BGDE 10-K & 10-Q changes, risk factors and insider trading

An investment in our securities involves a high degree of risk. You should consider carefully the following information about these risks, together with the other information contained in this Annual Report, including the mattersrisks and uncertainties addressed in the sections entitled “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, before making an investment decision. Our business, prospects, financial condition, and results of operations may be materially and adversely affected as a result of any of the following risks. The value of our securities could decline as a result of any of these risks. You could lose all or part of your investment in our securities. Some of the statements in “RISK FACTORS” are forward-looking statements. The following risk factors are not the only risk factors facing our company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial condition, and results of operations and it is not possible to predict all risk factors, nor can we assess the impact of all factors on us or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in or implied by any forward-looking statements.

We have a history of losses from operations, we expect potential negative cash flows from our operations to continue for the foreseeable future, and we expect that our net losses will continue for the foreseeable future as we seek to increase the efficiency of our operations, find new colocation customers, customers, and grow the size of our self-mining operations. These circumstances raise substantial doubt about our ability to continue as a going concern. Our financial statements as of December 31, 2024,2025, have been prepared on the basis that we will be able to continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. At December 31, 2024,2025, our accumulated accumulated deficit was $228.8$252.5 million, our cash and cash equivalents were $6.1$13.3 million, we had negative working capital of $35.9$31.3 million, and we had an aggregate of $20.9$25.2 million of debt. In addition, the Celsius deposit of $15.3 million is the subject of an ongoing legal dispute and litigation.

Advancing our future plans will require substantial additional investment. Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over the next 12 months from the date of this report.Annual Report. We will need to raise substantial additional capital in the near term to continue to fund our operations, meet our debt obligations and execute our current current business strategy. The amount and timing of our capital needs have and will continue to depend on many factors, as discussed further below as well as under Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources.”

We have several notes in default default which can subject collateral to seizure and otherwise impact our ability to use the collateral in our operations as well as affect our our ability to raise capital. Additional capital may not be available to us, or even if it is, the cost of such capital may be high or even even uncommercial. We may be forced to obtain additional capital when our stock price or trading volume or both are low, or when the general general market for digital assetsassets, AI or HPC companies is weak. Raising capital under any of these or similar scenarios, if we can raise any at all, may lead to significant dilution to our existing stockholders. We may be forced to sell assets to raise capital, and we may not be able to realize the full value of those assets at the time of sale.

Our management may devote significant time and we may incur substantial costs in pursuing, evaluating and negotiating potential strategic options or capital-raising transactions and those efforts may not prove successful on a timely basis, or at all. If we cannot raise adequate additional capital when needed, we may be forced to reorganize or merge with another entity, sell or monetize assets, file for bankruptcy, or cease operations. If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and our stockholders may lose all or part of their investment in our Common Stock.

The responsibility of the direction and operation of our business relies heavily on a small number of key people, including our CEOInterim Chief Executive Officer and CFO.our Chief Financial Officer. If any of our key employees cease their involvement in our business or, in the unfortunate situation one or more of them are seriously injured or dies, this loss would have a significant and likely adverse impact on us.

The global supply chains are increasingly risky and complex. Our business relies on digital assets-specific hardware such as the Miners, and containers in which to operate the Miners, and also more general plant and equipment such suchas transformers, breakers, power boards exhaust fans, deflectors, monitoring equipment and many other parts. If we are unable to procure such hardware, or replacement parts (at commercial prices, or at all), or they are delayed, our operations may be adversely affected which would likely have a material adverse effect on our business, financial condition, results of operations and prospects. If the manufacturers of such hardware are unable to obtain materials or components themselves, they may experience manufacturing delays or have to cease manufacturing altogether. Supply chain disruptions may also occur from time to time due to a range of factors beyond our control, including, but not limited to, increased costs of labor, freight costs and raw material prices along with a shortage of qualified workers.

Trade policies such as export/import restrictions, quotas or tariffs may reduce the ability of our suppliers to supply us with Miners or create a shortage or lack of components necessary for their manufacture or repair. Recently,Beginning in 2025, the U.S. government has threatenedannounced significantly increased tariffs on foreign imports into the U.S. from certain countries, including China, Canada and Mexico.Mexico, and in some cases threatened to impose additional tariffs. In response, several countries have imposed, or threatened to impose, reciprocal tariffs on imports from the U.S. and other retaliatory measures. Miners that we source from China and other mining hardware that we source from outside the U.S. may be subject to these tariffs. If these tariffs are imposed, or if retaliatory trade measures are taken by foreign countries in response to additional tariffs, it could have the impact of increasing the aggregate purchase cost of those commodities or reducing the supply of available commodities, which could have an adverse effect on our business and results of operations.

Additionally, the government of the People’s Republic of China in particular exerts a high level of influence and control over its economy and businesses (private and state owned). There have been various examples of government policies, decisions, laws and intervention into particular industries. Changes in any of these policies, laws and regulations, or the interpretations thereof, as they relate to the mining hardware suppliers, could have a negative impact on our business.

Miners and related mining equipment used to mine digital assets are sophisticated machines and may be operated over two years or longer. They are thus prone to breakdown and may not function at any given time. Any downtime of a significant number of our Miners and mining equipment will have a direct impact on us as they would not be performing their role. This could occur due to an accident on site, or during transportation of a large number of Miners. In addition, the failure of any critical single piece of equipment may represent a single point of failure which could have widespread impacts. An example of this could be a fire within a substation resulting in a total power outage for a mining facility for a period until the substation was rebuilt, or a blown fuse which may affect any part of our facility. Such widespread mechanical issues or critical failures for any material duration would therefore decrease our revenue.

A number of factors drive the adoption of ever more efficient Miners in the Bitcoin mining industry, including energy prices, the fact that the Bitcoin algorithm was was designed so that as more computing power is added to the network, the difficulty to mine for each block increases, and halving events. Over time older mining equipment becomes less and less profitable, and like most computing hardware, eventually becomes obsolete. Mawson’s fleet has not been materially renewed for a number of years, which means that a number of factors could render its self-mining fleet obsolete, obsolete, including a significant increase in difficulty, halving events, or simply wear and tear on the machines rendering some or all of them uncommercial, or inoperable.

Mawson, like almost all businesses around the world, is subject to continuous malicious attempts to penetrate its systems. We take measures to protect our operations and our digital and physical assets from unauthorized access, damage or theft; however, it is possible that the security system may not prevent improper improper access to, or damage or theft of our assets. A security breach could harm our reputation or result in the loss of some or all of our assets, or an inability to operate. A resulting perception that our measures do not adequately protect our assets could adversely affect affect our business, financial condition, results of operations and prospects.

We promptlyroutinely and frequently liquidate digital assets that we mine and keep a minimum number of digital assets in our possession so as to minimize our risks against theft, loss, destruction or other issues relating to hackers and technological attack.attack of digital assets in our possession. We have methods of monitoring and ensuring that our Miners are directing hashrate to the correct pools and that any Bitcoin produced is sent to the intended recipient. Nevertheless, this security system may still be penetrated and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God will be borne by us.

The security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee, or otherwise, and, as a result, an unauthorized party may obtain access to our private keys, data or Bitcoins. Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of its our security system could be harmed, which could adversely affect our business, financial condition, results of operations and prospects. In the event of a security breach, we may also be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect us.

We promptlyroutinely and frequently liquidate digital assets. This may mean that we sell digital assets at a time when the prices on the respective digital asset exchange market aremay be low, which could adversely affect our business, financial condition, results of operations and prospects.

DigitalThe assetspricing of digital assets, such as Bitcoin pricingBitcoin, has proven to be volatile, characterized by periods of extreme upturns and downturns that have lasted over lengthy time periods periods multiple times in digital assets’ history. A falling Bitcoin price directly affects our ability to generate revenue, which can affect our ability to meet our financial obligations. Further, volatility in energy prices has often resulted in the major input cost to generate Bitcoin increasing.

The price of Bitcoin can fluctuate fluctuate due to investment and trading sentiment amongst users, speculators, and investors for a range of reasons, including changes in interest rate settings, or negative or positive publicity (for example due to legal proceedings or losses to Bitcoin investors due to fraud or cyber-attacks on a digital assetsasset exchange or online wallet). Large holders of Bitcoin may be able to effect large price swings, especially especially if they were to liquidate their holdings, which would likely cause the price of Bitcoin to fall. A fall in the price of Bitcoin will have a negative impact on our revenues. The prices that we receive for our Bitcoin depend on numerous market factors beyond our control. Due to the highly volatile nature of the price of Bitcoin, our historical operating results have fluctuated, and continue to fluctuate, significantly from period to period. Mawson does not use derivatives to hedge Bitcoin prices.

We are also exposed to the the effect a falling price can have on our counterparties, including the exchanges we use and our colocation customers. In particular, in in July 2022, Celsius Networks, LLC and Celsius Mining LLC, filed for Chapter 11 bankruptcy. A subsidiary of MawsonMawson, Luna Squares LLC, remains an unsecured creditor of Celsius Mining LLC,LLC (“Celsius”), with two unpaid pre-petition invoices totaling in excess of $1.8$6.9 million.

Increasing network difficulty,difficulty plays a crucial role in determining the profitability of Digitaldigital Assetsassets and Bitcoin mining.

Essentially, network difficulty refers to the degree of effort required to solve the mathematical problems that validate transactions on the Bitcoin network. For digital assets that use a Proof-of-Work (PoW) validation system such as Bitcoin, creating new digital assets involves “miners”Miners using their computers to solve complex mathematical puzzles. In the case of Bitcoin, miners’Miners’ computers, also called nodes, collect and bundle individual transactions into blocks every ten minutes, which is the fixed “block time” of Bitcoin. The computers then compete to solve a complex cryptographic puzzle to be the first to validate the new block for the blockchain. As a digital assets like Bitcoin becomesbecome more popular, the number of computers participating in this peer-to-peer validation network increases. With more participants and more computing power, the so-called “hashpower” of the entire network increases accordingly.

2. Block time: As mentioned earlier, theThe target block time for Bitcoin is 10 minutes. If blocks are being generated too quickly, the difficulty level will increase to slow down the rate of block creation. Conversely, if blocks are being generated too slowly, the difficulty level will decrease to speed up the rate of block creation.

We are subject to a highly-evolvinghighly evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our business, reputation, prospects or operations. Obtaining and complying with required government permits and approvals may be time-consuming and costly.

Digital assets have been subject subject to ongoing scrutiny by regulators and government. It is possible that regulation in the digital asset industry will increase. We cannot be certain of future regulatory developments or interpretations, and it is difficult to list or describe all the risks that Mawson may be subject to in this space. In addition, regulatory actions, as well as any other political developments in the regions with active digital assets trading or mining, may increase our domestic competition as some of those digital assets minersMiners or new entrants in this market may move their digital assets mining operations or establishingestablish new operations in the United States. Furthermore, government scrutiny scrutiny related to restrictions on digital assets mining facilities and their energy consumption has increased over the past few years as digital assets mining has become more widespread. The consumption of electricity by mining operators may also have a negative environmental impact, impact, including contribution to climate change, which could set the public opinion against allowing the use of electricity for Bitcoin mining mining activities or create a negative consumer sentiment and perception of Bitcoin. State and federal regulators are increasingly focused on on the energy and environmental impact of Bitcoin mining activities. Additionally, if the regulatory and economic environment in Pennsylvania and Ohio were to become less favorable to Bitcoin mining and hosting companies, including by way of increased taxes, means our business, financial condition and results of operations could be adversely affected.

Regulatory changes or interpretations could causerequire us (or any of our related entities) to register and comply with new regulations, resulting in potentially extraordinary, recurring recurring or non-recurring expenses to continuingcontinue our digital assets business,business or enteringenter into new business ventures.

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Section 404 requires that our management maintain a system of internal control over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It also requires that our management annually evaluate whether our internal control over financial reporting is effective at providing reasonable assurance and to disclose its assessment to investors. Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024,2025, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). AsDuring a2025, resultmanagement devoted ofsignificant thiseffort assessment, managementand identifiedresources to remediating the material weaknesses in our internal control over financial reporting that were identified as describedof inDecember Item31, 9A.2024. “ControlsBased on management’s evaluation and testing performed during the year ended December 31, 2025, Procedures”.management Asdetermined athat resultthe controls implemented as part of the materialremediation weaknessesplan inwere ourappropriately internaldesigned controland had begun to operate effectively. Management continues to monitor the operating effectiveness of these controls to ensure their sustainability over financial reporting, the Company’s management has concluded that, as December 31, 2024, the Company’s internal control over financial reporting was not effective based on the criteria in Internal Control – Integrated Framework issued by COSO.time.

There can be no assurance that the IRS or other foreign tax authorities will not alter their position or introduce new laws, regulations or guidance with respect to digital assets. Any such alteration of existing IRS and other foreign tax authority positions or additional guidance regarding digital asset products and transactions could result in adverse tax consequences for our business and could have an adverse effect on the value of digital assetassets and the broader digital assets markets. In addition, the IRS and other foreign tax authorities may disagree with tax positions that we have taken, which could result in increased tax liabilities. Future technological and operational developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital currencies for U.S. federal income and foreign tax purposes.

Another example of an adverse ruling would be if we were classified as a passive foreign investment company (a “PFIC”) for any taxable year. Based on the current and anticipated composition of our income, assets and operations, and our business generally, we do not expect to be treated as as a PFIC for the current taxable year or in the foreseeable future. The application of the PFIC rules to digital assets and transactions related thereto is subject to uncertainty. There can be no assurance that Mawson will not be classified as a PFIC for the current taxable year or for any future taxable year. If Mawson is considered a PFIC then there may be negative tax consequences for U.S. holders of our ordinaryCommon shares,Stock, as well as being subject to annual information reporting requirements. U.S. holders may wish to consult their tax advisors about the potential application of the PFIC rules to an investment in our ordinaryCommon shares.Stock.

Changing environmental regulation and public energy policy may expose our business to new risks. Our Bitcoin colocation services and mining operations require a substantial amount of power and can only be successful, and ultimately profitable, if the costs we incur, including for electricity, are lower than the revenue we generate from our operations. As a result, our operations can only be successful if we can obtain sufficient electrical power for that minefacility on a cost-effective basis. For instance, our plans and strategic initiatives for our Pennsylvania and Ohio facilities are based, in part, on our understanding of current environmental and energy regulations, policies, and initiatives enacted by federal and state regulators. If new regulations are imposed, or if existing regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our planned business, if we are able to adapt at all, to such regulations.

We mayhave bebeen subject to material litigation (including with our lenders and counter-parties counterparties), investigations, or enforcement actions by regulators and governmental authorities that are expensive to support, and if resolved adversely, could harm our business, revenue, and financial results.

We have been the subject to certain certainclaims claims,and legal proceedings (see Item 3. “Legal Proceedings” for more information about ongoing litigation) and may be subject in the future to claims, legal proceedings, government investigations or enforcement actions, including in the ordinary course of business. Agreements entered into by Mawson sometimes include indemnification provisions which can subject Mawson to costs and damages in the event of a claim against an indemnified third party. Regardless of the merit of particular claims, defending against litigation or responding to government investigations can be expensive, time-consuming, disruptive to operations and distracting to management. If Mawson is unable to successfully defend itself against such claims, then it may become liable to make substantial payments to satisfy judgments, fines or penalties, or alter, delay, limit or cease some or all of its business practices. Mawson may also suffer damage to our its brand and reputation as a result of such adverse judgment.

If we fail to comply with the continued listing standards of The Nasdaq Capital Market (“Nasdaq”),Market, we may be delisted and the price of our Common Stock, our ability to access the capital markets and our financial condition could be negatively impacted.

We are a technology company focused on digital infrastructure platforms.platforms, headquartered in the United States.

The Company developsdesigns, builds and operates next-generation digital infrastructure platforms for enterprise customers and for its own purposes. The Company’sCompany digitalprovides services infrastructure platforms can be used to operate computing resources for a number of applications, and are offered acrossspanning AI, HPC, digital asseets,assets including Bitcoin mining, and other computingintensive compute applications. The Company delivers both applications.self-mining operations and colocation services to enterprise customers with a vertically integrated infrastructure model built for scalability and efficiency. The Company also has an energy management business, which utilizes software and analysis, to generate revenue when the Company Company adaptsparticipates itsin operationsenergy management programs related to the real-time needs of the power grid. The Company also periodically transacts in digital computational machines, data center infrastructure, and related equipment, subject to business and commercial opportunities.

The Company has a strategy to prioritize the usage of carbon-free energy sources, including nuclear energy, to power its digital infrastructure platforms and computational machines machines.to support the rapid growth of the digital economy in an environmentally sustainable way.

The Company manages and operates twodigital infrastructure platforms and data center facilities in Pennsylvaniacenters delivering a total current capacity of approximately 129 megawatts (“MW”) with andits hascurrent anoperational additional 24sites, MW ofwith future capacity in Ohio that is under development, all strategically located in locations served by the PJM Energy Market in the United States. The PJM Energy Market is the largest wholesale power market in North America.

Digital colocation revenue for the years ended December 31, 20242025 and 2023,2024, were $38.5$26.1 million and $16.4$38.5 million, respectively. This represented ana increasedecrease of $22.1$12.5 million or a 136%32% year-over-year revenue increase.decrease. The increasedecrease in revenue was dueprimarily attributable to a reduction in both the number of customers and the average contract size as compared to 2024. In 2025, the Company expandingentered into a profit-share agreement that generated lower revenue relative to traditional colocation arrangements but yielded higher overall profitability. The Company continues to enhance its number of digital colocation customers,capabilities increasingto expand its customer base and increase the number of machines usingutilizing ourits digital colocation infrastructure services, and growing its digital colocation business.services.

Energy management revenue for the years ended December 31, 20242025 and 2023,2024, were $7.6$11.8 million and $5.4$7.6 million, respectively. This represented a 56% increase or an increase of $2.2 million$4.2 ormillion, acompared 42%to year-over-year2024. revenue increase. ThisThe increase iswas dueprimarily attributable to the Company’s enhanced energy management programs, which utilizes leverage advanced software and analysis,analytics to optimize power usage in response to real-time grid conditions and market pricing signals. Energy management programs enable the Company to generate revenue whenand thereduce Companyenergy adaptscosts itsby adjusting power usageconsumption during periods of elevated demand or pricing volatility. Higher overall energy prices and greater grid demand variability during 2025 contributed to theincreased real-timeparticipation needs of the grid. The revenue opportunity fromin energy management isprograms expectedrelative to be impacted by seasonal patterns and other weather-related events as well as the dynamic nature of global power prices.2024.

Our overall revenue for the years ended December 31, 20242025 and 2023, 2024, were $59.3$39.8 million and $43.6$59.3 million, respectively. This represented ana increasedecrease of $15.7$19.5 million or a 36%33% year-over-year revenue increase.decrease.

Our operating expenses include: selling, general and administrative expenses; stock basedstock-based compensation; depreciation and amortization; and change in fair value of derivative asset; and depreciation and amortization.assets.

Our selling, general and administrative administrative expenses consist primarily of audit, legal, and other professional fees, employee compensation, director fees, equipment repairs, repairs;marketing, marketing; freight;freight, insurance;insurance, consultant fees;fees, lease amortization and general expenses.

Selling, general and administrative expenses for the years ended December 31, 20242025 and 2023,2024 were $18.3$22.6 million and $19.2$18.3 million, respectively.respectively, Totalrepresenting selling,an generalincrease of and administrative$4.3 expensesmillion, decreasedor by $0.9 million in 2024.24%. The decreaseincrease was primarily duedriven decreasesby inhigher rentexternal legal and equipmentlitigation-related rentalexpenses, which increased by approximately $6.1 million year over year, and the write-off of $0.9uncollectible customer accounts, which increased by approximately $1.1 million each,compared marketingto ofthe $0.4prior million,year. andThese propertyincreases costs of $0.3 million,were partially offset by anlower increase in overall employeebonuses and personnel compensationcommissions of $2.0approximately million.$1.3 million and lower payroll tax expense of approximately $1.6 million year over year.

Stock basedStock-based compensation

Stock basedStock-based compensation expense expenses for the years ended December 31, 20242025 and 2023,2024 werewas $9.0 million and $14.1 million and $10.8 million, respectively. The increasedecrease was primarily due to a lower an increase in stock-based compensation related to service-based restricted stock awardsnumber of $5.3share-based million as a result of an increase in awards issued in 2025 as long-term incentive for the Company’s directors, management and employees compared to 2024, and lower overall fair values of 6.4awards million shares, partially offset by a decreaseissued in stock-based2025 compensation relatedcompared to stock warrants/options of $1.8 million as a result of a decrease in stock warrants/options issued of 3.0 million shares.2024.

Depreciation consists primarily of depreciation of digitalelectric assetpower miningequipment, hardwaretransformers and MDC equipment.

Depreciation and amortization for the years ended December 31, 20242025 and 2023,2024, were $17.9$5.6 million and $38.1$17.9 million, respectively. The lower depreciation and amortization expense is the result of liquidation and deconsolidation of MIG No. 1 and an increased number of the Company’s digital asset mining hardware being fully depreciated duringcompared 2023 andto 2024,prior and a lower number of digital asset miners being acquired during the year ended December 31, 2024.periods.

During the years ended December 31, 20242025 and 2023,2024, there was ana unrealized lossgain on the fair value of the derivative asset of $1.2$0.6 million and $7.2a loss on the fair value of the derivative asset of $1.2 million, respectively, in relation to our power supply arrangements. The changeincrease in the fair value between December 31, 2023 and December 31, 2024 is primarily due to one less year remaining onof the derivative asset during as2025 was primarily driven by higher volatility and elevated forward energy prices, which increased the expected value of Decemberthe 31,Company’s hedge position. In contrast, the decrease in 2024 andreflected a reductionmore ofstable approximatelyenergy 5%price inenvironment thewith limited forward marketprice prices between 2024 and 2025.movement.

During the year ended December 31, 2024, wethe recordedCompany recognized a netdeconsolidation loss on deconsolidation of $12.4 millionmillion. relatingThis toloss was as a result of three of the liquidationCompany’s and deconsolidation ofAustralian subsidiaries, MIG No.1, Mawson AU, AU and Mawson PL.SPL, Duringproceeding theinto yearAustralian endedcourt Decemberappointed 31,liquidation. 2023,Accordingly, wethese subsidiaries were deconsolidated. The deconsolidation loss recorded awas gain on deconsolidation of $9.5 million relatingdue to the liquidation and deconsolidationremoval of Mawson PL. The deconsolidation gain and loss recorded were the result of removing the net assets and certain liabilities of this subsidiary offrom the variouscondensed subsidiariesconsolidated fromfinancial statements. See Note 3 –Subsidiary Deconsolidation to the consolidated financial statements.statements included in Item 15. “Exhibits, Financial Statement Schedules” in this Annual Report for further discussion of MIG No. 1.

The Company reports all financial information required in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The Company believes, however, that evaluating its ongoing operating results will be enhanced if it also discloses certain non-GAAP information. Adjusted EBITDA, which is a non-GAAP financial measure, is defined by the Company as net loss plus income tax, depreciation and amortization, further adjusted by impairment of financial assets, net loss of equity method investments, stock based compensation, (gain) loss on foreign currency, other non-operating income and expenses, change in fair value of derivative asset, fairbad valuedebt loss on investments,expense, and gain on deconsolidation.

Liquidity is the ability of of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. For the year ended December 31, 2024,2025, we financed our operations primarily through netcash positivefrom cashoperations, flowproceeds providedfrom byour operatingATM activities(defined below) and other cash reserves.

On DecemberOctober 13,16, 2024,2025, the Company entered into aan SalesAt the Market Offering Agreement (the “Sales Agreement”) with RothH.C. CapitalWainwright Partners,& Co., LLC (the “Lead AgentWainwright”) and A.G.P./Alliance Global Partners (collectively with the Lead Agent, the “Agents” and individually an “Agent”), to sell shares (the “Shares”) of our Common Stock (the “Shares”), having an aggregate sales price of up to $12$9.6 million, from time to time, time, through an “atat-the-market” offering program (the market offering“ATM” program) under which the AgentsWainwright will act as sales agent. TheOn December sales,11, if2025, any,the Company filed a prospectus supplement (the “Prospectus Supplement”) with the SEC to increase the capacity of the Shares made under the Sales Agreement will be madeATM by any$40 method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act.million.

We believe our near-term working working capital requirements will continue to be funded through a combination of the cash we expect to generate from future operations, our existing funds, external debt facilities that may be available to us, future issuances of shares, and other potential sources of capital, monetization, or funds. We believe a combination of these opportunities are expected to be adequate to fund our long-term operations needed over the next twelve months. For our business growth, it is expected we may continue investingto invest in expanding our infrastructure, expanding and/or upgrading our infrastructure and/or other equipment and will require additional working capital in the short-term and long-term. As of December 31, 2024,2025, we had an aggregate of $20.9$25.2 million of debt, all of which is overdue for repayment unless we refinance, renegotiate the terms, or prevail in our disputes and/or related claims and/or counterclaims. In addition,addition to the Celsiusdebt, as of December 31, 2025, the deposit of $15.3 million is from Celsius was the subject of an ongoing legal dispute that was in arbitration with Mawson, Celsius and Ionic Digital Mining LLC (“Ionic”), as successor in interest to Celsius, having claims and counterclaims. On February 6, 2026, Mawson reached a confidential settlement with Ionic to resolve claims Ionic brought against Mawson and Celsiustwo havingof its subsidiaries related to the $15.3 million deposit. All settlement amounts have already been paid and the Ionic arbitration claims andare counterclaims.dismissed in full.

We will need to raise substantial additional capital to continue our operations, execute our business strategy and meet our debt service obligations. We expect to continue to consider and evaluate potential strategic options and capital-raising transactions including, among other things, dispositions of certain businesses and assets and significant equity investments in us by third parties. Any capital-raising through equity or convertible debt could result in significant dilution to existing stockholders. In addition, newly issued securities may have rights, preferences, or privileges senior to those of our common shares. We may not be able to raise adequate capital on a timely basis, on favorable terms, or at all. Our inability to raise sufficient capital would have a material adverse effect on our financial condition and business.

As of December 31, 20242025 and 2023,2024, we had a cash and cash equivalent balance of $6.1$13.3 million and $4.5$6.1 million, respectively. The Company expects to continue to to focus on improving its cash flowsflow through a number of various activities.activities, including expanded diversified, high-margin colocation operations and optimizing energy procurement strategies.

As of December 31, 20242025 and 2023,2024, we had $20.9$25.2 million and $19.4$20.9 million, respectively, of outstanding short-term borrowings. The short-term borrowings as of December 31, 2024,2025 relate to the Celsius MiningPromissory LLC,Note, W Capital Advisors Pty Ltd,Loan, the securedSecured convertibleConvertible promissoryPromissory notes issued to investorsNotes and the Marshall Investments MIG Pty LtdLoan (theseeach as loansdefined arebelow), each of which is currently in default,default. referRefer to “Material Cash Requirements” section below for more information).information.

For the year ended December 31, 2024,2025, net cash providedused byin operating activities was $3.6$6.9 million and for the year ended December 31, 2023,2024, net cash usedprovided inby operating activities was $2.5$3.6 million. We had a net loss of $23.7 million for the year ended December 31, 2025, which included $5.6 million of depreciation and amortization expense, $8.6 million of stock based compensation, and $3.4 million of non-cash interest expense. We had a net loss of $46.3 million for the year ended December 31, 2024, which included $17.9 million of depreciation and amortization expense, $14.1 million of stock basedstock-based compensation, $13.0and $12.4 million of loss on deconsolidation, and $3.1 million of non-cash interest expense. We had a net loss of $58.5 million for the year ended December 31, 2023, which included $38.1 million of depreciation and amortization expense, $10.8 million of stock based compensation, $9.5 million of gain on deconsolidation, and $7.2 million of unrealized loss on derivative asset.deconsolidation.

For the years ended December 31, 20242025 and 2023,2024, net cash used in financinginvesting activities was $0.8$0.1 million and $4.6$1.1 million.,million, respectively. Net cash used in financinginvesting activities for the year ended December 31, 2024,2025 was due to loancapital paymentsexpenditures of $0.5 million and lease payments of $0.3$0.1 million. Net cash used in financinginvesting activities for during the year ended December 31, 20232024, was primarily dueattributable to loancapital paymentsexpenditures of $12.5$2 million,million partially offset by proceeds from issuancesales of commonproperty, stockplant and equipment of $6.2 million and proceeds from loans of $2.0$0.8 million.

The Company is included as a guarantor of a disputed Secured Loan Facility Agreement (the “Marshall Loan”) by MIG No. 1 Pty Ltd (“MIG No.1”) with with Marshall Investments GCP Pty Ltd ATF for the Marshall Investments MIG Trust (collectively, “Marshall”). The loan matured in in February 2024 and bears interest at a rate of 12% per annum (with an overdue rate provision of an additional 500bps), payable monthly with interest payments that commenced in December 2021. This loan facility is secured by directspecific mining assets of MIG No.1 and a general security security agreement given by the Company. Principal repayments began during November 2022. There hashave been no principal and interest payments made made since May 2023. TheBased on the disputed demands of Marshall, the outstanding balance including interest is $9.9$12.6 million as of December 31, 2024,2025, all of which is currently classified as a current liability.

The Company is included as a guarantor of a disputed Secured Loan Facility Agreement (the “W Capital Loan”) for working capital by Mawson PL with W Capital Advisors Pty Ltd for the W Capital Advisors Fund (collectively, “W Capital”). AsBased on the disputed demands of W Capital, as of December 31, 2024,2025, the balance was AUD $2.1$2.5 million (USD $1.3$1.7 million) representing outstanding interest, all of which is currently classified as a current liability. The W Capital Loan accrues interest daily at a rate of 12% per annum (with an overdue rate provision of an additional 800bps). The W Capital Loan expired in March 2023.

On February 23, 2022, Luna Squares LLC (“Luna Squares”) entered into a Digital Colocation Agreement with Celsius Mining LLC.LLC (the “Celsius Colocation Agreement”). In connection with this agreement, Celsius Mining LLC loaned Luna Squares a principal amount of $20.0 million, for the purpose of funding the infrastructure required to meet the obligations of the Digital Colocation Agreement, for which Luna Squares issued a Secured Promissory Note (the “Celsius LoanPromissory Note”) for repayment of such amount. The Celsius LoanPromissory Note accrues interest daily at a rate of 12% per annum (with an overdue rate provision of an additional 200bps). Luna Squares is required to amortize the loan at a rate of 15% per quarter, principal repayments began at the end of September 2022. The Celsius LoanPromissory Note had a maturity date of August 23, 2023. The outstanding balance including interest is $9.7$10.8 million as of December 31, 2024, 2025, all of which is currently classified as a current liability.

On July 8, 2022, the Company issued secured convertible promissory notes to investors in the aggregate principal amount of $3.6 million (the “Secured Convertible Promissory Notes”) in exchange for an aggregate of $3.6 million in cash. On September 29, 2022, the Company entered into a letter variation relating to some of the Secured Convertible Promissory Notes, with an aggregate principal amount of $3.1 million, which gave those holders the option to elect for pre-payment (including accrued interest to maturity) subject to certain conditions. All of the investors investors included in this letter variation elected for the pre-payment option and therefore there were $3.1 million principal repayments made during November 2022. The final convertible noteholdernoteholder, W Capital, who was not a party to this variation opted to enter into an arrangement whereby it received pre-payment of interest but agreed that repayment of the principal was not required therefore the remaining $0.50 $0.5 million had been classified as a current liability. The convertible note matured in July 2023. Interest has been accrued from July onwards and therefore the outstanding balance is $0.1$0.2 million as of December 31, 2024,2025, all of which is classified as a current liability. During 2024 the principal amount outstanding of $0.50 million was repaid to the investor.

On April 17, 2026, we received written notice from Nasdaq that, based on our reported stockholders’ equity as of December 31, 2025, we no longer satisfied Nasdaq Listing Rule 5550(b), and the Staff issued a delisting determination. On May 1, 2026, the Company requested a hearing before the Nasdaq Hearings Panel (the “Panel”) to present its plan to evidence compliance with the Rule,rule. whichOn willMay stay21, any further action by2026, the StaffCompany attended the hearing before the Panel. On June 16, 2026, the Company received written notice from the Listing Qualifications Hearings Department of Nasdaq confirming that the Company had regained compliance with the Nasdaq Listing Rules. Nasdaq’s determination is subject to the Company maintaining stockholders’ equity of at least until$5 million in each quarter for a twelve-month period, beginning with the hearingquarter concludesending June 30, 2026, and promptly notifying Nasdaq of any exception periodsignificant events that maycould be granted byaffect the PanelCompany’s followingcompliance thewith hearingthat expires.requirement.

Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” the “Company,” and “Big Digital,” refer to Big Digital Energy, Inc., a Delaware corporation, Cosmos Infrastructure LLC, Luna Squares LLC, , Mawson Bellefonte LLC, Luna Squares Repairs LLC, Luna Squares Property LLC, Mawson Midland LLC, Mawson Ohio LLC, Mawson Hosting LLC, Mawson Mining LLC and Mawson Capital LLC.

This report, and theThe 2025 Form 10-K and subsequent Quarterly Reports on Form 10-Q identify important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, including those set forth under Item 1A. “Risk Factors” below.

The risk factors included in this Quarterly Report on Form 10-Q, and in the 2025 Form 10-K are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking statements:

Results of Operations – Three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025

Digital colocation revenues for the three months ended MarchJune 31,30, 2026 and 2025, were $3.5 million and $10.4$3.7 million, respectively. This represented a 66%4% decrease or a decrease of $6.9 $0.2 million, compared to the same period in 2025. TheDigital decreasecolocation revenues for the three months ended June 30, 2026 include profit share revenues earned from our new joint mining agreement with Six Thirty AI which partially offset decreases in revenue was primarily attributabledue to a reductionreductions in both the number of customers and the average contract size as compared to the 2025 period. One customer, Consensus Technology Group LLC, accounted for $7.0 million of the decrease.

Energy management revenues for the three months ended MarchJune 31,30, 2026 and 2025, were $1.2$2.6 million and $3.1$5.1 million, respectively. This represented a 61%49% decrease or a decrease of $1.9 $2.5 million, compared to the same period in 2025. The decrease was primarily attributable to changes to miner specification requirements for curtailment program participation beginning in 2026, in which the Company’s mining fleet did not achieve the target life expectancy. The Company also realized lower curtailment earnings due to fewer customers and reductions in the average size of customer contracts. These decreases were partially offset by higher payments received for the sale of excess energy capacity.

Digital assets mining revenues from self-mining of Bitcoin for the three months ended MarchJune 31,30, 2026 and 2025, were $0.1$0.03 million and $0.3$0.7 million, respectively. This represented a decrease of $0.2 million compared to the same period in 2025. The decline was primarily driven by industry-widethe conditions,reallocation includingof higherour overall energyself-mining costsfleet capacity at our facilities in Midland and an increase in global network difficulty, both of which contributedBellefonte to lowercustomer Bitcoin productionfleets from self-miningour activities.new joint mining agreement.

Our cost of revenues consists primarily of direct power costs related to digital asset mining and colocation services and cost of mining equipment sold.services.

Cost of revenues for the three months ended March 31,June 30, 2026 and 2025, were $3.8$4.5 million and $7.9$5.6 million, respectively. This decrease of $4.1$1.1 million, or 52%,19%, in cost of revenues compared to the same period in 2025 was attributable to lower energy consumption from reduced digital colocation services and digital asset mining from self-mining, partially offset by higher average energy prices during the 2026 period.

Selling, general and administrative expenses for the three months ended MarchJune 31,30, 2026 and 2025 were $7.6$6.0 million and $5.8$5.9 million, respectively, an increase of $1.8$0.1 million, or 32%, 2%, from period to period. The increase was primarily due to higher legalinsurance andexpenses, professional fees,partially offset by lower payrollbonus-related tax expenses caused by lower share-based payment vesting activities in March 31, 2026 as compared to 2025.expenses.

Stock-based compensation expenses for the three months ended MarchJune 31,30, 2026 and 2025 were $0.4$0.7 million and $2.1$1.0 million, respectively. The decrease was primarily due to a reduction in new award issuances and the completion of service-based vesting conditions from awards issued over the prior two years. Stock-based compensation expense for the three months ended June 30, 2026 includes the acceleration of expense from outstanding service-based awards due to the April 6, 2026 change in the Company’s Board of Directors.

Depreciation consists primarily of depreciation of digitalenergy assetequipment, mining hardwaretransformers and modular data center (“MDC”) equipment.

Depreciation and amortization for the three months ended MarchJune 31,30, 2026 and 2025, were $1.2$1.1 million and $1.5 million, respectively. The lower depreciation and amortization expense is the resultdue ofto an increasedincrease number ofin the Company’samount digital asset mining hardware beingof fully depreciated equipment compared to prior periods.

During the three months ended MarchJune 31,30, 2026 and 2025, there was a gainloss on the fair value of the derivative asset of $0.1 million and $4.1$2.1 million, respectively. The change in fair value is primarily due to decreasing volatility in fair value due to the shorter remaining term of the power supply agreements.agreement.

During the threesix months ended MarchJune 31,30, 2026, loss on foreign currency transactions was $0.4 million. During the threesix months ended MarchJune 31,30, 2025, loss on foreign currency transactions was $0.1$0.8 million. The difference is due to the impact of changes in the US Dollar and Australian Dollar exchange rate on intercompany transactions.

During the threesix months ended MarchJune 31,30, 2026, we reached a confidential settlement with Ionic Digital Mining LLC (“Ionic”) to resolve all claims Ionic brought against us and two of our subsidiaries related to the Celsius Colocation Agreement, all settlement amounts have already been paid.Agreement. In addition, the Company entered a separate, unrelated settlement to resolve a customer dispute over a hosting arrangement. These two settlements resulted in the Company recognizing gains on legal settlements of $10.2 million.

The Company recorded income tax expense of approximately 17.8%$162 of income before income taxesthousand and (54.8)%$92 of loss before income taxesthousand for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The difference in the income tax expense for the threesix months ended MarchJune 31,30, 2026 versus the threesix months ended MarchJune 31,30, 2025 relates mainly to differences in estimated interest and penalty accruals included in the current payable for each of those periods, as well as changes in estimates regarding the realizability of deferred tax balances that impact the Company’s deferred tax expense.