
|
(132 |
) |
|
|
12 |
|
|
|
(100 |
) |
|
|
12 |
|
Income tax (benefit) expense |
|
|
(9,891 |
) |
|
|
(3,043 |
) |
|
|
(41,306 |
) |
|
|
6,174 |
|
Indirect tax contingency expenses |
|
|
1,731 |
|
|
|
— |
|
|
|
4,893 |
|
|
|
— |
|
Impairment expense - other |
|
|
4,008 |
|
|
|
— |
|
|
|
4,008 |
|
|
|
— |
|
Impairment expense - fixed assets |
|
|
— |
|
|
|
— |
|
|
|
1,398 |
|
|
|
— |
|
Non-GAAP Adjusted EBITDA* |
|
$ |
(241,201 |
) |
|
$ |
(57,789 |
) |
|
$ |
(536,617 |
) |
|
$ |
263,860 |
|
* We have not excluded our Loss (gain) on fair value of bitcoin, net or our (Loss) gain on bitcoin collateral which we record in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income as provided in ASC 350-60 and discussed in the Form 10-K. Loss (gain) on fair value of bitcoin, net totaled a loss of $224,107 and $127,667 in the three months ended March 31, 2026 and 2025, respectively, and a loss of $470,939 and a gain of $90,539 in the six months ended March 31, 2026 and 2025, respectively. (Loss) gain on bitcoin collateral totaled a loss of $38,838 and $0 in the three months ended March 31, 2026 and 2025, respectively, and a loss of $142,458 and a gain of $42,493 in the six months ended March 31, 2026 and 2025, respectively.
Liquidity and Capital Resources
($ presented in 000's)
Our primary requirements for liquidity and capital are working capital, capital expenditures, loan payments, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business. Our principal sources of liquidity have been and are expected to be our cash and cash equivalents, bitcoin, proceeds from our convertible note and line of credit.
As of March 31, 2026, we had total current assets of $1,099,037, consisting of cash and cash equivalents, prepaid expenses and other current assets, and bitcoin. Our total current liabilities and total liabilities as of March 31, 2026 were $133,068 and $1,927,341, respectively. We had working capital of $965,969 as of March 31, 2026. We use a portion of the bitcoin we mine to fund operations and to fund capital expenditures. In addition, we have a total outstanding balance of $1,769,369 zero-coupon convertible notes outstanding and unused lines of credit balances totaling $400,000 with Coinbase and Two Prime as discussed in Note 9 - Indebtedness.
Based on our current plans and business conditions, we believe that existing cash and cash equivalents and bitcoin, together with cash and bitcoin generated from operations and our future investing activities, will be sufficient to satisfy our anticipated cash requirements for the next 12 months and for the reasonably foreseeable future until we reach consistent profitability, and we are not aware of any trends or demands, commitments, events or uncertainties that are reasonably likely to result in a decrease in the liquidity of our assets. We are likely to require additional capital to respond to technological advancements, competitive dynamics or technologies, business opportunities, challenges, acquisitions or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In particular, the ongoing impacts of inflation and fluctuations in interest rates, global conflicts including increases in tariffs, have resulted in, and may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.
Material Cash Requirements
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the Condensed Consolidated Balance Sheets as of March 31, 2026, while others are considered future commitments. Our contractual obligations primarily consist of cancelable purchase commitments with various parties to purchase goods or services, primarily mining equipment and construction costs, as well as operating leases. For information regarding our other contractual obligations, refer to Note 15 - Commitments and Contingencies in this Quarterly Report on Form 10-Q for the period ended March 31, 2026, and Note 19 - Commitments and Contingencies included in our Form 10-K as filed with the SEC on November 25, 2025.
We regularly evaluate opportunities to expand our business, including through potential acquisitions of businesses or assets. We will evaluate a variety of sources of capital in connection with financing any future possible acquisitions, including the incurrence of debt, sales of stock or bitcoin, or using cash on hand. We may also use the Company’s stock as transaction consideration, as we have done in the past.
Digital Asset Management Treasury Activity
During 2025, the Company instituted a Digital Asset Management (“DAM”) treasury strategy designed to enhance liquidity and generate incremental income from the Company’s bitcoin holdings. The Company selectively engages in derivative transactions, primarily covered call and put option contracts, that are collateralized by bitcoin held in treasury or cash, respectively. These transactions are structured to manage operating liquidity and monetize near-term volatility while maintaining long-term exposure to bitcoin price appreciation.
During periods of rising bitcoin prices, the Company’s realized derivative results may reflect accounting losses on written call options that are settled in bitcoin or cash, as the strike price is below the prevailing market price of bitcoin. However, such losses are offset economically and accounted for by an increase in the fair value of the underlying bitcoin retained by the Company through the settlement date. This strategy, referred to internally as “Spot+” trading, provides the Company with steady proceeds from the sale of options while managing the regular and ongoing sale of bitcoin for operating needs.
The Company also generates premium proceeds from the sale of far out-of-the-money call options with low delta exposure. While bitcoin subject to these contracts may get called from time to time, these options typically expire unexercised and provide proceeds without requiring disposition of bitcoin. In the event of an exercise, the Company may adjust the pace of Spot+ and yield activities to replenish bitcoin balances held for long-term investment purposes (“HODL balances”), or use the additional cash generated for operating or capital expenditures. The proceeds generated from these activities provide a steady stream of investing cash flows for the company while acting as economic hedges for the company’s wider operating activities. While the Company’s use of purchased or written put options has been limited to date, these are expected to be a growing portion of the Company’s holistic and growing treasury management and hedging activities.
The table below reconciles the Company’s derivative income to its related proceeds from DAM activities for the period presented:
|
|
|
|
|
|
|
|
|
For the three months ended March 31, |
|
|
For the six months ended March 31, |
|
($ in thousands) |
2026 |
|
|
2026 |
|
(Loss) gain on derivative securities, net |
$ |
(4,840 |
) |
|
$ |
6,955 |
|
Add: Fair value in excess of strike price on settled DAM derivatives |
|
631 |
|
|
|
1,232 |
|
Add: Loss on value assigned to costless Bitmain contract option |
|
5,230 |
|
|
|
5,463 |
|
Less: Gain on other non-DAM Investments |
|
(60 |
) |
|
|
(166 |
) |
Add: Change in net fair value of unsettled DAM derivatives during the period |
|
2,907 |
|
|
|
3,570 |
|
Add: Basis premium generated from DAM forward trades |
|
106 |
|
|
|
191 |
|
Proceeds from premiums |
$ |
3,974 |
|
|
$ |
17,245 |
|
During the three and six months ended March 31, 2026 activities provided approximately $4.0 and $17.2 million, respectively, of proceeds from premiums and incremental Spot+ trading. These premiums are used to supplement operating cash flows from bitcoin mining. Management views DAM activities as an integrated component of its treasury strategy and liquidity management, rather than as speculative trading. The Company expects to continue its Spot+ and yield strategies at measured levels relative to its total bitcoin balance and operating requirements. The Bitmain options are bitcoin-linked derivatives but were not a result of the Company’s DAM strategy and are not included in DAM activity.
The table below presents the Company’s DAM derivative activity for the three months ended March 31, 2026, which supports the proceeds reconciliation above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2026 |
Average BTC Price at Contract Date |
|
Average BTC Strike Price |
|
BTC Equivalent Contracts |
|
Proceeds from Premiums ($000's) |
|
Effective Sales Price to Spot (1) |
|
Annualized Premium Yield (1) |
|
Spot+ Calls |
$ |
75,561 |
|
$ |
82,532 |
|
|
8,395 |
|
$ |
8,679 |
|
|
110.6 |
% |
|
— |
|
Yield Calls |
|
76,322 |
|
|
103,067 |
|
|
3,410 |
|
$ |
1,901 |
|
|
— |
|
|
3.8 |
% |
Yield Puts |
|
84,125 |
|
|
74,916 |
|
|
5,225 |
|
$ |
9,313 |
|
|
— |
|
|
22.8 |
% |
Forwards(2) |
|
80,177 |
|
|
80,519 |
|
|
310 |
|
$ |
106 |
|
|
— |
|
|
5.1 |
% |
Bitmain options hedge |
|
— |
|
|
— |
|
|
— |
|
$ |
— |
|
|
— |
|
|
— |
|
Derivative close-out transactions |
|
74,505 |
|
|
85,169 |
|
|
7,550 |
|
$ |
(16,025 |
) |
|
— |
|
|
— |
|
Total |
|
|
|
|
|
|
$ |
3,974 |
|
|
|
|
|
(1) Trade-date, illustrative metrics intended to show the strategy’s implied economics at inception; they do not represent actual sales or yields, and bitcoin subject to these contracts may be exited early or remain unsold.
(2) Annualized premium yields from Forwards represent expected settlement premium on inception of $106.
The table below presents the Company’s DAM derivative activity for the six months ended March 31, 2026, which supports the proceeds reconciliation above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months ended March 31, 2026 |
Average BTC Price at Contract Date |
|
Average BTC Strike Price |
|
BTC Equivalent Contracts |
|
Proceeds from Premiums ($000's) |
|
Effective Sales Price to Spot (1) |
|
Annualized Premium Yield (1) |
|
Spot+ Calls |
$ |
87,099 |
|
$ |
94,473 |
|
|
17,955 |
|
$ |
18,630 |
|
|
109.7 |
% |
|
— |
|
Yield Calls |
|
92,738 |
|
|
123,935 |
|
|
9,335 |
|
$ |
5,061 |
|
|
— |
|
|
3.4 |
% |
Yield Puts |
|
86,758 |
|
|
75,670 |
|
|
7,385 |
|
$ |
9,898 |
|
|
— |
|
|
19.6 |
% |
Forwards(2) |
|
86,177 |
|
|
86,499 |
|
|
592 |
|
$ |
191 |
|
|
— |
|
|
5.2 |
% |
Bitmain options hedge |
|
118,700 |
|
|
122,000 |
|
|
128 |
|
$ |
362 |
|
|
— |
|
|
— |
|
Derivative close-out transactions |
|
82,027 |
|
|
94,317 |
|
|
11,955 |
|
$ |
(16,897 |
) |
|
— |
|
|
— |
|
Total |
|
|
|
|
|
|
$ |
17,245 |
|
|
|
|
|
(1) Trade-date, illustrative metrics intended to show the strategy’s implied economics at inception; they do not represent actual sales or yields, and bitcoin subject to these contracts may be exited early or remain unsold.
(2) Annualized premium yields from Forwards represent expected settlement premium on inception of $191.
Operating Activities
The Company generates non-cash revenue through mining bitcoin, which it retains the majority of based on its long-term value strategy, while funding all operating expenses with cash. As a result, net cash used in operating activities for the six months ended March 31, 2026 was $296,962 primarily due to cost of revenues of $177,312, payroll expenses of $48,707 and general and administrative expenses of $31,547, as well as a net $48,789 use of cash from changes in operating assets and liabilities, The Company also reported a net loss of $757,054 for the six months ended March 31, 2026, which was primarily driven by the decrease in the price of bitcoin during the period.
Operating activities from continuing operations for the six months ended March 31, 2025, resulted in a net cash outflow of $231,735, primarily due to cost of revenues of $155,714 and payroll expenses of $36,124, in spite of a net income of $107,999, due to the increase of the non-cash gains in the held bitcoin balance. Changes in operating assets and liabilities used a net total of $20,529 of cash.
Investing Activities
Investing activities from operations generated $48,995 during the six months ended March 31, 2026. Our payments on miners (including miner deposits) of $14,808, purchase of fixed assets of $74,522, purchase of bitcoin of $162,772 and payments for asset acquisitions of $62,134, were the main components of our investing cash outflow for the six months ended March 31, 2026. This was fully offset by cash received from proceeds from the sales of bitcoin of $342,815 and by cash proceeds received from the sale of miners of $3,361.
During the six months ended March 31, 2025, cash used in investing activities totaled $315,877 and was primarily driven by payments on miners and mining equipment of $253,754, purchase of fixed assets of $91,451, and payments for asset acquisitions cumulating to about $13,595. This was partially offset by cash received in the GRIID acquisition of $1,411 and by proceeds from the sale of miners of $41,512.
Financing Activities
Cash flows generated from financing activities during the six months ended March 31, 2026 amounted to $465,011 compared to $523,751 for the six months ended March 31, 2025. Our cash flows from financing activities for the six months ended March 31, 2026 consisted primarily of proceeds from the convertible note totaling $1,133,086, partially offset by net repayments on the revolving lines of credit of $174,500 and the repurchase of common stock of $460,000.
Our cash flows from financing activities for the six months ended March 31, 2025 consisted primarily of proceeds from the convertible note of $635,695 and proceeds from equity offerings of $186,808, partially offset by the repurchase of common stock of $145,000, aggregate payments for capped call transactions of $90,350, and payments on loans in the amount of $54,423.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We evaluate our estimates and assumptions on an ongoing basis and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for the judgments we make about the carrying value of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and statement of cash flows.
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Form 10-K other than as described in Note 2 - Summary of Significant Accounting Policies in our unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
Please refer to Note 2 - Summary of Significant Accounting Policies in our unaudited Condensed Consolidated Financial Statements contained elsewhere in this Quarterly Report on Form 10-Q and the corresponding Note 2 in our audited Consolidated Financial Statements for the year ended September 30, 2025 in our Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about the Company’s market risk exposures involves forward-looking statements. Actual results could differ materially from those discussed in the forward-looking statements.
Market Price Risk of Bitcoin. The Company holds a significant amount of bitcoin; therefore, we are exposed to the impact of market price changes in bitcoin on its bitcoin holdings. This exposure would generally manifest itself in the following areas:
•The Company accounts for its bitcoin holdings at fair value and records changes in fair value throughout the periods being reported.
•Declines in the fair market value of bitcoin will impact the cash value that would be realized if the Company were to sell its bitcoin for cash, therefore having a negative impact on its liquidity.
At March 31, 2026, the Company held approximately 11,920 bitcoin on hand and the equivalent of 1,641 bitcoins receivable as a result of collateral held by third parties. As of March 31, 2026, the fair value of a single bitcoin was approximately $68,200, causing the fair value of the Company’s bitcoin holdings and receivable from collateral on that date to approximate $925 and $112 million, respectively. A 10% increase or decrease in the fair value of bitcoin as of March 31, 2026, would have increased or decreased the total cash value that could be realized if the Company were to sell its bitcoin and related receivables by approximately $104 million in total.
Market Price Risk of Bitcoin-Linked Derivative Instruments.
As of March 31, 2026, we held bitcoin-linked derivative liabilities with a combined fair value of approximately $3,786 and bitcoin-linked derivative assets with a combined fair value of $1,499. A 10% change in the fair value of these derivative liabilities, holding all other variables constant, would result in an approximate $379 increase or decrease in the total fair value of the derivatives and a corresponding offset to net loss. Likewise, a 10% change in the fair value of these derivative assets, holding all other variables constant, would result in an approximate $150 increase or decrease in the fair value of the derivative assets and a corresponding offset to net loss.
Item 4. Controls and Procedures
Limitation on Effectiveness of Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our CEO and CFO have concluded that as of March 31, 2026, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation described above that occurred during the six months ended March 31, 2026 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.