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Bitmine Immersion Technologies, Inc.
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Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should
be read together with our audited financial statements and the related notes included elsewhere in this Annual Report on Form 10-K and
with our interim financial statements incorporated by reference. This MD&A is intended to provide investors with an understanding
of our results of operations, financial condition, liquidity and capital resources, and critical accounting estimates through the eyes
of management. It includes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements due to a number of factors, including those discussed under “Risk Factors”
and elsewhere in this Annual Report on Form 10-K. The numbers below are presented in thousands except for percentages as well as share
and per share amounts.
Overview
We are a digital asset focused company. Beginning in the third calendar quarter of 2025, management expanded its
existing digital asset business to primarily focus on the Ethereum blockchain and ETH as the digital asset. This included expanding
toward an asset light operating model centered on Ethereum adjacent services (including advisory) and disciplined digital
asset treasury management. Our results are now driven primarily by operating efficiency in a lower capex model and Ethereum market conditions,
including their impact on client activity and the value of any ETH held in our treasury.
In June and July 2025, we strengthened our liquidity
through an underwritten public offering of common stock, private placements, and the establishment of our ATM Program permitting sales
of up to $20,000,000 of our common stock from time to time. We also uplisted our common stock to the NYSE American in June 2025.
Unless otherwise indicated, period to period comparisons
are presented for the two most recent fiscal years consistent with Item 303 of Regulation S-K, as amended.
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ETH Treasury Strategy, Drivers and Outlook
Our operating model is now anchored by our ETH
Treasury Strategy and capital-light ecosystem services. The key drivers of our results include (i) ETH market conditions, which affect
the value of our holdings and the economics of any staking or staking-adjacent activities; (ii) client demand for Ethereum-adjacent services,
including advisory; (iii) security, custody and compliance expenditures necessary to support institutional-grade treasury
operations; and (iv) access to capital to opportunistically acquire ETH and invest in enabling infrastructure.
Treasury and yield framework.
Our objective is to grow our net ETH position over time, subject to risk and liquidity constraints. We evaluate staking and related mechanisms
based on security, liquidity, counterparty and regulatory profiles. We expect staking yields to evolve with validator participation rates,
protocol parameters and market conditions. Where we deploy ETH to staking or analogous activities, we intend to size exposures conservatively,
prioritize best-in-class custody and validator operations (including multi-client diversity and performance monitoring), and maintain
appropriate unencumbered liquidity to meet corporate needs. We may rebalance or unwind positions in response to changes in risk, reward,
or regulatory context.
Operating expenditures
and investment priorities . As an ETH-focused company, we expect a mix shift in operating expenses toward cybersecurity, custody,
treasury operations, compliance and technology enablement for advisory and analytics. Capital expenditures are expected to
remain modest relative to a mining-centric model. We intend to maintain a flexible cost structure aligned with services activity and treasury
scale.
Key trends and uncertainties.
We are monitoring (i) protocol upgrades on Ethereum’s roadmap and their implications for staking yields, fee markets and network
security; (ii) growth in L2 activity and cross-chain interoperability; (iii) institutional adoption trends, including tokenization initiatives
and regulated market-structure developments; (iv) availability and terms of regulated custodial services; and (v) evolving U.S. and non-U.S.
regulatory frameworks applicable to digital assets and staking.
Liquidity considerations.
Our liquidity planning considers ETH price volatility, potential impairment charges under applicable accounting policies, the liquidity
profile of any staked positions and our ability to access capital markets through our shelf registration and at-the-market program. We
intend to maintain sufficient liquidity to support operations, regulatory compliance, and security investments, while seeking opportunities
to increase ETH holdings when market conditions are attractive.
Known events reasonably
likely to affect future results. Our future results may be materially affected by changes in ETH prices and staking economics; regulatory
developments pertaining to ETH, staking and custody; counterparty or custodian developments; cybersecurity investments and events; and
market structure changes affecting liquidity and capital access for digital-asset issuers.
Key Performance Drivers
Key performance drivers include ETH market conditions
and staking economics; client demand for advisory services; and access to capital
under our shelf and ATM Program. We focus on treasury security and liquidity, sizing of staking or staking adjacent activities,
and maintaining flexibility to rebalance positions as risk return or regulatory contexts evolve. Given our pivot to an asset light, ETH
focused model, energy use metrics from prior mining operations are no longer decision useful and have been excluded from MD&A.
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Results of Operations
Comparison of Results of Operations for Fiscal
Years Ended August 31, 2025 and 2024.
Fiscal Year Ended August 31,
2025
2024
% Change
Revenue from the sale of mining equipment
$ 846
$ 231
NM
3,133
3,031
3 %
Revenue from hosting
-
48
-100 %
Revenue from consulting
235
-
NM
Revenue from leasing
1,881
-
NM
Total Revenue
6,095
3,310
84 %
Cost of sales mining equipment
752
181
NM
3,277
3,254
1 %
Cost of sales hosting
-
38
-100 %
Cost of sales consulting
7
-
NM
Cost of sales leasing
1,749
-
NM
Total Cost of Sales
5,785
3,473
67 %
General and administrative expenses
13,984
2,279
NM
Warrant expense
348,959
-
NM
Impairment of fixed assets
1,912
120
-100 %
Realized gain from the sale of digital assets
(3,748 )
(114 )
NM
Unrealized gain from the digital assets holding
(805,008 )
-
NM
Total operating expenses
(443,901 )
2,285
NM
Income (loss) from operations
444,211
(2,448 )
NM
Interest expense
(245 )
(269 )
-9 %
Interest income
1
55
-98 %
Loss on the extinguishment of debt
(289 )
(320 )
-10 %
Loss on investment in joint venture
(1,278 )
(311 )
NM
Loss on the sale of equipment
(1,528 )
-
NM
440,872
(3,293 )
NM
Income taxes
92,295
-
NM
Net Income (loss)
348,577
(3,293 )
NM
For the results of operations we have included
the respective percentage of changes, unless greater than 100% or less than (100)%, in which case we have denoted such changes as not
meaningful (“NM”).
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Revenues
During the fiscal year ended August 31, 2025,
revenues were $6,095, compared to $3,310 during the fiscal year ended August 31, 2024. The increase in revenue was a result of the following:
● Revenue from the sale of mining equipment.
During the fiscal year ended August 31, 2025, revenue from the sale of mining equipment was $846, compared to $231 in the fiscal
year ended August 31, 2024. The increase was primarily the result of new brokered transactions of transformers and an increase in the
sale of ASIC miners to third parties.
● Revenue from self-mining. During
the fiscal year ended August 31, 2025, revenue from self-mining was $3,133, compared to $3,031 in the fiscal year ended August 31, 2024.
Mining revenues were positively impacted during the 2025 period as a result of the purchase of additional ASIC miners in November 2024,
most of which were installed in December 2024. This increase was offset by several factors, including delays in installing newly acquired
miners, miners that were offline due to maintenance issues, and the termination of our hosting agreement with Soluna SW, LLC as of April
30, 2025. The increase in self-ming revenue was also offset by the execution of additional machine lease agreements resulting in less
self-mining revenue and more leasing revenue.
● Revenue from hosting. During the
fiscal year ended August 31, 2025, revenue from hosting was $0, compared to $48 in the fiscal year ended August 31, 2024. The decrease
was a result of the termination of all hosting clients in the fourth quarter of fiscal 2024.
● Revenue from consulting. During
the fiscal year ended August 31, 2025, revenue from consulting was $235, as compared to $0 during the fiscal year ended August 31, 2024.
All of the consulting revenue in 2025 was derived from one consulting agreement under which the Company is obligated to provide various
operational, maintenance and consulting services from May 16, 2025 to May 15, 2026 for aggregate consideration of $800, of which half
was paid on May 16, 2025.
● Revenue from leasing. During the
fiscal year ended August 31, 2025, revenue from the leasing of miners was $1,881, as compared to $0 during the fiscal year ended August
31, 2024. Under the March 2025 machine lease agreement, the lessee paid $850 for all revenues generated from 2,500 of our miners from
March 8, 2025 to May 7, 2025. Under the May 2025 machine lease agreement, the lessee agreed to pay $3,200 for all revenues generated from
3,000 of our miners from May 16, 2025 to December 31, 2025.
Cost of Sales
Major components of cost of sales include rent
to house mining and hosting equipment, electricity, depreciation, and supplies. During the fiscal year ended August 31, 2025, cost of
sales were $5,785, compared to $3,473 during the fiscal year ended August 31, 2024. The increase in cost of sales was a result of the
following:
● Cost of sales mining equipment. Cost
of sales related to sales of mining equipment was $752 for the fiscal year ended August 31, 2025, compared to $181 for the fiscal year
ended August 31, 2024. Cost of sales related to sales of mining equipment consisted of the purchase price of equipment sold, plus shipping
and value added tax on the equipment sales reported under the “completed sale” method.
● Cost of sales self-mining. Cost
of sales related self-mining remained relatively flat at $3,277 in the fiscal year ended August 31, 2025, compared to $3,254 in the fiscal
year ended August 31, 2024. Cost of sales normally includes electricity, utilities, facilities costs, and supplies where mining is performed
in self-owned facilities. Power prices are the most significant cost driver and can be highly volatile and global events may cause fuel
prices, and to a lesser extent power prices, to fluctuate widely.
● Cost of sales hosting. Cost of
sales related to hosting was $-0- in the fiscal year ended August 31, 2025, compared to $38 in the fiscal year ended August 31, 2024.
Cost of sales normally includes utilities, facilities costs, and supplies. Unlike the cost of sales from mining, cost of sales from hosting
does not include electricity costs, as such costs are passed on to the hosting client.
● Cost of sales consulting. Cost
of sales related to consulting services was $7 for the fiscal year ended August 31, 2025 and $0 for the fiscal year ended August 31, 2024.
Cost of sales for consulting services consists primarily of an allocation of a percentage of the labor costs of the employees who provide
the consulting services.
● Cost of sales leasing. Cost of
sales related to leasing was $1,749 for the fiscal year ended August 31, 2025, compared to $0 in the fiscal year ended August 31, 2024.
The increase in cost of sales leasing is a result of the Machine Lease Agreement Bitmine entered with KULR Technology Group, Inc. on May
16, 2025. As part of this agreement, Bitmine is responsible for maintaining the equipment and ensuring continuous operation, either directly
or through third-party providers.
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Operating Expenses
● General and administrative expenses. General
and administrative expenses were $13,984 in the fiscal year ended August 31, 2025, compared to $2,279 in the fiscal year ended August
31, 2024. This increase was due to new bank and custody fees in 2025, reflecting higher transaction and storage costs. Further, professional
fees more than doubled, and officer’s compensation increased from 2024, driven by higher personnel costs. Employee shareholder compensation
also grew significantly, likely due to stock-based awards.
● Strategic Advisor expenses. Estimated fees that will be
incurred from industry-experienced third parties to manage the Company’s multi-billion dollar ETH
portfolio are expected to be in the range of $40 to $50 million annually. The Company expects these fees
to be significantly offset by projected staking fees earned from the same ETH portfolio, although there
can be no assurances that the Company will be successful in doing so.
● Warrant expense. Warrant Expense
was $348,959 in fiscal year 2025 which was entirely related to the Strategic Advisor warrants . Refer to Note 10–Stock Based
Compensation within the financial statements for additional details.
● Impairment of fixed assets. Impairment of fixed assets was
$1,912 in August 31, 2025, as compared to $120 in August 31, 2024, reflecting management’s review of under-utilized or obsolete
equipment and site-specific assets.
● The Company acquired ETH on top of its BTC holdings
as part of our business expansion during fiscal year 2025 and therefore only held an ETH balance as of August 31, 2025. As a result, the
○ Realized gain from the sale of digital assets of $3,748 for the fiscal year ended August
31, 2025, as compared to $114 for the fiscal year ended August 31, 2024; and
○ Unrealized gain from the sale of digital assets holding of $805,008 for the fiscal year
ended August 31, 2025, as compared to $0 for the fiscal year ended August 31, 2024.
Other Income (Expense)
During the fiscal year ended August 31, 2025,
the Company incurred $3,339 in other expenses, as compared to other expenses of $845 in the fiscal year ended August 31, 2024, which was
driven by:
● Interest expense. Interest expense
remained relatively flat at $245 in the fiscal year ended August 31, 2025, as compared to $269 in the fiscal year ended August 31, 2024.
● Interest income. Interest income
was $1 in fiscal year ended August 31, 2025, as compared to $55 in fiscal year ended August 31, 2024.
● Loss on the extinguishment of debt. The
company incurred a loss on the extinguishment of its debt of $289 during the fiscal year ended August 31, 2025, as compared to $320 in
fiscal year ended August 31, 2024, which is associated with financings with Luxor. Refer to Note 7 – Loan Payable and Note
8 – Related Party Transactions for additional documentation.
● Loss on investment in joint venture and
loss on sale of equipment . During the fiscal year ended August 31, 2025, the Company disposed of $2,100 related to three transformers
and select addback equipment held in Trinidad and $720 in unfinished Rykor Containers held at the Roc Mining joint venture for $400 and
$110 in cash, respectively. The preceding dispositions resulted in $1,528 and $1,278 recorded in loss on the sale of equipment and loss
on investment in joint venture, respectively, within the Statement of Income.
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Income Taxes
During fiscal year 2025, our expense from
income taxes primarily related to an increase in our deferred tax liability related to the unrealized built-in gain on our ETH
holdings relative to fiscal year 2024.
Known Trends, Events and Uncertainties
Business expansion . Following our July
2025 financings, we pivoted to a services-led model and reduced proprietary mining exposure, including by redeploying/retiring less-efficient
machines, concentrating hashrate at lower-cost sites and phasing capex. In the second half of calendar 2025, we further reduced exposure
to halving-driven volatility by pivoting to a services-led, capital-light model and by winding down new proprietary mining investments.
We discuss the implications for liquidity, capital needs and accounting estimates under “ Liquidity and Capital Resources ”
and “ Critical Accounting Estimates. ”
This reduces direct exposure to network difficulty
and power prices but increases reliance on client demand for advisory and leasing services. We expect services mix and pricing
to be key drivers of variability.
Ethereum market dynamics. ETH price levels
influence client activity and the value of any ETH held in treasury. Increased adoption or volatility can raise demand for advisory services; conversely, sustained price declines could dampen client spending.
Capital markets and liquidity. We believe
our June and July 2025 transactions, shelf registration and ATM Program provide flexibility to access equity capital opportunistically
to support working capital and selective investments aligned with a capital-light strategy. Adverse market conditions or unfavorable industry
sentiment could constrain our ability to raise capital on acceptable terms.
Regulatory environment. Evolving U.S. and
foreign regulations related to digital assets, data center operations, financial markets and custody may impose new compliance obligations
or restrictions.
Liquidity and Capital Resources
Current liquidity position
As of August 31, 2025, the Company had $511,999
in cash on hand and working capital of $503,045. Our primary sources of liquidity during and subsequent to the period included:
● net proceeds from our June 2025 underwritten
public offering of common stock of approximately $7,717,761, after underwriting discounts, commissions and offering expenses;
● proceeds from July 2025 private placements of
common stock and pre-funded warrants and digital asset consideration of approximately $230,290;
● our Registration Statement on Form S-3ASR filed
July 9, 2025 and an equity sales agreement with Cantor Fitzgerald & Co. and ThinkEquity LLC, providing the ability, at our discretion
and subject to market conditions, to sell up to $20 billion of our common stock from time to time in our ATM Program; and
● our related-party line of credit with IDI, which
was addressed through a letter agreement and restructuring arrangements described below.
The IDI obligations were addressed via restructuring
as disclosed in the Company’s Registration Statement on Form S-1 and the Company’s Registration Statement on Form S-3ASR.
We also expanded related party disclosures to include the largest aggregate principal outstanding and amounts of principal and interest
paid under the IDI line during the applicable periods.
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Sources and uses of cash
Fiscal Year Ended August 31,
2025
2024
Net cash used in operating activities
$ (4,149 )
$ (30 )
Net cash used in investing activities
(7,432,009 )
(67 )
Net cash provided by financing activities
7,947,659
325
Net increase in
cash and cash equivalents
$ 511,501
$ 228
Net cash used in operating activities was $4,149
for the fiscal year ended August, 31 2025, compared to $30 for the fiscal year ended August 31, 2024. The increase in operating cash outflow
was primarily due to an increase in general and administrative expenses which were driven by increased compensation costs. This increase
in cash outflow was offset by an increase in cash received from the Company’s revenue generating activities.
Net cash used in investing activities was $7,432,009
for the fiscal year ended August, 31 2025, compared to $67 for the fiscal year ended August 31, 2024. The increase in investing cash outflow
was almost entirely driven by the $7,433,131 purchase of ETH. This amount was offset by proceeds from the sale of ETH and BTC.
Net cash provided by financing activities was
$7,947,659 for the fiscal year ended August, 31 2025, compared to $325 for the fiscal year ended August 31, 2024. This increase was primarily
driven by the $7,717,761 of proceeds received from the Company’s ATM offering and $230,290 of proceeds received from the Company’s
private placement and prefunded warrants. Refer to Note 10 – Stock-Based Compensation within the financial statements for
further details regarding these offerings.
Material cash requirements and known liquidity
risks
We expect the following material cash requirements
over the next 12 months under our capital-light model:
●
estimated
fees that will be incurred from industry-experienced third parties to manage the Company’s multi-billion dollar ETH portfolio
are expected to be in the range of $40 to $50 million annually. The Company expects these fees to be significantly offset by projected
staking fees earned from the same ETH portfolio, although there can be no assurances that the Company will be successful in doing
so;
●
modest
capital expenditures of approximately $1,500 primarily for maintenance of existing equipment and technology platforms’ supporting
services;
●
working
capital to support services delivery, equipment leasing, and advisory engagements of approximately $1,000 per month at current run-rate
activity levels; and
●
public
company costs, including audit and compliance, of approximately $4,000 annually.
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Our liquidity is now less sensitive to network
difficulty and power price volatility than under a mining-centric model, though BTC price levels can influence client demand and the value
of any BTC held in treasury. We mitigate liquidity risks by (i) maintaining a flexible cost structure aligned with services activity,
(ii) limiting new capex commitments, and (iii) preserving access to equity capital via our shelf and ATM facilities. We believe, based
on our current operating plan, expected cash on hand, anticipated operating cash flows and access to capital under our shelf/ATM, that
we will have sufficient liquidity to fund operations for at least the next 12 months. Beyond 12 months, our ability to fund growth and
meet obligations will depend on market conditions, client demand for services, and access to capital on acceptable terms.
Off-balance sheet arrangements and commitments.
We do not have material off-balance sheet arrangements as defined by Item 303. Legacy commitments under power, site control and joint-venture
agreements are being evaluated in light of our strategic shift; any remaining obligations (e.g., minimums or deposits) are included in
our liquidity planning. We do not expect to enter into new long-term power purchase or build-to-suit arrangements absent clear, low-risk
returns.
Counterparty and market developments . We
monitor counterparties in the digital asset ecosystem for credit and operational risks, including custodians, pool operators, hosting
partners and joint venture partners. We currently do not have material assets with bankrupt or suspended counterparties, and we assess custody practices,
insurance and operational controls at our partners. Disruptions in digital asset markets, regulatory developments or power market dislocations
could adversely affect our liquidity, capital access and operational continuity.
arrangements that have or are reasonably likely to have a current or future material effect on the Company’s financial condition,
changes in financial condition, and results of operations, liquidity or capital resources.
Critical Accounting Estimates
Our financial statements are prepared in accordance
with U.S. GAAP, which requires management to make estimates and assumptions affecting reported amounts of assets, liabilities, revenues,
expenses and related disclosures. We consider the following to be our critical accounting estimates because they involve significant judgment,
are subject to uncertainty, and could materially impact our financial results if actual results differ from our estimates. This discussion
supplements, and should be read together with, the summary of significant accounting policies in our financial statement notes.
ASU 2023-08, Intangibles-Goodwill and
Accounting for and Disclosure of Digital Assets . In fiscal year 2025, we account for eligible digital
assets at fair value with changes in fair value recognized in net income, consistent with ASU 2023-08. We present digital assets
separately on the balance sheet and disclose changes in their carrying amounts. This accounting may increase the volatility of our
reported results relative to prior impairment-based accounting.
Digital assets—impairment recognition .
We recognize digital assets received from operations pursuant to ASC 606 and subsequently account for the assets under our policy supported
by applicable GAAP. Management monitors digital asset balances for impairment indicators and measures impairment when required. The carrying
amount is subject to market price volatility, and our estimates of impairment depend on the timing and frequency of measurement. We performed
analyses, including those requested by the SEC staff, to assess the materiality of alternative impairment measurement methods and concluded
that differences were not material for the periods presented. Key inputs include observable market prices and timing of acquisitions/disposals.
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equipment leasing . Under ASC 606, we identify our customer, performance obligations and transaction price for
consulting/advisory services, and equipment/container leasing. Revenue is recognized
as services are provided (over time) or upon transfer of control (point-in-time) for equipment leasing. For leasing arrangements
within the scope of ASC 842, we assess lease classification and recognize lease income over the lease term. Estimates include
variable consideration (e.g., success-based fees), collectability, and principal-versus-agent considerations.
impairment and recoverability . We depreciate miners, containers and related site equipment over estimated useful lives of 2–10
years. With our shift to a capital-light model, we evaluate long-lived assets for impairment when indicators arise (e.g., reduced utilization
or obsolescence) and assess recoverability at the asset group level. Key inputs include expected service lives, secondary market values
and expected cash flows from any continued use or disposition.
awards at grant-date fair value under ASC 718 using observable market prices and, where applicable, option-pricing models. Inputs include
volatility, expected term and risk-free rates.
Fair value of derivative liabilities and financing
instruments . Certain financing arrangements contain embedded features accounted for as derivatives measured at fair value with changes
recognized in earnings. We estimate fair value using market-based models that require assumptions about volatility, discount rates and
probability-weighted outcomes.
Collectability of receivables; warranty and
returns for equipment sales . Where we provide services or sell equipment on credit, we assess collectability considering customer
creditworthiness, collateral and payment history, and we establish allowances for expected credit losses based on historical experience
and current conditions. For equipment transactions with warranty obligations, we estimate reserves based on observed failure rates, supplier
warranties and repair logistics.
Accounting policies and estimates are reviewed
periodically for consistency with SEC guidance, including the 2003 MD&A Guidance and the 2020 amendments to Item 303. We will update
our critical accounting estimates as our operations evolve and additional trends and data become reasonably available.