Quarterly Report for Quarter Ending November 30, 2025 (Form 10-Q)

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 $20,000,000 of our common stock from time to time (the "ATM Program"). As of November 30, 2025, $4,617,859 of sales relating to the ATM Program are still available. 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.

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.

Results of Operations

Comparison of Results of Operations for the Three Months Ended November 30, 2025 and November 30, 2024.

		Three Months Ended November 30,
		2025				2024				% Change
Revenue from the sale of mining equipment		$	-			$	717				NM
Revenue from self-mining			2				484				NM
Revenue from consulting			199				-				NM
Revenue from leasing			1,112				-				NM
Revenue from staking			980				-				NM
Total Revenue			2,293				1,201				91	%
Cost of sales mining equipment			-				670				NM
Cost of sales self-mining			86				541				-84	%
Cost of sales leasing			909				-				NM
Cost of sales staking			29				-				NM
Total Cost of Sales			1,024				1,211				-18	%
Operating expenses:
General and administrative expenses			223,436				959				NM
Impairment of property and equipment			200				-				NM
Unrealized loss (gain) from the digital assets holding			5,247,925				(85	)			NM
Total operating expenses			5,471,561				874				NM
Loss from operations			(5,470,292	)			(884	)			NM
Other income (expense):
Interest expense			(200	)			(68	)			NM
Interest income			-				1				NM
Unrealized gain from trading securities			15,890				-				NM
Change in fair value of warrant liability			158,212				-				NM
Loss on the extinguishment of debt			-				(23	)			NM
Pre-tax loss			(5,296,390	)			(974	)			NM
Income tax benefit			(92,295	)			-				NM
Net loss		$	(5,204,095	)		$	(974	)			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 November 30, 2025, revenues were $2,293, compared to $1,201 during the three months ended November 30, 2024. The increase in revenue was a result of the following:

	●	Revenue from the sale of mining equipment. During the three months ended November 30, 2025, revenue from the sale of mining equipment was $0, compared to $717 in the three months ended November 30, 2024. The revenue recognized during the three months ended November 30, 2024 was primarily related to the sale of ten transformers. No such revenue was recognized during the three months ended November 30, 2025.
	●	Revenue from self-mining. During the three months ended November 30, 2025, revenue from self-mining was $2, compared to $484 in the three months ended November 30, 2024. The Company continued its strategy of winding down its proprietary self-mining exposure and deferring new site buildouts during the three months ended November 30, 2025 resulting in nominal self-ming revenue.
	●	Revenue from consulting. During the three months ended November 30, 2025, revenue from consulting was $199, as compared to $0 during the three months ended November 30, 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 three months ended November 30, 2025, revenue from the leasing of miners was $1,112, as compared to $0 during the three months ended November 30, 2024. 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.
	●	Revenue from staking. During the three months ended November 30, 2025, revenue from staking was $980, compared to $0 in the three months ended November 30, 2024. The increase was a result of the Company initiating both native staking and liquid staking in November 2025, with the intent for staking to become a primary yield generation strategy of the Company during the current fiscal year.

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 November 30, 2025, cost of sales was $1,024 compared to $1,211 during the three months ended November 30, 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 $0 for the three months ended November 30, 2025, compared to $670 for the three months ended November 30, 2024. The costs incurred during the three months ended November 30, 2024 was related to the sale of the ten transformers noted above. No such costs were incurred during the three months ended November 30, 2025.
	●	Cost of sales self-mining. Cost of sales related to self-mining remained was $86 in the three months ended November 30, 2025, compared to $541 in the three months ended November 30, 2024. The Company continued its strategy of winding down its proprietary self-mining exposure and deferring new site buildouts during the three months ended November 30, 2025.
	●	Cost of sales leasing. Cost of sales related to leasing was $909 for the three months ended November 30, 2025, compared to $0 during the three months ended November 30, 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, 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 $29 for the three months ended November 30, 2025, compared to $0 for the three months ended November 30, 2024. 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 $223,436 in the three months ended November 30, 2025, compared to $959 in the three months ended November 30, 2024. 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.
	●	Impairment of property and equipment. Impairment of fixed assets was $200 in the three months ended November 30, 2025, as compared to $0 in the three months ended November 30, 2024, reflecting our review of under-utilized or obsolete equipment and site-specific assets.
	●	Unrealized gain/loss from digital assets holding. During the three months ended November 30, 2025, The Company recorded an unrealized loss of $5,247,925 related to changes in the fair value of our digital asset holdings. This is compared to a $85 gain for the three months ended November 30, 2024. The Company acquired ETH on top of its BTC holdings as part of our business expansion during fiscal year 2025. As of November 30, 2025, the total fair value of ETH and BTC holdings amounted to $10,544,339 and $17,450, respectively. As of November 30, 2024, the total fair value of BTC holdings amounted to $150. No ETH was held as of November 30, 2024.

Other Income (Expense)

	●	Interest expense. Interest expense related solely to ETH activity was $200 in the three months ended November 30, 2025, as compared to $68 in interest expense related to debt in the three months ended November 30, 2024.
	●	Interest income. Interest income was $0 in three months ended November 30, 2025, as compared to $1 in three months ended November 30, 2024.
	●	Unrealized gain from trading securities. The Company recognized a $15,890 gain during the three months ended November 30, 2025. This gain 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.
	●	Change in fair value of warrant liability. The Company recognized a $158,212 gain during the three months ended November 30, 2025. 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 7 of the Interim Statements for additional information.
	●	Loss on the extinguishment of debt. The Company had no debt as of November 30, 2025. The loss on the extinguishment of its debt was $0 during the three months ended November 30, 2025, as compared to $23 during the three months ended November 30, 2024. The decrease is due to the equity proceeds raised by the Company enabling the paydown of debt.

Income Taxes

During the three months ended November 30, 2025, 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.

Non-GAAP 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.

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 November 30, 2025 and 2024 is as follows:

		Three Months Ended November 30,
		2025				2024
Net loss		$	(5,204,095	)		$	(974	)
Interest expense, net			(200	)			(67	)
Provision for income taxes			(92,295	)			-
Depreciation expense			124				131
EBITDA			(5,296,466	)			(910	)
Adjustments
Stock based compensation(1)			677				471
Impairment of property and equipment(2)			200				-
Unrealized gain from trading securities(3)			(15,890	)			-
Change in fair value of warrant liability(4)			(158,212	)			-
Loss on the extinguishment of debt(5)			-				23
Unrealized loss (gain) from the digital assets holding(6)			5,247,925				(85	)
One time consulting and legal fees(7)			200,051				-
Adjusted EBITDA		$	(21,715	)		$	(501	)

(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 months ended November 30 2025 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 investment in Eightco's common stock for the three months ended November 30, 2025.

(4) Represents the change in fair value of the company's liability classified warrants for the three months ended November 30, 2025.

(5) Represents non-recurring charges incurred in connection with the early settlement of the Company's loan with a third-party lender and the Hash Rate Sale Agreement.

(6) Removes the impact of unrealized changes in fair value of our digital asset holdings from net income.

(7) Represents one time capital raising, advisory, legal and other consulting fees incurred during the period.

The reconciliation of Adjusted EPS for the three months ended November 30, 2025 and 2024 is as follows:

		Three Months Ended November 30,
		2025				2024
Pre-tax loss			(5,296,390	)			(974	)
Adjustments:
Stock based compensation(1)			677				471
Impairment of property and equipment(2)			200				-
Unrealized gain from trading securities(3)			(15,890	)			-
Change in fair value of warrant liability(4)			(158,212	)			-
Loss on the extinguishment of debt(5)			-				23
Unrealized loss (gain) from the digital assets holding(6)			5,247,925				(85	)
One time consulting and legal fees(7)			200,051				-
Adjusted loss before income tax provision			(21,639	)			(565	)
Income tax benefit (as reported)			(92,295	)			-
Income tax provision adjustment(8)			88,188				-
Adjusted income tax benefit			(4,107	)			-
Adjusted net loss			(17,532	)			(565	)
Deemed dividend on Series A Preferred Stock			-				(2,961	)
Adjusted net loss attributable to common stockholders			(17,532	)			(3,526	)
Diluted weighted average common shares outstanding			325,665,565				2,371,103
Adjusted diluted loss per common shares		$	(0.05	)		$	(0.24	)

(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 months ended November 30 2025 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 investment in Eightco's common stock for the three months ended November 30, 2025.

(4) Represents the change in fair value of the company's liability classified warrants for the three months ended November 30, 2025.

(5) Represents non-recurring charges incurred in connection with the early settlement of the Company's loan with a third-party lender and the Hash Rate Sale Agreement.

(6) Removes the impact of unrealized changes in fair value of our digital asset holdings from net income.

(7) Represents one time capital raising, advisory, legal and other consulting fees incurred during the period.

(8) 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%.

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 November 30, 2025, the Company had $887,678 in cash on hand and working capital of $751,900. Our primary sources of liquidity during the three months ended November 30, 2025 included:

	●	net proceeds of $7,726,810 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 $20 billion of our common stock from time to time in our ATM Program
	●	net proceeds of $365,240 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.

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 the Company's 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).

In connection with the share offering on June 4, 2025, the Company issued to ThinkEquity 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

		Three months ended November 30,
		2025				2024
Net cash used in operating activities		$	(228,356	)		$	(96	)
Net cash used in investing activities			(7,422,439	)			(18	)
Net cash provided by financing activities			8,026,474				412
Net increase in cash and cash equivalents		$	375,679			$	298

Net cash used in operating activities was $228,356 for the three months ended November 30, 2025, compared to $96 for the three months ended November 30, 2024. 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 $7,422,439 for the three months ended November 30, 2025, compared to $18 for the three months ended November 30, 2024. The increase in investing cash outflow was almost entirely driven by the $7,527,221 purchase of ETH.

Net cash provided by financing activities was $8,026,474 for the three months ended November 30, 2025, compared to $412 for the three months ended November 30, 2024. This increase was primarily driven by the $7,664,380 of proceeds received from the Company's ATM Offering. Refer to Note 7 - 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;
	●	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.

Off-Balance 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.

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.

Stock-based 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.