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Bitmine Immersion Technologies, Inc.
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Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This
Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For this purpose, any statements contained herein
that are not statements of historical fact, including without limitation, certain statements regarding industry prospects and our results
of operations or financial position, may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,”
“anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking
statements. The important factors discussed under “Part II. Item 1A. Risk Factors,” among others, could cause actual results
to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to
time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned
that actual results may differ from management’s expectations.
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 at-the-market program permitting sales of up to $24,500,000 of our common stock from time to time (the
“ATM Program”). As of February 28, 2026, $6,713,325 of sales capacity relating to the ATM Program are still available.
We also uplisted our common stock to the NYSE American in June 2025 and subsequently uplisted our common stock to the New York
Stock Exchange on April 9, 2026.
During
the current quarter, we also deployed capital into strategic moonshot investments that we believe complement our ETH-focused operating
model and treasury strategy. These investments were evaluated alongside direct ETH acquisitions as part of our broader capital allocation
framework and are intended to support long-term value creation rather than near-term operating income.
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.
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.
Capital
deployed into strategic investments is subject to similar risk discipline, liquidity considerations and governance oversight as our ETH
treasury activities, and may introduce additional sources of earnings volatility unrelated to ETH price movements.
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. In addition to direct ETH holdings, we may selectively pursue strategic moonshot investments in operating companies, platforms
or ecosystems that we believe are aligned with Ethereum adoption, infrastructure or adjacent services. These investments are evaluated
within the context of our ETH Treasury Strategy and are intended to complement, rather than replace, direct exposure to ETH.
22
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.
Results
of Operations
Comparison
of Results of Operations for the Three Months Ended February 28, 2026 and 2025.
Three
Months Ended February 28,
2026
2025
%
Change
Revenue from the sale of mining
equipment
$
-
$
-
NM
219
1,517
-86
%
Revenue from consulting
197
-
NM
Revenue from leasing
424
-
NM
Revenue from staking
10,201
-
NM
Total
Revenue
11,041
1,517
NM
Cost of sales mining equipment
-
-
NM
702
1,440
-51
%
Cost of sales leasing
418
-
NM
Cost of sales staking
306
-
NM
Total
Cost of Sales
1,426
1,440
-1
%
General and administrative
expenses
74,988
964
NM
Unrealized
loss (gain) from the digital assets holding
3,775,209
26
NM
Total
operating expenses
3,850,197
990
NM
Loss from operations
(3,840,582
)
(913
)
NM
Interest income (expense),
net
4,817
(60
)
NM
Unrealized loss from trading
securities
(21,507
)
-
NM
Unrealized loss from derivatives
(65,272
)
-
NM
Change in fair value of
warrant liability
80,040
-
NM
Option premium income
24,090
-
NM
Bad debt expense
-
(125
)
NM
Other
income (expense)
1
(58
)
NM
(3,818,413
)
(1,156
)
NM
Income
tax benefit
-
-
NM
Net loss
$
(3,818,413
)
$
(1,156
)
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”).
Revenues
During
the three months ended February 28, 2026, revenues were $11,041, compared to $1,517 during the three months ended February 28, 2025.
●
Revenue
from self-mining. During the three months ended February 28, 2026, revenue from self-mining was $219, compared to $1,517
in the three months ended February 28, 2025. The Company is maintaining its small BTC mining operations. However, mining revenue
declined partially due to the suspension of self-mining operations during relocation in the three months ended February 28, 2026.
●
Revenue
from consulting. During the three months ended February 28, 2026, revenue from consulting was $197, as compared to $0 during
the three months ended February 28, 2025. All of the consulting revenue in 2026 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 three months ended February 28, 2026, revenue from the leasing of miners was $424, as compared to
$0 during the three months ended February 28, 2025. Under the March 2025 machine lease agreement which expired on December 31, 2025,
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. The machine lease agreements expired December 31, 2025 and were not renewed.
●
Revenue
from staking. During the three months ended February 28, 2026, revenue from staking was $10,201, compared to $0 in the three
months ended February 28, 2025. The increase was a result of the Company initiating native staking in November 2025, with
the intent for staking to become a primary yield generation strategy of the Company during the current fiscal year.
23
Cost
of Sales
Major
components of cost of sales include rent to house mining and hosting equipment, electricity, depreciation, and supplies. During the three
months ended February 28, 2026, cost of sales was $1,426 compared to $1,440 during the three months ended February 28, 2025. The decrease
in cost of sales was a result of the following:
●
Cost
of sales self-mining. Cost of sales related to self-mining remained was $702 in the three months ended February 28, 2026,
compared to $1,440 in the three months ended February 28, 2025. The Company continued its strategy of winding down its proprietary
self-mining exposure and deferring new site buildouts during the three months ended February 28, 2026.
●
Cost
of sales leasing. Cost of sales related to leasing was $418 for the three months ended February 28, 2026, compared to $0
during the three months ended February 28, 2025. 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, providing a contractually agreed upon level of hash rate, and ensuring continuous operation, either directly or through
third-party providers.
●
Cost
of staking. Cost of sales related to revenue from staking was $306 for the three months ended February 28, 2026, compared
to $0 for the three months ended February 28, 2025. Cost of sales primarily comprises direct expenses associated with the ETH staking
business, including service fees payable to the service provider.
Operating
Expenses
●
General
and administrative expenses. General and administrative expenses were $74,988 in the three months ended February 28, 2026,
compared to $964 in the three months ended February 28, 2025. The increase is primarily related to ETH custodian fees related to
treasury operations, shareholder compensation, and stock-based compensation. See Note 9 of the Interim Statements for additional
information around the increase in stock-based compensation expense.
●
Unrealized
gain/loss from digital assets holding. During the three months ended February 28, 2026, the Company recorded an unrealized
loss of $3,775,209 related to changes in the fair value of our digital asset holdings, as compared to $26 for the three months ended
February 28, 2025. The Company acquired ETH on top of its BTC holdings as part of our business expansion during fiscal year 2025.
As of February 28, 2026, the total fair value of ETH and BTC holdings amounted to $8,793,210 and $13,073, respectively. As of February
28, 2025, the total fair value of BTC holdings amounted to $248. No ETH was held as of February 28, 2025.
Other
Income (Expense)
●
Interest
income (expense), net. Interest expense related solely to ETH activity was $0 in the three months ended February 28, 2026,
as compared to $60 during the three months ended February 28, 2025. The 2025 interest was related to the debt during the three months
ended February 28, 2025 which was extinguished during fiscal 2025. Interest income was $4,817 in three months ended February 28,
2026, as compared to $0 in three months ended February 28, 2025. The increase is due to interest earned on money market cash accounts
held during the three months ended February 28, 2025
●
Unrealized
loss from trading securities. The Company recognized a loss of $21,507 during the
three months ended February 28, 2026. This loss reflects the change in fair value of the
investment in Eightco, which is reflected in “Other Income” within the consolidated
statement of operations. See Note 6 of the Interim Statements for additional information.
●
Unrealized
loss from derivatives. The Company recognized a loss of $65,272 during the three months ended February 28, 2026. This loss
reflects the change in fair value of the option contracts open at February 28, 2026.
24
●
Change
in fair value of warrant liability. The Company recognized a $80,040 gain during the three months ended February
28, 2026. This gain reflects the change in fair value of the Liability Classified Warrants, which is reflected in other income within
the consolidated statement of operations. See Note 8 of the Interim Statements for additional information.
●
Option
premium income. During the three months ended February 28, 2026, net derivative income was $24,090, compared to $0 in the three months
ended February 28, 2025. The increase was a result of premium income earned on option contracts executed during the three months ended
February 28, 2026.
●
Bad
debt expense. The bad debt expense was $0 during the three months ended February
28, 2026, as compared to $125 during the three months ended February 28, 2025. The bad debt expense incurred in the prior year was related
the Company’s note receivable from ROC Digital during the 2025 period.
●
Other
income (expense) . The Company recognized other income (expense) of $1 during the three months ended February 28, 2026, as
compared to ($58) during the three months ended February 28, 2025. The decrease in expense is because the Company had no loss on
extinguishment of debt during the three months ended February 28, 2026, as compared to a loss of ($58) during the three months ended
February 28, 2025. The 2025 loss was related to the Company’s Hashrate Sale Agreement. The Company had no debt as of February
28, 2026.
Income
Taxes
During
the three months ended February 28, 2026, the Company recognized no income tax benefit or income tax expense.
Comparison
of Results of Operations for the Six Months Ended February 28, 2026 and 2025.
Six
Months Ended February 28,
2026
2025
%
Change
Revenue from the sale of mining
equipment
$ -
$ 717
NM
221
2,001
-89 %
Revenue from consulting
397
-
NM
Revenue from leasing
1,536
-
NM
Revenue from staking
11,181
-
NM
Total
Revenue
13,335
2,718
NM
Cost of sales mining equipment
-
670
NM
788
1,982
-60 %
Cost of sales leasing
1,327
-
NM
Cost of sales staking
336
-
NM
Total
Cost of Sales
2,451
2,652
-8 %
General and administrative
expenses
298,625
1,923
NM
Unrealized
loss (gain) from the digital assets holding
9,023,134
(59 )
NM
Total
operating expenses
9,321,759
1,864
NM
Loss from operations
(9,310,875 )
(1,798 )
NM
Interest income (expense),
net
4,617
(128 )
NM
Unrealized loss from trading
securities
(5,616 )
-
NM
Unrealized loss from derivatives
(65,272 )
-
NM
Change in fair value of
warrant liability
238,252
-
NM
Option premium income
24,090
-
NM
Bad debt expense
-
(125 )
NM
Other
income (expense)
1
(81 )
NM
(9,114,803 )
(2,132 )
NM
NM
Income
tax benefit
92,295
-
NM
Net loss
$ (9,022,508 )
$ (2,132 )
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”).
Revenues
During
the six months ended February 28, 2026, revenues were $13,335, compared to $2,718 during the six months ended February 28, 2025. The
increase in revenue was a result of the following:
●
Revenue
from the sale of mining equipment. During the six months ended February 28, 2026, revenue from the sale of mining equipment
was $0, compared to $717 in the six months ended February 28, 2025. The revenue recognized during the six months ended February 28,
2025 was primarily related to the sale of ten transformers. No such revenue was recognized during the three months ended February
28, 2026.
●
Revenue
from self-mining. During the six months ended February 28, 2026, revenue from self-mining was $221, compared to $2,001 in
the six months ended February 28, 2025. The Company is maintaining its small BTC mining operations. However, mining revenue declined
partially due to the suspension of self-mining operations during relocation in the six months ended February 28, 2026.
●
Revenue
from consulting. During the six months ended February 28, 2026, revenue from consulting was $397, as compared to $0 during
the six months ended February 28, 2025. All of the consulting revenue in 2026 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 six months ended February 28, 2026, revenue from the leasing of miners was $1,536, as compared to
$0 during the six months ended February 28, 2025. Under the March 2025 machine lease agreement which expired on December 31, 2025,
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. The machine lease agreements expired December 31, 2025 and were not renewed.
●
Revenue
from staking. During the six months ended February 28, 2026, revenue from staking was $11,181, compared to $0 in the six
months ended February 28, 2025. The increase was a result of the Company initiating native staking in November 2025, with the intent
for staking to become a primary yield generation strategy of the Company during the current fiscal year.
25
Cost
of Sales
Major
components of cost of sales include rent to house mining and hosting equipment, electricity, depreciation, and supplies. During the six
months ended February 28, 2026, cost of sales was $2,451 compared to $2,652 during the six months ended February 28, 2025. 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 $0 for the six months ended February 28,
2026, compared to $670 for the six months ended February 28, 2025. The costs incurred during the six months ended February 28, 2025
was related to the sale of the ten transformers noted above. No such costs were incurred during the six months ended February 28,
2026.
●
Cost
of sales self-mining. Cost of sales related to self-mining was $788 in the six months ended February 28, 2026, compared to
$1,982 in the six months ended February 28, 2025. The Company continued its strategy of winding down its proprietary self-mining
exposure and deferring new site buildouts during the six months ended February 28, 2026.
●
Cost
of sales leasing. Cost of sales related to leasing was $1,327 for the six months ended February 28, 2026, compared to $0
during the six months ended February 28, 2025. 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,
providing a contractually agreed upon level of hash rate, and ensuring continuous operation, either directly or through third-party
providers.
●
Cost
of staking. Cost of sales related to revenue from staking was $336 for the six months ended February 28, 2026, compared to
$0 for the six months ended February 28, 2025. Cost of sales primarily comprises direct expenses associated with the ETH staking
business, including service fees payable to the service provider.
Operating
Expenses
●
General
and administrative expenses. General and administrative expenses were $298,625 in the six months ended February 28, 2026,
compared to $1,923 in the six months ended February 28, 2025. The increase is primarily related to one time capital raising, advisory,
legal, and other consulting fees. The increase is also related to expenses associated with the Consulting Agreement. 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 $40,000 to $50,000 annually. The Company expects these fees to be significantly offset and exceeded
in the future 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. See Note 13 of the Interim Statements for additional information.
●
Unrealized
gain/loss from digital assets holding. During the six months ended February 28, 2026, the Company recorded an unrealized
loss of $9,023,134 related to changes in the fair value of our digital asset holdings, as compared to gain of $59 for the six months
ended February 28, 2025. The Company acquired ETH on top of its BTC holdings as part of our business expansion during fiscal year
2025. As of February 28, 2026, the total fair value of ETH and BTC holdings amounted to $8,793,210 and $13,073, respectively. As
of February 28, 2025, the total fair value of BTC holdings amounted to $248. No ETH was held as of February 28, 2025.
Other
Income (Expense)
●
Interest
income (expense), net. Interest expense related solely to ETH activity was $200 in the six months ended February
28, 2026, as compared to $129 in interest expense related to debt in the six months ended February 28, 2025. Interest income was $4,817
in six months ended February 28, 2026, as compared to $1 in six months ended February 28, 2025. The increase is due to interest earned
on money market cash accounts.
26
●
Unrealized
loss from trading securities. The Company recognized a $5,616 loss during the six months ended February
28, 2026. This loss reflects the change in fair value of the investment in Eightco, which is reflected in “Other Income” within
the consolidated statement of operations. See Note 6 of the Interim Statements for additional information.
●
Unrealized
loss from derivatives. The Company recognized a loss of $65,272 during the six months ended February
28, 2026. This loss reflects the change in fair value of the option contracts open at February 28, 2026.
●
Change
in fair value of warrant liability. The Company recognized a $238,252 gain during the six months ended February
28, 2026. This gain reflects the change in fair value of the Liability Classified Warrants, which is reflected in other income within
the consolidated statement of operations. See Note 8 of the Interim Statements for additional information.
●
Option
premium income. During the six months ended February 28, 2026, net derivative income was $24,090, compared to $0 in the six months
ended February 28, 2025. The increase was a result of premium income earned on option contracts executed during the three months ended
February 28, 2026.
●
Bad
debt expense. The bad debt expense was $0 during the six months ended February 28, 2026, as compared to $125 during the six
months ended February 28, 2025. The bad debt expense incurred in the prior year was related the Company’s note receivable from
ROC Digital during the 2025 period.
●
Other
income (expense) . The Company recognized other income (expense) of $1 during the six months ended February 28, 2026, as compared
to ($81) during the three months ended February 28, 2025. The decrease in expense is because the Company had no loss on extinguishment
of debt during the six months ended February 28, 2026, as compared to a loss of ($81) during the six months ended February 28, 2025.
The 2025 loss was related to the Company’s Hashrate Sale Agreement. The Company had no debt as of February 28, 2026.
Income
Taxes
During
the six months ended February 28, 2026, the Company recognized the full valuation allowance that was recorded against the Company’s
deferred tax assets as a discrete item. This resulted in a $92,295 income tax benefit for the period.
Financial Measures
The
following tables present Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) and Adjusted
Earnings Per Share (“EPS”). These are non-U.S. GAAP financial measurements within the meaning of Regulation G dictated by
the Securities and Exchange Commission. Adjusted EBITDA is defined as EBITDA excluding the impact of certain non-cash items for the period
presented. Adjusted EPS is defined as EPS in accordance with US GAAP excluding the impact of certain non-cash items for the period presented.
The
Company uses Adjusted EBITDA and Adjusted EPS in explaining its results to shareholders and the investment community and in its internal
evaluation and management of its businesses. The Company’s management believes that these non-GAAP financial measures and the information
they provide are useful to investors since these measures (a) permit investors to view the Company’s performance using the same
tools that management uses to evaluate the Company’s past performance, (b) permit investors to compare the Company with its peers,
and (c) provide consistent period-to-period comparisons of the results.
27
While
the Company believes that these measures are useful in evaluating the Company’s performance, this information should be considered
as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP.
Additionally, these measurements may differ from similar measures presented by other companies. A reconciliation of Adjusted EBITDA and
Adjusted EPS are detailed below.
The
reconciliation of Adjusted EBITDA for the three months ended February 28, 2026 and 2025 is as follows:
Three
Months Ended February 28,
2026
2025
Net loss
$ (3,818,413 )
$ (1,156 )
Interest expense (income),
net
(4,817 )
60
Provision for income taxes
-
-
Depreciation
expense
124
228
EBITDA
(3,823,106 )
(868 )
Adjustments
Stock
based compensation (1)
24,429
201
Impairment
of property and equipment (2)
-
-
Unrealized
loss from trading securities (3)
21,507
-
Unrealized
loss from derivatives (4)
65,272
-
Change
in fair value of warrant liability (5)
(80,040 )
-
Option
premium income (6)
(24,090 )
-
Loss on
the extinguishment of debt (7)
-
58
Unrealized
loss (gain) from the digital assets holding (8)
3,775,209
26
One
time consulting and legal fees (9)
-
-
Adjusted
EBITDA
$ (40,819 )
$ (583 )
The
reconciliation of Adjusted EBITDA for the six months ended February 28, 2026 and 2025 is as follows:
Six
Months Ended February 28,
2026
2025
Net loss
$ (9,022,508 )
$ (2,132 )
Interest expense (income),
net
(4,617 )
128
Provision for income taxes
(92,295 )
-
Depreciation
expense
248
358
EBITDA
(9,119,172 )
(1,646 )
Adjustments
Stock
based compensation (1)
25,106
672
Impairment
of property and equipment (2)
200
-
Unrealized
loss from trading securities (3)
5,616
-
Unrealized
loss from derivatives (4)
65,272
-
Change
in fair value of warrant liability (5)
(238,252 )
-
Option
premium income (6)
(24,090 )
-
Loss on
the extinguishment of debt (7)
-
81
Unrealized
loss (gain) from the digital assets holding (8)
9,023,134
(59
One
time consulting and legal fees (9)
200,051
-
Adjusted
EBITDA
$ (62,135 )
$ (952 )
(1)
Stock based compensation represents the non-cash expense recorded for the Company’s restricted stock units and restricted stock
awards. This includes the impact of the modification that occurred during the three and six months ended February 28, 2026 as well
the vesting of existing awards.
28
(2)
Represents a non-cash charges recorded during the period to reduce the carrying value of certain assets to their estimated fair value.
(3)
Represents the change in fair value of the company’s held invesment in Eightco’s common stock for the three and six months
ended February 28, 2026.
(4)
Represents the change in fair value of the company’s held ETH option contracts for the three and six months ended February
28, 2026.
(5)
Represents the change in fair value of the company’s liability classified warrants for the three and six months ended February
28, 2026.
(6)
Represents the premiums earned on the Company’s written ETH option contracts for the three and six months ended February 28,
2026.
(7)
Represents non-recurring charges incurred in connection with the early settlement of the Company’s line of credit from IDI
and the Hash Rate Sale Agreement.
(8)
Removes the impact of unrealized changes in fair value of our digital asset holdings from net income.
(9)
Represents one time capital raising, advisory, legal and other consulting fees incurred during the period.
(10)
The income tax provision adjustment is calculated by multiplying “Adjusted income (loss) before income tax provision”
by the Company’s applicable tax rate of 21%.
The
reconciliation of Adjusted EPS for the three months ended February 28, 2026 and 2025 is as follows:
Three
Months Ended February 28,
2026
2025
(3,818,413 )
(1,156 )
Stock
based compensation (1)
24,429
201
Impairment
of property and equipment (2)
-
-
Unrealized
loss from trading securities (3)
21,507
-
Unrealized
loss from derivatives (4)
65,272
-
Change
in fair value of warrant liability (5)
(80,040 )
-
Option
premium income (6)
(24,090 )
-
Loss on
the extinguishment of debt (7)
-
58
Unrealized
loss (gain) from the digital assets holding (8)
3,775,209
26
One
time consulting and legal fees (9)
-
-
Adjusted
loss before income tax provision
(36,126 )
(871 )
Income tax benefit (as reported)
-
-
Income
tax provision adjustment (10)
-
-
Adjusted
income tax benefit
-
-
Adjusted net loss
(36,126 )
(871 )
Deemed
dividend on Series A Preferred Stock
-
-
Adjusted
net loss attributable to common stockholders
(36,126 )
(871 )
Diluted weighted average common shares outstanding
454,620,613
1,983,380
Adjusted diluted loss per
common shares
$ (0.08 )
$ (0.44 )
29
The
reconciliation of Adjusted EPS for the six months ended February 28, 2026 and 2025 is as follows:
Six
Months Ended February 28,
2026
2025
(9,114,803 )
(2,132 )
Stock
based compensation (1)
25,106
672
Impairment
of property and equipment (2)
200
-
Unrealized
loss from trading securities (3)
5,616
-
Unrealized
loss from derivatives (4)
65,272
-
Change
in fair value of warrant liability (5)
(238,252 )
-
Option
premium income (6)
(24,090 )
Loss on
the extinguishment of debt (7)
-
81
Unrealized
loss (gain) from the digital assets holding (8)
9,023,134
(59 )
One
time consulting and legal fees (9)
200,051
-
Adjusted
loss before income tax provision
(57,766 )
(1,438 )
Income tax benefit (as reported)
(92,295 )
-
Income
tax provision adjustment (10)
88,188
-
Adjusted
income tax benefit
(4,107 )
-
Adjusted net loss
(53,659 )
(1,438 )
Deemed
dividend on Series A Preferred Stock
-
(2,961 )
Adjusted
net loss attributable to common stockholders
(53,659 )
(4,399 )
Diluted weighted average common shares outstanding
389,434,545
2,178,313
Adjusted diluted loss per
common shares
$ (0.14 )
$ (0.66 )
(1)
Stock based compensation represents the non-cash expense recorded for the Company’s restricted stock units and restricted stock
awards. This includes the impact of the modification that occurred during the three and six months ended February 28, 2026 as well
the vesting of existing awards.
(2)
Represents a non-cash charges recorded during the period to reduce the carrying value of certain assets to their estimated fair value.
(3)
Represents the change in fair value of the company’s held invesment in Eightco’s common stock for the three and six months
ended February 28, 2026.
(4)
Represents the change in fair value of the company’s held ETH option contracts for the three and six months ended February
28, 2026.
(5)
Represents the change in fair value of the company’s liability classified warrants for the three and six months ended February
28, 2026.
(6)
Represents the premiums earned on the Company’s written ETH option contracts for the three and six months ended February 28,
2026.
(7)
Represents non-recurring charges incurred in connection with the early settlement of the Company’s line of credit from IDI
and the Hash Rate Sale Agreement.
(8)
Removes the impact of unrealized changes in fair value of our digital asset holdings from net income.
(9)
Represents one time capital raising, advisory, legal and other consulting fees incurred during the period.
(10)
The income tax provision adjustment is calculated by multiplying “Adjusted income (loss) before income tax provision”
by the Company’s applicable tax rate of 21%.
30
Known
Trends, Events and Uncertainties
Business
expansion . Following our July 2025 and ongoing financings, we have 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.
Management
updates . On November 20, 2025, the Company entered into an employment agreement with Chi Tsang to serve as the Company’s Chief
Executive Officer. Additionally, on January 7, 2026, the Company entered into an employment agreement with Young Kim to serve as the
Company’s Chief Financial Officer and Chief Operating Officer.
Liquidity
and Capital Resources
Current
liquidity position
As
of February 28, 2026, the Company had $879,577 in cash on hand and working capital of $869,527. Our primary sources of liquidity during
the six months ended February 28, 2026 included:
●
cash
proceeds of $555 were received during the quarter from the exercise of strategic warrants issued to a third-party Strategic Advisor
as part of a July 8, 2025 agreement.
●
net
proceeds of $10,068,914 from 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
$24.5 billion of our common stock from time to time in our ATM Program
●
net
proceeds of $361,751 from our September 2025 issuance of (i) 5,217,715 shares of common stock at a price of $70 per share and (ii)
warrants to purchase up to 10,435,430 shares of common stock at an exercise price of $87.50 per share
In
connection with the June offering, the Company issued common stock purchase warrants to a placement agent (the “Placement Agent
Warrants”) on July 8, 2025 in exchange for services. The Placement Agent Warrants are exercisable immediately upon issuance to
purchase up to 1,231,945 shares of the Company’s common stock at an exercise price of $5.40 per share. The warrants were fully
vested upon issuance and have a contractual term of five years. The total grant-date fair value of the Placement Agent Warrants is $134,654,
which was treated as the issuance cost, net against the cash proceeds from the June offering.
31
On
July 8, 2025, the Company entered into a Strategic Advisor Agreement with a third-party service provider (the “Strategic Advisor”)
pursuant to which the Company engaged the Strategic Advisor to provide strategic advice and guidance relating to the Company’s
business, operations, growth initiatives and industry trends in the digital asset technology sector. As compensation for services rendered
by the Strategic Advisor under the Strategic Advisor Agreement, the Company issued to the Strategic Advisor warrants to purchase 3,192,620
shares of common stock (the “Strategic Advisor Warrants”) at an exercise price of $5.40 per share. The Strategic Advisor
Warrants were fully vested upon issuance and have a contractual term of five years. The total grant-date fair value of the Strategic
Advisor Warrants is $348,959, which was immediately expensed and included in operating expense in the consolidated statement of income
(loss). As of February 28, 2026, approximately 2.8 million Strategic Advisor Warrants with an exercise price of $5.40 remain outstanding.
If these warrants are exercised for cash, they could represent a potential future source of liquidity for the Company, thereby contributing
to future cash flows.
In
connection with the share offering on June 4, 2025, the Company issued to ThinkEquity LLC warrants to purchase up to 129,375 shares of
common stock at an exercise price of $10 per share (the “Representative’s Warrants”) in exchange for services. The
Representative’s Warrants were fully vested upon issuance, but are not exercisable until December 1, 2025. The warrants have a
contractual term of approximately five years. The total grant-date fair value of the Representative’s Warrants is $852, which was
treated as the issuance cost, net against the cash proceeds from the capital raise.
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.
Sources
and uses of cash
Six
months ended February 28,
2026
2025
Net cash used in operating activities
$ (316,599 )
$ (311 )
Net cash used in investing activities
(9,742,785 )
(18 )
Net cash provided by financing
activities
10,426,962
312
Net increase in cash
and cash equivalents
$ 367,578
$ (16 )
Net
cash used in operating activities was $316,599 for the six months ended February 28, 2026, compared to $311 for the three months ended
February 28, 2025. The increase is primarily related to one time capital raising, advisory, legal, and other consulting fees. The increase
is also related to expenses associated the Consulting Agreement. 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 $9,742,785 for the six months ended February 28, 2026, compared to $18 for the three months ended
February 28, 2025. The increase in investing cash outflow was primarily driven by the $9,536,644 purchase of ETH. The remaining investing
cash outflow was driven by the purchases of the Company’s investments in Beast Industries and Eightco Holdings
Net
cash provided by financing activities was $10,426,962 for the six months ended February 28, 2026, compared to $312 for the three months
ended February 28, 2025. This increase was primarily driven by the $10,068,914 of proceeds received from the ATM Offering. Refer to Note
8 – Stockholder’s Equity 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 $40,000 to $50,000 annually. The Company expects these fees to be significantly offset and exceeded
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;
32
●
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.
●
general
operating and overhead costs of approximately $83,016 annually.
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.
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.
Sheet Arrangements
The
Company does not have any off-balance sheet 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.
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.
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 Other Digital Assets: 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.
33
Revenue
recognition—services and 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.
Property
and equipment—useful lives, 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.
compensation . We measure equity 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.