BMNR 10-K & 10-Q changes, risk factors and insider trading
Bitmine Immersion Technologies, Inc. (also BMNP) · NYSE · Finance Services · CIK 1829311 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Risks Related to Digital Asset Prices, Network Dynamics and Treasury Holdings”
New heading “The future development and growth of digital assets are subject to a variety of factors that are difficult to predict and evaluate. If digital assets do not grow as we expect, our business, operating results and financial condition could be adversely affected.”
New heading “Ethereum-specific market, technology and regulatory developments may adversely affect the value and liquidity of our ETH holdings and our Treasury Strategy.”
New heading “Our digital asset treasury business model has multiple layers of corporate finance risks.”
New heading “Our ETH Treasury Strategy and any decision to hold digital assets may increase our exposure to market volatility and potential uninsured losses.”
New heading “Operational, Cybersecurity and Custody Risks”
New heading “Any ETH staking and related activities may expose us to slashing, lock-ups, liquidity, counterparty and operational risks.”
New heading “Ethereum scaling via rollups and Layer 2 solutions introduces additional dependencies and risks.”
New heading “Smart contract, bridge, oracle and protocol vulnerabilities could result in loss of digital assets or business interruption.”
New heading “Market structure and liquidity for ETH could deteriorate, impacting our ability to transact or to accurately value our holdings.”
New heading “ETH price declines or prolonged underperformance versus other digital assets could adversely affect our financial position and capital access.”
New heading “Restaking and correlated risk exposures may amplify losses during stress events.”
New heading “Concentration and governance risks in the Ethereum ecosystem could create systemic vulnerabilities.”
New heading “Our ability to earn mining rewards may decline and our revenues could be materially reduced.”
New heading “Our treasury strategy and any decision to hold digital assets may increase our exposure to market volatility and potential uninsured losses.”
New heading “Reliance on mining pools and other third-party service providers may expose us to counterparty failures, operational issues, and losses.”
New heading “Regulatory, Legal and Policy Risks”
New heading “Changes in laws and regulations applicable to digital assets may increase our compliance costs, restrict our operations, or expose us to enforcement actions.”
New heading “Conflicting or extraterritorial regulations may complicate cross-border operations and disrupt access to essential services.”
New heading “Adverse changes in the tax treatment of digital assets may increase our tax liabilities and compliance costs.”
New heading “Financing, Liquidity, Capital Markets and Listing Risks”
New heading “We may be unable to raise additional capital when needed or on acceptable terms, and future financings may be highly dilutive.”
New heading “Failure to maintain exchange listing standards may reduce liquidity, increase financing costs, and negatively affect valuation.”
New heading “Limited access to banking, payments and insurance services for digital asset-related businesses may create operational friction and liquidity risks.”
New heading “Accounting, Financial Reporting and Internal Control Risks”
New heading “Complex and evolving accounting for digital assets and related items may increase the volatility of our reported results and require significant judgment.”
New heading “Auditor transitions and internal control remediation may result in delays, increased costs, or identification of material weaknesses.”
New heading “If our breakeven metrics or related assumptions are inaccurate, investors may misinterpret our operating performance and risk profile.”
New heading “Strategic, Counterparty and Concentration Risks”
New heading “Our strategic exposure to ETH may subject us to ETH-specific market, technology, and regulatory risks.”
New heading “We operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition could be adversely affected if we are unable to compete effectively.”
New heading “Dependence on a limited number of counterparties and strategic partners may concentrate risk and exacerbate disruptions.”
New heading “Cybersecurity, Data Privacy and Intellectual Property Risks”
New heading “Cybersecurity incidents, including data breaches and ransomware, may compromise systems, disrupt operations, and cause financial loss.”
New heading “Loss of key personnel or inability to recruit and retain qualified employees may adversely affect our operations and growth.”
New heading “Litigation, arbitration or governmental proceedings may be costly, time-consuming, and disruptive, and adverse outcomes could result in significant liabilities.”
New heading “Our stock price may be highly volatile, and future sales or issuances of our securities could depress the trading price.”
Removed heading “Risks Related to Our Business”
Removed heading “Risks Related to Governmental Regulation and Enforcement”
Removed heading “Risks Related to Our Common Stock”
Removed heading “Risks Related to Our Business”
Removed heading “Bitcoin prices are highly volatile, which may affect our ability to effectively manage growth plans and our profitability.”
Removed heading “The price of bitcoin may be influenced by regulatory, commercial, and technical factors that are highly uncertain.”
Removed heading “Fluctuations in the price of bitcoin may significantly influence the market price of our bitcoin holdings and therefore, the price of our common stock.”
Removed heading “If we fail to grow our hash rate, we may be unable to compete, and our results of operations could suffer.”
Removed heading “We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand, which could have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “Our business is capital intensive, and failure to obtain the necessary capital when needed may force us to delay, limit or terminate our expansion efforts or other operations, which could have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “To the extent we host third party miners, our success will depend in large part on our ability to provide a competitive hosting environment, and our inability to attract customers for our hosting services could have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “Significant disruptions in the crypto asset markets, such as those experienced in the second half of 2022, may cause material impairment of the value and use of our miners.”
Removed heading “Geopolitical or economic crises may create increased uncertainty and price changes, or motivate large-scale sales of digital assets, which could result in a reduction in some or all digital assets’ values and adversely affect an investment in our securities.”
Removed heading “Adoption of a different method of validating transactions in bitcoin could materially impair the business of mining firms, and could even make them obsolete.”
Removed heading “The sale of our digital assets to pay expenses at a time of low digital asset prices could adversely affect an investment in our securities.”
Removed heading “Supply chain and shipping disruptions have resulted in shipping delays, a significant increase in shipping costs, and could increase product costs and result in lost sales, which may have a material adverse effect on our business, operating results and financial condition.”
Removed heading “We may experience difficulties in establishing relationships with banks, leasing companies, insurance companies and other financial institutions that are willing to provide us with customary financial products and services, which could have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “The development and acceptance of digital asset networks and other digital assets, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of digital asset systems may adversely affect an investment in our securities.”
Removed heading “The open-source structure of the bitcoin network protocol means the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol. A failure to properly monitor and upgrade the protocol could damage the bitcoin network and an investment in our securities.”
Removed heading “The acceptance of digital asset network software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in any digital asset network could result in a “fork” in the respective blockchain, resulting in the operation of two separate networks until such time as the forked blockchains are merged. The temporary or permanent existence of forked blockchains could adversely impact an investment in our securities.”
Removed heading “To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction fee will not be recorded on the blockchain until a block is solved by a miner who does not require the payment of transaction fees. Any widespread delays in the recording of transactions could result in a loss of confidence in that digital asset network, which could adversely impact an investment in our securities.”
Removed heading “If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any digital asset network, including the bitcoin network, it is possible that such actor or botnet could manipulate the blockchain in a manner that adversely affects an investment in our securities.”
Removed heading “Our reliance on third-party mining pool service providers for our mining revenue payouts may have a negative impact on our operations.”
Removed heading “Bitcoin is subject to halving, and as such the reward for successfully solving a block will halve several times in the future and its value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts, which could cause us to cease our mining operations altogether and investors could suffer a complete loss of their investment.”
Removed heading “To the extent that the profit margins of digital asset mining operations are not high, operators of digital asset mining operations are more likely to immediately sell their digital assets earned by mining in the digital asset exchange market, resulting in a reduction in the price of digital assets that could adversely impact an investment in our securities.”
Removed heading “Our reliance on immersion-cooling exposes us to additional risks.”
Removed heading “Potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof.”
Removed heading “Security threats to our business could result in, a loss of our digital assets, or damage to our reputation and our brand, each of which could adversely affect an investment in our securities.”
Removed heading “Our ability to adopt technology in response to changing security needs or trends and our reliance on, third-party custody providers, poses a challenge to the safekeeping of our digital assets.”
Removed heading “Digital asset transactions are irrevocable and stolen or incorrectly transferred digital assets may be irretrievable. As a result, any incorrectly executed digital asset transactions could adversely affect an investment in our securities.”
Removed heading “The limited rights of legal recourse available to us, and our lack of insurance protection expose us and our stockholders to the risk of loss of our digital assets for which no person is liable.”
Removed heading “If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our bitcoin, we may lose some or all of our bitcoin and our financial condition and results of operations could be materially adversely affected.”
Removed heading “We rely on third-party hosting for much of our mining activity, and as such, our operations could be adversely affected by the actions or inactions of such third-parties. Additionally, third-party hosting, among other things, often requires us to give the hosting company a first lien on the miners installed on the site and creates business risk for us.”
Removed heading “We are subject to risk that key counterparties file bankruptcy, enter insolvency proceedings or otherwise default on their obligations to us.”
Removed heading “Intellectual property rights claims may adversely affect the operation of some or all digital asset networks.”
Removed heading “Our future success depends on our ability to keep pace with rapid technological changes that could make our current or future technologies less competitive or obsolete.”
Removed heading “Variability in intellectual property laws may adversely affect our intellectual property position.”
Removed heading “We may seek to internally develop additional new inventions and intellectual property, which would take time and be costly. Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.”
Removed heading “Our future success depends on our ability to expand our organization to match the growth of our activities.”
Removed heading “We are highly dependent on the continued services of our small team of executives.”
Removed heading “We have engaged in, and in the future may engage in, strategic acquisitions and other arrangements that could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our operating results.”
Removed heading “Increased scrutiny and changing expectations from stockholders with respect to our environmental, social and governance (“ESG”) practices and the impacts of climate change may result in additional costs or risks.”
Removed heading “Delays in the construction of our hosting facilities or significant cost overruns could present significant risks to our business and could have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “We are subject to risks associated with our need for significant electrical power.”
Removed heading “We may not be able to compete effectively against our current and future competitors, which could have a material adverse effect on our business, financial condition and results of operations.”
Removed heading “Risks Related to Governmental Regulation and Enforcement”
Removed heading “Regulatory changes or actions may restrict the use of bitcoins or the operation of the bitcoin network in a manner that adversely affects an investment in our securities.”
Removed heading “If regulatory changes or interpretations require the regulation of bitcoins under the Securities Act and Investment Company Act by the SEC, we may be required to register and comply with such regulations. To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease certain operations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors. This would likely have a material adverse effect on us and investors may lose their investment.”
Removed heading “If regulatory changes or interpretations of our activities require our registration as an MSB under the regulations promulgated by FinCEN under the authority of the BSA, or otherwise under state laws, we may incur significant compliance costs, which could be substantial or cost-prohibitive. If we become subject to these regulations, our costs in complying with them may have a material adverse effect on our business and the results of our operations.”
Removed heading “Current regulation regarding the exchange of bitcoins under the CEA by the CFTC is unclear; to the extent we become subject to regulation by the CFTC in connection with our exchange of bitcoin, we may incur additional compliance costs, which may be significant.”
Removed heading “It may be illegal now, or in the future, to mine, acquire, own, hold, sell or use bitcoin or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries, the ruling of which could adversely affect us.”
Removed heading “Changing environmental regulation and public energy policy may expose our business to new risks.”
Removed heading “Future developments regarding the treatment of digital assets for U.S. federal income and applicable state, local and non-U.S. tax purposes could adversely impact our business.”
Removed heading “Our bitcoin holdings could subject us to regulatory scrutiny.”
Removed heading “Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our bitcoin.”
Removed heading “Our interactions with the bitcoin network may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate distributed ledger technology.”
Removed heading “We have operations in Trinidad and may commence operations in other foreign countries. Foreign countries have differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to contractual terms, laws and regulations. In addition, we, and our joint arrangements and associates, face the risk of litigation and disputes worldwide.”
Removed heading “Risks Related to Ownership of Our Common Stock”
Removed heading “An active trading market for our common stock may never develop or be sustained.”
Removed heading “The trading price of our common stock may be volatile, and you could lose all or part of your investment.”
Removed heading “The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.”
Removed heading “We have the right to designate and issue additional shares of preferred stock. If we were to designate and/or issue additional preferred stock, it is likely to have rights, preferences and privileges that may adversely affect the common stock.”
Removed heading “We incur significant costs and demands upon management and accounting and finance resources as a result of complying with the laws and regulations affecting public companies; any failure to establish and maintain adequate internal controls and/or disclosure controls or to recruit, train and retain necessary accounting and finance personnel could have an adverse effect on our ability to accurately and timely prepare our financial statements and otherwise make timely and accurate public disclosure.”
Removed heading “Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.”
Removed heading “Because there has been limited precedent set for financial accounting of bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency assets transactions may be subject to change.”
Removed heading “Exercise or conversion of warrants and other convertible securities, along with new issuances of our common stock, will dilute our stockholder’s percentage of ownership.”
Removed heading “A significant portion of our assets are pledged to an entity controlled by our chairman and failure to repay obligations to such entity when due will have a material adverse effect on our business and could result in foreclosure on our assets.”
Removed heading “We depend on key personnel and could be harmed by the loss of their services because of the limited number of qualified people in our industry.”
Removed heading “Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business, which in turn could have a material adverse effect on our business, financial condition and results of operation.”
Removed heading “Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.”
Removed heading “Our common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business.”
Removed heading “We do not intend to pay dividends for the foreseeable future.”
Largest changes
Our business is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal and regulatory interpretations and guidance in the markets in which we operate, including those governing financial services and banking, trust companies, securities, derivative transactions and markets, broker-dealers and alternative trading systems (“ATS”), commodities, credit, digital asset custody, exchange, and transfer, cross-border and domestic money and digital asset transmission, commercial lending, usury, foreign currency exchange, privacy, data governance, data protection, cybersecurity, fraud detection, payment services, consumer protection, antitrust and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing. Many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies,see in full comparisoncryptodigital assets, generative artificial intelligence (“AI”) and related technologies. As a result, some applicable laws and regulations dodonot contemplate or address unique issues associated withtheblockchaincryptoandeconomy,digital assets industry, are subject to significant uncertainty, and vary widely acrossacrossU.S. federal, state, and local and international jurisdictions. These legal and regulatory regimes, including the laws,rules,rules and regulations thereunder, evolve frequently and may be modified,interpreted,interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty surroundingsurroundingthe regulation of thecryptoblockchaineconomyand digital assets industry requires us to exercise our judgment as to whether certain laws,rules,rules and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied withwithsuch laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on or temporary or permanent suspensions of our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.
“We are subject to risk that key counterparties file bankruptcy, enter insolvency proceedings or otherwise default on their obligations to us.”see in full comparison
“In the future, we may seek additional opportunities to grow our mining operations through strategic acquisitions, including through purchases of miners, data centers and other facilities from other operating companies, including companies in financial distress. Our ability to grow through future acquisitions will depend on the availability of, and our ability to identify, suitable acquisition and investment opportunities at an acceptable cost, our ability to compete effectively to attract those opportunities and the availability of financing to complete acquisitions. …”see in full comparison
“Our listing on NYSE American subjects us to continued quantitative and qualitative listing requirements. Failure to maintain minimum price, market capitalization, public float, shareholder equity, governance, or filing standards could result in warnings, additional costs, or delisting, reducing liquidity and potentially triggering defaults or investor redemptions.”see in full comparison
“Governmental bodies and regulators, including the SEC, CFTC, FinCEN, IRS, Office of Foreign Assets Control, state authorities and non-U.S. regulators, continue to evaluate and assert jurisdiction over digital assets, mining activities, market structure, custody, broker-dealer/ATS regimes, sanctions/AML compliance, consumer protection, and energy usage. …”see in full comparison
“If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our bitcoin, we may lose some or all of our bitcoin and our financial condition and results of operations could be materially adversely affected.”see in full comparison
Full comparison: every changed paragraph (305)
Ownership
of our securities involves a high
degree of risk. Holders of our securitiesYou should carefully consider the followingrisks riskdescribed factorsbelow, andtogether thewith all other information
contained contained
in or incorporated by reference into this Annual Report on Form 10-K, including our historical condensedaudited financial statements and relatedthe notes
thereto, includedand herein.“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The following
discussion discussion
highlights some of thematerial risks that maycould adversely affect futureour operatingbusiness, results.financial condition, results of operations, cash flows,
liquidity, prospects and the trading price of our common stock. Additional risks and uncertainties not presently known to us,us whichor that
we currently deem immaterial or which are similar to those faced by other companies in our industry or businesses in general, may also
impair our businessesbusiness operations. If any of the following risks or uncertainties actually occur, our business, financial condition and
operating resultsbusiness could be adverselymaterially
harmed affected in a material way. This could causeand the tradingmarket pricesprice of our common stock tocould decline, perhaps
significantly, and you maycould lose partall or allpart of your investment. Please see “Cautionary Notes Regarding Forward-Looking Statements.”
The principal risks that could materially and adversely affect us include, among others, the following, grouped by category for ease of reference:
The summary above is qualified in its entirety by the more complete risk factors set forth below.
Risks Related to Digital Asset Prices, Network Dynamics and Treasury Holdings
Below is a summary of the principal factors that make an investment
in our common stock speculative or risky. This summary does not address all of the risks we face. Additional discussion of the risks summarized
in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other
information included in this Annual Report.
Risks Related to Our Business
Risks Related to Governmental Regulation and Enforcement
Risks Related to Our Common Stock
Risks Related to Our Business
Bitcoin prices are highly volatile, which may affect our ability
to effectively manage growth plans and our profitability.
The price of bitcoin is extremely volatile. In 2023 the price range
of bitcoin was approximately $16,600 to $42,800, and in 2024 the price range of bitcoin has been approximately $40,000 to $103,000 through
December 5, 2024. The cost to mine a bitcoin is independent of the then current price of bitcoin, so when prices are low, the cost per
coin to mine may consume much of our available cash, which means that there is less capital with which to invest in future company growth.
Similarly, when prices are low, our profitability is decreased on a dollar-for-dollar basis correlated to the then price of bitcoin. Given
the volatility of bitcoin, these factors render us unable to accurately predict in advance what our growth plans may be and accurately
forecast any revenue and profitability projections for any reporting period.
The price of bitcoin may be influenced by regulatory, commercial,
and technical factors that are highly uncertain.
Bitcoin and other digital assets are relatively novel and are subject
to various risks and uncertainties that may adversely impact their price. For example, the application of securities laws and other regulations
to such assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may create
new regulations or interpret laws in a manner that adversely affects the price of bitcoin. The growth of the digital assets industry in
general, and the use and acceptance of bitcoin in particular, may also impact the price of bitcoin and is subject to a high degree of
uncertainty. The pace of worldwide growth in the adoption and use of bitcoin could depend on the following:
Even if growth in bitcoin adoption occurs in the near or medium-term,
there is no assurance that bitcoin usage will continue to grow over the long-term. Because bitcoin has no physical existence beyond the
record of transactions on the bitcoin blockchain, a variety of technical factors related to the bitcoin blockchain could also impact the
price of bitcoin. For example, malicious attacks by “miners” who validate bitcoin transactions, inadequate mining fees to
incentivize validating of bitcoin transactions, “hard forks” of the bitcoin blockchain, and advances in quantum computing
could undercut the integrity of the bitcoin blockchain and negatively affect the price of bitcoin. The liquidity of bitcoin may also be
reduced and damage to the public perception of bitcoin may occur, if financial institutions were to deny banking services to businesses
that hold bitcoin, provide bitcoin-related services or accept bitcoin as payment, which could also decrease the price of bitcoin.
Fluctuations in the price of bitcoin may significantly influence
the market price of our bitcoin holdings and therefore, the price of our common stock.
To the extent investors view the value of our common stock as linked
to the value or change in the value of our bitcoin, fluctuations in the price of bitcoin may significantly influence the market price
of our common stock.
If we fail to grow our hash rate, we may be unable to compete,
and our results of operations could suffer.
Generally, a bitcoin miner’s chance of solving a block on the
bitcoin blockchain and earning a bitcoin reward is a function of the miner’s hash rate (i.e., the amount of computing power devoted
to supporting the bitcoin blockchain), relative to the global network hash rate. As greater adoption of bitcoin occurs, we expect the
demand for bitcoin will increase further, drawing more mining companies into the industry and thereby increasing the global network hash
rate. As new and more powerful miners are deployed, the global network hash rate will continue to increase, meaning a miner’s chance
of earning bitcoin rewards will decline unless it deploys additional hash rate at pace with the industry.
Accordingly, to maintain our chances of earning new bitcoin rewards
and remaining competitive in our industry, we must seek to continually add new miners to grow our hash rate at pace with the growth in
the bitcoin global network hash rate. However, as demand miners has increased sharply, and we expect this process to continue in the future
as demand for bitcoin increases. Therefore, if the price of bitcoin is not sufficiently high to allow us to fund our hash rate growth
through new miner acquisitions and if we are otherwise unable to access additional capital to acquire these miners, our hash rate may
stagnate and we may fall behind our competitors. If this happens, our chances of earning new bitcoin rewards would decline and, as such,
our results of operations and financial condition may suffer.
We may not be able to obtain new hosting and transaction processing
hardware or purchase such hardware at competitive prices during times of high demand, which could have a material adverse effect on our
business, financial condition and results of operations.
Historically, an increase in interest and demand for digital assets
has led to a shortage of hosting and transaction processing hardware and increased prices. As the price of digital assets increase, the
profits that are generated from the mining those assets also increase, which causes more companies to enter the mining industry and existing
companies to expand their mining operations. When that occurs, the demand for equipment may outpace supply and create mining machine equipment
shortages. Currently, with the substantial increase in the price of bitcoin from its lows in late 2023, there is increased demand for
new and used mining and hosting equipment. While we have not seen an uptick in the price of used mining equipment so far due to an overhang
of supply on the market, we expect that prices will trend up in the near future if the bitcoin price of bitcoin remains constant or increases
from its current level. In the short-term, a substantial increase in the price of bitcoin and associated equipment prices would improve
the profitability of our existing operations, but in the long-term it could impair our ability to expand our operations or replace obsolete
equipment, which could have a material adverse effect on our business, financial condition and results of operations.
Our business is capital intensive, and failure to obtain the
necessary capital when needed may force us to delay, limit or terminate our expansion efforts or other operations, which could have a
material adverse effect on our business, financial condition and results of operations.
Part of our business plan is to construct, develop and operate digital
asset mining facilities, and to mine digital assets for our own account in those facilities by means of a fleet of the latest generation
mining equipment. We may also use our mining facilities to host third-party miners. However, the costs of constructing, developing, operating
and maintaining digital asset mining and hosting facilities, and owning and operating a large fleet of the latest generation mining equipment,
are substantial. We have completed our initial hosting facility in Trinidad which recently became operational. We are also a partner in
a joint venture that recently completed a facility with a capacity of 5-6 MW in Texas, which became operational in June 2023. We currently
lack the capital to open material additional facilities or materially expand our additional facilities. Without capital to construct new
mining facilities, we have focused our efforts on acquiring miners which are hosting in mining facilities owned by third parties.
We will need to raise additional funds through equity or debt financings
in order to meet our capital needs. Additional debt or equity financing may not be available when needed or, if available, may not be
available on satisfactory terms. If our stock price declines and/or our trading volume remains low, our ability to raise capital to expand
our business will be impaired. We have retained investment bankers to assist in raising the necessary capital to expand our business,
but they can provide no assurance that capital is available on attractive terms in the current market environment. An inability to obtain
additional debt or equity financing would adversely affect our business, financial condition and results of operations.
To the extent we host third party miners, our success will depend
in large part on our ability to provide a competitive hosting environment, and our inability to attract customers for our hosting services
could have a material adverse effect on our business, financial condition and results of operations.
While our primary plan is to utilize our hosting facilities to mine
bitcoin for our own account, we may utilize our hosting facilities to host third-party miners where we can do so on attractive terms.
Our hosting success will depend our ability to attract hosting customers, which will depend our ability to offer competitive hosting terms
and capabilities that enable our hosting clients to operate profitably. We may not be able to attract customers to our hosting capabilities
for a number of reasons, including if:
Furthermore, all of the risks that exist for our mining business would
also exist for our third-party hosting clients. The inability of our hosting clients to operate profitably could adversely impact on our
hosting business, which could have a material adverse effect on our business, financial condition and results of operations.
Significant disruptions in the crypto asset markets, such as
those experienced in the second half of 2022, may cause material impairment of the value and use of our miners.
During the fourth quarter of 2022, the per coin price of bitcoin reached
a low of approximately $15,500 from a high of almost $21,500 earlier in the quarter. This decrease in the price of bitcoin, combined with
general market sentiment caused in large part by the collapse of FTX Trading Ltd. (“FTX”) in November 2022 and various bitcoin
company-related bankruptcies and restructurings, led to a material decline in the fair value of our miners during that period. Any future
decrease in the value of bitcoin could cause us to record additional impairments in the value of our current and future assets.
In addition, if bitcoin prices dropped to levels below that experienced
in 2022 and held at those levels for a significant period of time, it could impact our profitability such that we would possibly need
to consider whether it would be prudent to leave certain of our miners idle until the price of bitcoin recovered.
Theoretically, there is a minimum bitcoin price that is so low that
we would be incentivized to cease our mining operations, particularly where our operating costs exceed our revenues. However, this is
a complex projection involving multiple ever-changing, dynamic variables. We have multiple mining sites and hosting partners, all with
different hosting prices, electricity prices, and contract structures. These costs would need to be compared to the current revenue being
produced by our miners.
Adverse developments Volatility
in the blockchainprices industryof ETH and inBTC themay blockchain
hostingmaterially marketand couldadversely have a material adverse effect onaffect our business, financial condition and results of operations.
Our revenues, gross margins, liquidity and ability to service obligations depend significantly on prevailing ETH prices and, less so, BTC prices. Prolonged or sharp price declines, or heightened volatility, may impede ETH ecosystem growth or render BTC mining activities unprofitable, reduce the carrying value and liquidity of digital assets held, and decrease investor demand for our securities.
The future development and growth of digital assets are subject to a variety of factors that are difficult to predict and evaluate. If digital assets do not grow as we expect, our business, operating results and financial condition could be adversely affected.
Digital assets built on blockchain technology were only introduced in 2008 and remain in the early stages of development. In addition, different digital assets are designed for different purposes. Ethereum, for instance, was designed to serve as a smart contract and decentralized application platform, while Bitcoin was designed to serve as a peer-to-peer electronic cash system. Many other blockchain networks, ranging from cloud computing to tokenized securities networks, have only recently been established. The further growth and development of any digital assets and their underlying networks and other cryptographic and algorithmic protocols governing the creation, transfer and usage of digital assets and related assets represent a new and evolving paradigm that is subject to a variety of factors that are difficult to evaluate, including:
Various other technical issues have also been uncovered from time to time that resulted in disabled functionalities, exposure of certain users’ personal information, theft of users’ assets, and other negative consequences, and which required resolution with the attention and efforts of their global miner, user, and development communities. If any such risks or other risks materialize, and in particular if they are not resolved, the development and growth of digital assets may be significantly affected and, as a result, our business, operating results, and financial condition could be adversely affected.
Ethereum-specific market, technology and regulatory developments may adversely affect the value and liquidity of our ETH holdings and our Treasury Strategy.
The Ethereum network is subject to rapidly evolving technology, competitive dynamics (including alternative Layer 1 and Layer 2 networks), and changing regulatory and market-structure frameworks. Adverse developments—including protocol upgrades with unintended consequences, forks or chain instability, validator concentration, consensus failures, smart contract vulnerabilities, L2 settlement failures, bridge exploits, or regulatory restrictions—could reduce the value or liquidity of ETH and impair our treasury strategy.
Our digital asset treasury business model has multiple layers of corporate finance risks.
Our ETH Treasury Strategy has multiple layers of risk based on corporate finance principles and blockchain mechanics, including but not limited to the following:
Together, these risks form the structural challenges of our ETH Treasury Strategy. Its success depends on maintaining perpetual premium expansion in a market that is inherently cyclical.
Our ETH Treasury Strategy and any decision to hold digital assets may increase our exposure to market volatility and potential uninsured losses.
Market conditions and operational needs may necessitate longer holding periods, increasing exposure to price swings. If we hold ETH or other digital assets under our treasury strategy, we would be exposed to additional volatility, regulatory, and market structure risks specific to those assets. We are currently exposed to potential uninsured losses to the extent digital asset balances exceed the custodian’s applicable insurance coverage.
Operational, Cybersecurity and Custody Risks
Any ETH staking and related activities may expose us to slashing, lock-ups, liquidity, counterparty and operational risks.
Staking requires operational reliability and adherence to protocol rules. Validators that act maliciously or suffer extended downtime can be “slashed,” resulting in a partial loss of staked principal. Staking may also involve unbonding or lock-up periods that reduce liquidity and flexibility, and, where conducted through third-party providers, introduces counterparty and operational risk. Liquid staking or restaking mechanisms may involve additional smart contract risk, rehypothecation or correlation risks, and market liquidity considerations for derivative tokens. Any failure in our validator operations or at a third-party staking provider could result in losses and reputational harm.
Ethereum scaling via rollups and Layer 2 solutions introduces additional dependencies and risks.
Many L2 networks rely on fraud proofs, validity proofs, sequencing, bridging contracts and centralized or semi-centralized governance during early phases. Security or operational failures at an L2 or bridge could lead to loss of funds, delays in withdrawals, or market dislocations affecting assets bridged to or from Ethereum. Our operations could be adversely affected by such disruptions, particularly if we hold or accept assets that are bridged or rely on L2 settlement pathways.
Smart contract, bridge, oracle and protocol vulnerabilities could result in loss of digital assets or business interruption.
Decentralized protocols and token standards underpin many Ethereum-based activities. Exploits or failures—whether in widely used standards, core protocol implementations, bridges, or oracles—can cause material losses or network instability. Even if we are not directly exposed to a compromised protocol, contagion effects can depress market prices, reduce liquidity, and disrupt counterparties or service providers on which we rely.
Market structure and liquidity for ETH could deteriorate, impacting our ability to transact or to accurately value our holdings.
We rely on a limited number of venues for price discovery and liquidity. Market events—including exchange or market-maker disruptions, de-platforming of digital asset participants by banks or service providers, stress in stablecoin markets, or regulatory actions that affect trading venues—could reduce liquidity and increase volatility. A lack of reliable liquidity may impair valuation, hedging, or the ability to rebalance our treasury.
ETH price declines or prolonged underperformance versus other digital assets could adversely affect our financial position and capital access.
Our strategy is focused on ETH as our primary treasury asset. Sustained price declines in ETH or underperformance relative to other assets could reduce the carrying value of our digital assets, increase the frequency or magnitude of impairment charges under applicable accounting policies, and diminish our ability to raise capital or maintain compliance with exchange listing standards.
Restaking and correlated risk exposures may amplify losses during stress events.
If we engage in restaking or similar activities that create stacked security obligations or re-use of staked collateral across protocols, we may face correlated losses across multiple positions in a single adverse event. Losses at one protocol could affect the security or liquidity of positions at another, and recovery pathways may be uncertain or prolonged.
Concentration and governance risks in the Ethereum ecosystem could create systemic vulnerabilities.
Concentration of validators among a small number of providers, reliance on a limited set of client implementations, or governance capture by large stakeholders could increase systemic risk. A critical bug in a dominant client, or adverse decisions by influential governance participants, could affect network stability, validator incentives, or ETH economics.
Our ability to earn mining rewards may decline and our revenues could be materially reduced.
The mining industry is competitive, and rapid deployments by competitors, access to lower-cost power, or availability of next-generation ASICs may increase hash rate and difficulty and outpace our growth or efficiency gains.
Management's Discussion & Analysis (MD&A)
New heading “ETH Treasury Strategy, Drivers and Outlook”
New heading “Key Performance Drivers”
New heading “Known Trends, Events and Uncertainties”
New heading “Current liquidity position”
New heading “Sources and uses of cash”
New heading “Material cash requirements and known liquidity risks”
Removed heading “The following discussion and analysis should be read in conjunction with the condensed financial statements and notes thereto included elsewhere in this Form 10-K. All information presented herein is based on the Company’s fiscal year, which ends August 31. Unless otherwise stated, references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.”
Removed heading “Trinidad Operations”
Removed heading “Pecos, Texas Operations”
Removed heading “Murray, Kentucky Operations”
Removed heading “Bitcoin Holdings”
Removed heading “Related Party Transactions”
Removed heading “Line of Credit from IDI”
Removed heading “Transactions with ROC Digital Mining I, LLC”
Removed heading “Transactions with Rykor Energy Solutions, LLC”
Removed heading “Basis of Presentation”
Removed heading “Use of Estimates”
Removed heading “Revenue Recognition”
Removed heading “Revenues from digital currency mining – General”
Removed heading “Revenues from hosting”
Removed heading “Revenues from the sale of mining equipment”
Removed heading “Cash and cash equivalents”
Removed heading “Stock-based Compensation”
Removed heading “Related party transactions”
Removed heading “Net Loss per Share”
Removed heading “Recent Accounting Pronouncements”
Largest changes
“Material cash requirements and known liquidity risks”see in full comparison
“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.”see in full comparison
“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.”see in full comparison
“The following discussion and analysis should be read in conjunction with the condensed financial statements and notes thereto included elsewhere in this Form 10-K. All information presented herein is based on the Company’s fiscal year, which ends August 31. Unless otherwise stated, references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and periods of those fiscal years.”see in full comparison
“Off-balance sheet arrangements and commitments. We do not have material off-balance sheet arrangements as defined by Item 303. Legacy commitments under power, site control and joint-venture agreements are being evaluated in light of our strategic shift; any remaining obligations (e.g., minimums or deposits) are included in our liquidity planning. We do not expect to enter into new long-term power purchase or build-to-suit arrangements absent clear, low-risk returns.”see in full comparison
Full comparison: every changed paragraph (164)
The following discussion and analysis should be read together with our audited financial statements and the related notes included elsewhere in this Annual Report on Form 10-K and with our interim financial statements incorporated by reference. This MD&A is intended to provide investors with an understanding of our results of operations, financial condition, liquidity and capital resources, and critical accounting estimates through the eyes of management. It includes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements due to a number of factors, including those discussed under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. The numbers below are presented in thousands except for percentages as well as share and per share amounts.
The following discussion and analysis should
be read in conjunction with the condensed financial statements and notes thereto included elsewhere in this Form 10-K. All information
presented herein is based on the Company’s fiscal year, which ends August 31. Unless otherwise stated, references to particular
years, quarters, months or periods refer to the Company’s fiscal years ended in September and the associated quarters, months and
periods of those fiscal years.
We are a digital asset focused company. Beginning in the third calendar quarter of 2025, management expanded its existing digital asset business to primarily focus on the Ethereum blockchain and ETH as the digital asset. This included expanding toward an asset light operating model centered on Ethereum adjacent services (including advisory) and disciplined digital asset treasury management. Our results are now driven primarily by operating efficiency in a lower capex model and Ethereum market conditions, including their impact on client activity and the value of any ETH held in our treasury.
In June and July 2025, we strengthened our liquidity through an underwritten public offering of common stock, private placements, and the establishment of our ATM Program permitting sales of up to $20,000,000 of our common stock from time to time. We also uplisted our common stock to the NYSE American in June 2025.
Unless otherwise indicated, period to period comparisons are presented for the two most recent fiscal years consistent with Item 303 of Regulation S-K, as amended.
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.
Since July 2021, our business has been as a blockchain
technology company that is building out industrial scale digital asset mining, equipment sales and hosting operations. The Company’s
primary business is hosting third-party equipment used in mining of digital asset coins and tokens, specifically bitcoin, as well as self-mining
for its own account. Our state-of-the-art facilities will be specifically designed and constructed for housing advanced mining equipment.
Our data centers will provide power, racks, proprietary thermodynamic management (heat dissipation and airflow management), redundant
connectivity, 24/7 security, as well as software which provide infrastructure management and custom firmware that boost performance and
energy efficiency.
We plan to operate our data centers using immersion
cooling technology. Immersion cooling is the process of submerging computer components (or full servers) in a thermally, but not electrically,
conductive liquid (dielectric coolant) allowing higher heat transfer performance than air and many other benefits. Immersion cooling can
be up to 95% more efficient than standard air cooling, producing an estimated PUE (power usage effectiveness) of 1.05. This cooler environment
has been shown to extend machine lives by 30% or longer.
Our digital asset mining operation is focused on
the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network
blockchains, which is commonly referred to as “mining.” Mining requires the use of specialized computers equipped with application-specific
integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the bitcoin blockchain
(in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin). Whether we are hosting
our client’s computers or mining for our own account with our own computers, the miners participate in “mining pools”
organized by “mining pool operators” in which we or our clients share mining power (known as “hash rate”) with
the hash rate generated by other miners participating in the pool to earn digital asset rewards. The mining pool operator provides a service
that coordinates the computing power of the independent mining enterprises participating in the mining pool. Fees are paid to the mining
pool operator to cover the costs of maintaining the pool. The pool uses software that coordinates the pool members’ mining power,
identifies new block rewards, and records how much hash rate each participant contributes to the pool. Pools typically pay rewards in
two different ways: as a percentage of the total reward received by the mining pool each day based on each pool participant’s proportionate
share of hashing power provided that day (the “Pay-Per-Share Method”); or based on the theoretical reward the pool participant
should have received each day based on its hashing power contributed to the pool each day times the difficulty index (the “Full-Pay-Per-Share
Method”). We only use mining pools that pay rewards under the Full-Pay-Per-Share Method. Even though we plan to effect our self-mining
operations in data centers that we own, we reserve the right to operate miners in third-party data centers when we receive advantageous
terms and/or do not have sufficient capacity in our own data centers.
Our digital asset self-mining activity competes
with a myriad of mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an
established unit of a digital asset. Revenue from digital asset mining and hosting third party digital asset miners are impacted by volatility
in bitcoin prices, as well as increases in the bitcoin blockchain’s network hash rate resulting from the growth in the overall quantity
and quality of miners working to solve blocks on the bitcoin blockchain and the difficulty index associated with the secure hashing algorithm
employed in solving the blocks. Gross profits from digital asset mining are primarily impacted by the cost of electricity to operate
the miners and to a lesser extent by other operating costs. While we expect to sell or exchange a portion of the digital assets we mine
to fund our growth strategies or for general corporate purposes, we reserve the right to hold our digital assets as a long-term investment.
As the demand for digital assets increases and
digital assets become more widely accepted, there is an increasing demand for professional-grade, scalable infrastructure to support growth
of the blockchain ecosystem. We expect to continually evaluate the performance of our data centers, including our ability to access additional
megawatts of electric power and to expand our total self-mining and customer and related party hosting hash rates.
We also generate revenues from the advantageous
purchase and sale of equipment used for digital asset mining and hosting. We have relationships with some suppliers that enable us to
acquire highly desired equipment at attractive prices, which we plan to resell to third parties. In most cases, resales of digital asset
mining equipment would be to our hosting customers, which have the dual benefit of generating short-term gross profits from the equipment
sale as well as growing the customer base of our hosting business.
The primary factors that will impact future hosting
revenues include: (i) the price of bitcoin, since hosting revenues are primarily a percentage of bitcoin mined by clients; (ii) the completion
of operational hosting facilities, as potential hosting clients have been reluctant to sign contracts prior to the date the Company has
a fully operational hosting facility; and (iii) the availability of attractive electricity prices, since power usage is the primary marginal
cost for any mining operation.
The primary factors that will impact proprietary
mining revenues include: (i) the price of bitcoin; (ii) the completion of operational facilities to provide us with a cost-effective facility
to operate in; (iii) the availability of attractive electricity prices, since power usage is the primary marginal cost for any mining
operation; and (iv) the availability of mining equipment suitable for the Company’s immersion hosting environment at attractive
prices and available capacity in the Company’s hosting facilities.
Revenues from cryptocurrency mining, whether derived
from hosting clients or from proprietary mining, are impacted significantly by volatility in bitcoin prices, as well as increases in the
bitcoin blockchain’s network hash rate resulting from the growth in the overall quantity and quality of miners working to solve
blocks on the bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks.
Below are changes in key metrics effecting the profitability of mining bitcoin during the year ended August 31, 2024:
The primary factors that will impact resales of
mining equipment include the availability of equipment at attractive prices and the number of participants willing to enter the mining
business or expand their existing operations, which is highly correlated to the margin from mining, as determined by the market price
of bitcoin and prevailing energy costs. Also, our resales of mining equipment will be impacted by the existence of hosting capacity with
attractive electricity rates in our hosting operations.
Trinidad Operations
We initially decided to locate our initial facilities
in Trinidad, because it has some of the cheapest electricity in the world due to its abundant supplies of oil and gas and because some
of our technical staff is located there. We have entered into an agreement with Telecommunications Services of Trinidad & Tobago Limited
(“TSTT”), the largest and oldest telecom company in Trinidad, to co-locate up to 125 800 kw containers for hosting digital
asset miners. TSTT has up to 93 potential locations for co-location of our containers. Under the agreement, we have the option, but not
the obligation, to co-locate containers at our own pace. We pay a fixed amount per container, plus the actual electricity costs incurred
by our containers in the amount billed to TSTT by the local utility without any markup. The term of the agreement expires on October 14,
2031. We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per
kwh.
In October 2022, we completed the installation
of initial hosting containers under our agreement with TSTT. Our rate for electricity is TSTT’s existing rate of 3.5 cents per kwh
or 75% of the declared reserve capacity, which is equal to the customer’s highest expected monthly kilovolt-ampere demand at $7.40.
See “Item 1. Business – Company Overview – Trinidad Operations” for a more complete description of our
relationship with TSTT.
While our TSTT site was delayed pending electrification,
we entered into a hosting agreement with a third party in Trinidad to host up to 192 miners in one immersion container until December
31, 2024. We had previously sold two containers to the third party under a long-term note secured by the containers. In July 2024, we
foreclosed on the containers as a result of a default by the third party on the note. We moved our miners to our existing TSTT site, where
we now have 440 operational miners as of December 5, 2024. We are currently evaluating other TSTT sites as a location for the two repossessed
immersion containers, and expect to install them in the first calendar quarter of 2025.
We are also leasing space from a third party on
an at will basis to co-host 60 miners, for which we pay a flat rate of $0.06 per kwh for the electricity used by our miners. We ultimately
intend to move all of our Trinidad miners to our TSTT hosting facilities.
Despite the expective favorable resolution of our
dispute in Trinidad, we are currently focusing our efforts on the development of hosting centers in the United States and Canada, both
directly and in joint ventures with third parties. We are exploring situations where medium to long-term power agreements may be available
at affordable prices, whether using traditional power sources such as coal or natural gas, as well as environmentally friendly sources
such as hydroelectric, wind and solar-backed projects, which might allow us to generate collateral revenue from the sale of excess power
to the local utility grid and from the generation of saleable carbon credits.
Pecos, Texas Operations
In October 2022, we entered into a joint venture
arrangement with ROC Manager to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed
one immersion container, six transformers and cash with a value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the
“ROC Digital”). In return, we received 240 Class B Units of ROC Digital pursuant to an ongoing offering of a total of 1,000
Class B Units at $4,400 per unit. An affiliate of ROC Manager also contributed an immersion container. We simultaneously sold ROC Digital
four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable
pursuant to monthly payments of $31,203.64 per month commencing on December 30, 2022, with any remaining principal and interest payable
in full on May 31, 2026. The note is secured by the equipment that was sold. We also obtained the right to locate one container at the
location that we would be able to use for self-mining. As of August 31, 2023 and August 31, 2024, the note receivable from ROC Digital
amounted to $1,029,721 and $655,277, respectively. See “Item 1. Business – Company Overview – Pecos, Texas Operations”
for a more complete description of the terms of the joint venture.
Our joint venture partner initially expected the
site would be operational by December 31, 2022. After the site work was substantially completed, the commencement of operations was delayed
as a result of a request by the electricity provider for an additional deposit as a result of recent bankruptcies in the mining and hosting
industry. In addition, a dispute with the joint venture’s vendor for ASIC miners delayed the delivery of miners for the facility.
In April 2023, the joint venture entered into a
new one year agreement with the electricity provider, under which the site received electricity at $0.03991 per kwh for at least 95% of
the annualized hourly intervals during the period, which provided the joint venture with more predictable pricing than the initial agreement.
At the same time, we finalized a hosting agreement with the joint venture, under which we located one immersion container at the site
for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site. Under the hosting agreement,
we also agreed to contribute $100,000 toward the electricity deposit for the site, which is refundable to us at the earlier of the date
the electricity provider releases the deposit or 90 days after the expiration or termination of the hosting agreement. The hosting agreement
has a term of one year, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms
of the joint venture’s electricity supply agreement for the upcoming year. The site became fully electrified in June 2023. As of
December 5, 2024, we had deployed 145 Antminer S-19 pro miners to our hosting container at the site. The joint venture initially filled
its six immersion containers with ASIC miners provided by hosting clients, although most of the hosting clients agreements terminated
in April 2024. Currently, five of the operational hosting containers owned by the joint venture are fully or partially occupied by
clients, although the joint venture is aggressively trying to fill the remaining capacity with hosting clients. The joint venture also
owns two immersion containers which are not installed, but will be if hosting demand warrants.
On April 29, 2024, the joint venture executed an
energy services agreement for the site that runs from May 1, 2024 to April 30, 2025. Under the current agreement, the site will receive
electricity at the prevailing rate plus $0.0055 per kwh. The joint venture is not obligated to purchase any specific quantity of electricity,
and employs software which automatically discontinues mining operations when the prevailing rate exceeds certain levels. In April 2024,
we renewed our hosting contract with the joint venture for an additional year.
Murray, Kentucky Operations
On October 4, 2023, the Company purchased 1,050
used ASIC miners from Luxor Technology Corporation (“Luxor”) for $488,775, and simultaneously entered into a Co-Location Services
Agreement to host the miners at a hosting facility owned by Soluna SW, LLC (“Soluna”) in Murray, Kentucky. We subsequently
added 45 ASIC miners in May 2024 that we purchased from Soluna. The hosting agreement with Soluna has a term of 18 months, and provides
that the Company is obligated to reimburse Soluna for the actual cost of the electricity used by the Company’s machines and pay
a hosting fee equal to 50% of the net profit generated by the machines each month. The hosting fee is payable in bitcoin. The hosting
facility has an electricity cost of $0.025 per kwh and guarantees uptime of 83% per week.
Miner Summary
Set forth below is a summary of the Company’s
ASIC miner inventory as of August 31, 2024:
Comparison of Results of Operations for Fiscal
Years Ended August 31, 2024
2025 and 2023.2024.
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”).
During the fiscal year ended August 31, 2025, revenues were $6,095, compared to $3,310 during the fiscal year ended August 31, 2024. The increase in revenue was a result of the following:
During the year ended August 31, 2024, the Company
generated $3,310,348 in revenue, compared to $645,278 in revenue in the year ended August 31, 2023.
During the year ended August 31, 2024, the Company
generated $3,030,910 in bitcoin revenue from self-mining digital assets, compared to $389,222 revenue in the year ended August 31, 2023.
Mining revenues were impacted somewhat by miners that were offline due to maintenance issues. Mining revenue should be higher in future
periods as we continue to add miners. We expected mining revenues to be lower in 2024 as a result of a halving that occurred in April
2024. However, the impact of the halving was offset by a rise in the price of bitcoin due to fewer miners online after the halving event,
as has historically occurred after a halving event, and by the positive impact of “ordinals,” which are increased transaction
fees that occur as parties have discovered ways to imbed data regarding other assets, such as art, in the bitcoin blockchain. Mining revenues
in the year ended August 31, 2024 were also positively impacted by the resolution of operating issues at the Company’s first hosting
facilities in Trinidad and Pecos, Texas, and the commencement of operations at a facility in Murray, Kentucky that is hosted by a third-party.
Self-mining revenues were positively impacted by
4.70 bitcoin earned, with a value of $319,465, from operating 777 S-19 miners under a short-term lease from Luxor Technology Corporation
(“LTC”) that began on March 8, 2024 and expired when the halving occurred on April 19, 2024.
During the year ended August 31, 2024, the Company
generated $231,133 in revenue from equipment sales, compared to $244,036 in revenue in the year ended August 31, 2023. The revenue from
equipment sales in the years ended August 31, 2024 and 2023 were primarily derived from the following transactions:
Under the guidelines of ASC 606, the Company determined
that payments due to under notes receivable arrangements from certain customers was not “probable” due to the start-up nature
of the customer. As a result the Company reported revenue from equipment sales on October 2022 and August 2022, which were vendor financed
by the Company, under the installment sale method, under which the Company reports its gross profit on the sales only after payments are
received from the purchaser.
As of February 1, 2023, the Company reached an
agreement with the obligor under the $910,000 note to convert the note into an interest only note commencing as of February 1, 2023, with
a balloon payment being due at maturity on August 31, 2024, and an agreement that the principal balance on the note was $731,472. The
maturity date was later extended to December 31, 2024. One effect of the agreement with the obligor is to materially reduce any deferred
revenue associated with the sale, as the note is scheduled to receive interest only payments until December 31, 2024. In July the Company
repossessed the collateral securing the August 2022 note as a result of a default by the obligor, and as a result the Company does not
expect to report any further revenues under this note.
During the fiscal year ended August 31, 2024 the
Company recorded $6,824 in equipment sales on each of the twelve monthly payments of $31,204 received from ROC Digital, for a total of
$81,883 in equipment sales.
See “Note 5. Investments and Notes Receivable”
in the accompanying financial statements for additional information about both notes.
During the years ended August 31, 2024 and 2023,
the Company recorded $149,250 and $70,000, respectively, of revenue from isolated sales of equipment recorded under the “completed
sale” method.
In future periods, the Company expects to generate
additional revenues from the resale of certain hosting equipment, primarily containers and transformers, and of miners in “buy/host”
transactions, in which the Company sells miners already installed in its hosting facilities to buyers that simultaneously execute a hosting
agreement for the purchased miners, and in some cases additional miners.
During the year ended August 31, 2024, the Company
generated $48,305 in revenue from hosting, compared to $12,022 in revenue from hosting in the year ended August 31, 2023. In October 2022,
the Company reached an agreement to terminate its only hosting client at the time and repurchased the miners which it had previously sold
to the hosting client. In June 2023, the Company signed two new hosting clients. However, it elected not to renew both hosting contracts
in the Summer of 2024, and therefore as of August 31, 2024 it did not have any hosting clients. In the current market environment, the
Company believes that self-mining is more profitable than hosting third party miners, however we will pursue hosting opportunities on
a selective basis. While the Company still sees good opportunities to acquire mining equipment at attractive prices, the price of mining
equipment has recently increased with the recent increase in the price of bitcoin.
The primary factors that will impact our revenues
in subsequent periods are described in the “—Overview” above.
Major components of cost of sales include rent to house mining and hosting equipment, electricity, depreciation, and supplies. During the fiscal year ended August 31, 2025, cost of sales were $5,785, compared to $3,473 during the fiscal year ended August 31, 2024. The increase in cost of sales was a result of the following:
Cost of sales related to bitcoin hosting and mining
revenue was $37,678 for hosting and $2,330,752 for mining, respectively in the year ended August 31, 2024, compared to $9,098 for hosting
and $326,630 for mining, respectively, in the year ended August 31, 2023. Cost of sales normally includes electricity, utilities, facilities
costs and supplies where we perform mining from our own facilities. Major components of cost of sales include rent to house mining and
hosting equipment, electricity, and supplies. Where our miners are hosted by third parties, major components of cost of sales include
hosting fees and/or electricity costs. Cost of sales for both owned and hosted facilities does not include depreciation, which is stated
separately. The Company believes that cost of sales as a percentage of revenues may be less in future periods as compared to prior periods
if the market price of bitcoin remains at its current level or increases.
The table below describes the average cost of mining
each bitcoin for the years ended August 31, 2024 and 2023, and the total energy usage and cost per each kilowatt hour ("KWH")
utilized within both our facilities.
(1) Other direct costs of mining
for owned facilities consists mostly of rent for the facility, as well as minor costs such as supplies and internet. Other direct costs
of mining for hosted miners consist of hosting fees.
(2) Depreciation expense includes depreciation of miners used in mining.
For owned facilities, it also includes depreciation of the hosting containers and corollary equipment such as transformers and switches.
(3) Financing costs include the cost of purchase money financing for
miners, but do not include any financing costs for miners or hosting equipment acquired with general working capital, nor the cost of
hedging the price of bitcoin.
What changed in the latest 10-Q
Risk Factors
New heading “The following risk factors supplement the Company’s existing Item 1A disclosures included in the Company’s previous filings with the SEC. These supplemental risk factors should be read in conjunction with the other information contained in this Report and the Company’s other filings with the SEC, including, but not limited to, the Company’s Rule 424(b)(5) prospectus supplement dated June 5, 2026 filed with the Securities and Exchange Commission.”
New heading “Risks Related to Our Series A Preferred Stock”
New heading “Staking yield volatility may materially and adversely affect our ability to pay dividends on the Series A Preferred Stock.”
New heading “Ongoing issuance of new ETH may adversely affect the price of ETH and our ability to cover dividend payments on the Series A Preferred Stock.”
New heading “Our ETH holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity to fund dividends on the Series A Preferred Stock.”
New heading “Regulatory treatment of digital assets could cause us to be deemed an “investment company,” which could materially harm the trading price of the Series A Preferred Stock.”
New heading “Our option strategies and strategic investments expose us to additional volatility and counterparty risks that could impair our ability to cover dividend payments on the Series A Preferred Stock.”
New heading “We may be unable to access capital markets on acceptable terms, which could increase the cost of issuing parity or junior preferred stock and adversely affect our ability to maintain dividends on the Series A Preferred Stock.”
New heading “Risks Related to Our Staking and Validator Operations”
New heading “Our staking and validator operations conducted through MAVAN are subject to significant risks, including slashing, lock-up periods, smart contract vulnerabilities, liquidity constraints, counterparty exposure, and operational failures, any of which could result in a partial or total loss of staked ETH or a material reduction in staking revenue.”
New heading “Our recent strategic transactions, including the acquisition of Pier Two and the launch of MAVAN, may not be successfully integrated or generate the anticipated benefits, and our projected staking revenue figures are based on assumptions that may prove incorrect.”
New heading “Our revenue is highly concentrated in ETH staking and validation operations conducted through MAVAN, and any disruption to those operations, decline in staking yields, or adverse protocol change would have a disproportionate impact on our results of operations and financial condition.”
New heading “Regulatory uncertainty regarding the classification and treatment of staking activities and staking rewards in the United States and abroad may subject us to additional compliance obligations, restrict our staking operations, or require changes to MAVAN’s business model as it expands to serve institutional clients.”
New heading “We rely on third-party infrastructure providers and key personnel, including Ethereum Tower LLC under a long-term Management Services Agreement, to operate MAVAN’s validator nodes, and any failure of performance, termination of arrangements, or loss of key personnel could materially disrupt our staking operations.”
New heading “MAVAN’s planned expansion from an internally-focused staking platform to a commercial staking-services provider serving third-party institutional investors, custodians, and ecosystem partners introduces new customer acquisition, competitive, service-level, and reputational risks not previously applicable to the Company’s business.”
Largest changes
“The following risk factors supplement the Company’s existing Item 1A disclosures included in the Company’s previous filings with the SEC. These supplemental risk factors should be read in conjunction with the other information contained in this Report and the Company’s other filings with the SEC, including, but not limited to, the Company’s Rule 424(b)(5) prospectus supplement dated June 5, 2026 filed with the Securities and Exchange Commission.”see in full comparison
“Our staking and validator operations conducted through MAVAN are subject to significant risks, including slashing, lock-up periods, smart contract vulnerabilities, liquidity constraints, counterparty exposure, and operational failures, any of which could result in a partial or total loss of staked ETH or a material reduction in staking revenue.”see in full comparison
“Our ETH holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity to fund dividends on the Series A Preferred Stock.”see in full comparison
“The regulatory treatment of staking activities and staking rewards under U.S. federal and state securities laws, banking regulations, money transmission laws, and tax laws remains uncertain and continues to evolve. Regulators, including the Securities and Exchange Commission, the Commodity Futures Trading Commission, and various state regulators, have not provided definitive guidance on whether staking activities or staking rewards constitute securities transactions, commodity transactions, or money services business activities. …”see in full comparison
“MAVAN’s planned expansion from an internally-focused staking platform to a commercial staking-services provider serving third-party institutional investors, custodians, and ecosystem partners introduces new customer acquisition, competitive, service-level, and reputational risks not previously applicable to the Company’s business.”see in full comparison
“Regulatory uncertainty regarding the classification and treatment of staking activities and staking rewards in the United States and abroad may subject us to additional compliance obligations, restrict our staking operations, or require changes to MAVAN’s business model as it expands to serve institutional clients.”see in full comparison
Full comparison: every changed paragraph (33)
The following risk factors supplement the Company’s existing Item 1A disclosures included in the Company’s previous filings with the SEC. These supplemental risk factors should be read in conjunction with the other information contained in this Report and the Company’s other filings with the SEC, including, but not limited to, the Company’s Rule 424(b)(5) prospectus supplement dated June 5, 2026 filed with the Securities and Exchange Commission.
Risks Related to Our Series A Preferred Stock
Staking yield volatility may materially and adversely affect our ability to pay dividends on the Series A Preferred Stock.
A significant portion of our revenue is derived from staking rewards earned on our Ethereum holdings. Staking rewards are not fixed and are subject to substantial fluctuation based on a variety of factors, many of which are beyond our control. These factors include changes in the total amount of Ethereum staked across the network, modifications to the Ethereum protocol’s reward mechanisms through network upgrades or governance decisions, fluctuations in network transaction volume and associated priority fees, changes in the rate of new validator participation, and broader macroeconomic and cryptocurrency market conditions. As the total amount of Ethereum staked on the network increases, the per-validator reward rate generally decreases, which could result in a material reduction in the yield we earn on our staked assets over time.
Because we rely on staking income as a primary source of cash generation, any sustained decline or period of heightened volatility in staking yields could materially impair our ability to meet our operating expenses, service any outstanding indebtedness, and maintain dividend payments on our Series A Preferred Stock at current or anticipated levels. Our board of directors retains discretion over the declaration and payment of dividends, and there can be no assurance that dividends will be declared or paid in any particular amount or at all. A reduction or suspension of dividends resulting from diminished staking yields could adversely affect the market price of our securities, including the Series A Preferred Stock, and may make our securities less attractive to income-oriented investors.
In addition, the yield earned through Ethereum staking is denominated in ETH, the value of which is itself subject to significant price volatility. Even if staking yields remain stable in terms of the quantity of ETH earned, the fiat-currency equivalent of those rewards may fluctuate materially due to changes in the market price of ETH. A decline in the price of ETH concurrent with a decline in staking yield rates would compound the adverse impact on our cash flow and our ability to fund dividend payments on the Series A Preferred Stock. Conversely, even if ETH prices appreciate, a sufficient decline in staking yield rates could still result in reduced revenue in absolute terms if the rate of yield compression outpaces any price appreciation.
Furthermore, the Ethereum network and its proof-of-stake consensus mechanism remain subject to ongoing development and potential protocol changes. Future upgrades to the Ethereum network, including changes to issuance schedules, reward distribution mechanisms, or the introduction of new staking paradigms, could alter the economics of staking in ways that are difficult to predict. Regulatory developments in the United States and abroad may also affect our ability to stake Ethereum or the economic terms on which staking is conducted, including the potential classification of staking activities or staking rewards as securities transactions, which could subject us to additional compliance obligations or restrict our staking operations. Any such changes could further reduce the yields available to us, which may have a material adverse effect on our ability to cover dividend payments on the Series A Preferred Stock. There can be no assurance that staking yields will remain at levels sufficient to support our current business model or dividend policy, and investors should not place undue reliance on historical staking yields as indicative of future performance.
Ongoing issuance of new ETH may adversely affect the price of ETH and our ability to cover dividend payments on the Series A Preferred Stock.
The rate at which new ETH are issued and put into circulation is expected to vary. Unlike bitcoin, which has a hard-coded maximum supply of 21 million coins, the Ethereum network has no formal cap on the total supply of ETH. New ETH is issued to validators as staking rewards on a continuing basis, and continued net issuance of ETH may introduce sustained downward pressure on the price of ETH, particularly if a meaningful portion of newly minted ETH is sold by validators. Sustained pressure on the price of ETH may have a material adverse effect on our ability to cover dividend payments on the Series A Preferred Stock.
Our ETH holdings are less liquid than cash and cash equivalents and may not be able to serve as a source of liquidity to fund dividends on the Series A Preferred Stock.
Historically, the ETH market has been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. Staked ETH may not be immediately available for withdrawal or sale. As part of the “activating” and “exiting” processes of staking, staked ETH will be inaccessible for a variable period of time determined by a range of factors, including network congestion. These delays may be unpredictable and could occur during periods of market stress or declining ETH prices, limiting our ability to use staked ETH as a source of liquidity to fund dividends on the Series A Preferred Stock.
Further, during times of market instability, we may not be able to sell our ETH at favorable prices or at all. For example, a number of ETH trading venues temporarily halted deposits and withdrawals in 2022, although the Coinbase exchange (our principal market for ETH) has, to date, not done so. As a result, our ETH holdings may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Further, ETH we hold with our custodians do not enjoy the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered ETH or otherwise generate funds using our ETH holdings, including during times of market instability or when the price of ETH has declined significantly. If we are unable to sell our ETH, enter into additional capital raising transactions, including capital raising transactions using ETH as collateral, or otherwise generate funds using our ETH holdings, or if we are forced to sell our ETH at a significant loss, in order to meet our working capital requirements, our business and financial condition could be negatively impacted and our ability to fund dividend payments on the Series A Preferred Stock could be materially impaired.
Regulatory treatment of digital assets could cause us to be deemed an “investment company,” which could materially harm the trading price of the Series A Preferred Stock.
There is a risk that changing regulatory treatment of ETH, other digital assets we hold, or activities in which we are engaged could cause us to be deemed to be an “investment company” within the meaning of the Investment Company Act of 1940, as amended, which would impose substantial regulatory burdens, restrict our ability to operate our business as currently conducted, and could require us to liquidate or restructure our holdings. If we were deemed to be an investment company, we could be required to register as such under the Investment Company Act, which would subject us to significant regulatory requirements and restrictions, including limitations on leverage, affiliate transactions, and our ability to pursue our current digital asset treasury strategy. The costs and administrative burden of compliance with the Investment Company Act could be substantial and could materially affect our profitability and operations. Adverse regulatory developments concerning the classification of digital assets and related activities under the Investment Company Act or other federal securities laws could materially harm our business and the trading prices of our securities, including the Series A Preferred Stock.
Our option strategies and strategic investments expose us to additional volatility and counterparty risks that could impair our ability to cover dividend payments on the Series A Preferred Stock.
We generate ETH option premium income from option strategies on our ETH holdings. These strategies expose us to mark-to-market volatility, counterparty risk, and the risk that ETH could be called away at unfavorable prices. We also hold strategic “moonshot” investments, including a stake in Beast Industries Co. valued at $186 million (recorded as an equity investment measured at cost) and a stake in Eightco Holdings Inc. valued at $93 million as of May 31, 2026 (recorded as an equity method investment measured at fair value), which are subject to substantial volatility, illiquidity, and concentration risks. If any of the foregoing risks were to materialize, it could reduce the yield generated from our ETH holdings and/or our future revenues, which could have a material adverse effect on our ability to cover dividend payments on the Series A Preferred Stock.
We may be unable to access capital markets on acceptable terms, which could increase the cost of issuing parity or junior preferred stock and adversely affect our ability to maintain dividends on the Series A Preferred Stock.
Our digital asset acquisition strategy depends on our continued ability to access capital markets, including through issuances of equity, preferred, and debt securities. Adverse capital markets conditions, regulatory developments, declines in the price of ETH or our common stock, or perceptions about our creditworthiness could limit our ability to raise capital and could increase our cost of capital, including our cost of issuing additional parity stock or junior stock. If we are unable to access the capital markets on acceptable terms, we may be unable to fund our digital asset treasury strategy, meet our operating obligations, or maintain dividend payments on the Series A Preferred Stock, any of which could have a material adverse effect on our business, financial condition, results of operations, and the trading price of our securities.
Risks Related to Our Staking and Validator Operations
Our staking and validator operations conducted through MAVAN are subject to significant risks, including slashing, lock-up periods, smart contract vulnerabilities, liquidity constraints, counterparty exposure, and operational failures, any of which could result in a partial or total loss of staked ETH or a material reduction in staking revenue.
We generate substantially all of our revenue from native ETH staking conducted through MAVAN. Staking requires continuous operational reliability, adherence to Ethereum protocol rules, and the maintenance of high-availability validator infrastructure. Validators that act maliciously, produce conflicting attestations, or suffer extended downtime may be “slashed” by the Ethereum network, resulting in an irrecoverable partial loss of staked principal. As of May 31, 2026, the Company held 5,416,945 ETH with a fair value of $10.9 billion, a substantial portion of which is staked through MAVAN, and any slashing event could result in a material loss of digital assets. In addition, staking involves unbonding or lock-up periods during which staked ETH cannot be withdrawn or sold; these periods may be unpredictable and may coincide with periods of market stress, reducing our ability to respond to adverse price movements or meet liquidity needs. Our staking operations also involve exposure to smart contract risk—the underlying protocols, liquid staking mechanisms, and restaking integrations on which MAVAN relies are governed by code that may contain undiscovered vulnerabilities exploitable by malicious actors. Where staking is conducted through or in conjunction with third-party custodians, infrastructure providers, or staking protocols, we face counterparty and operational risk that could result in delayed access to staked assets, loss of staking rewards, or in extreme cases, loss of principal. Any of the foregoing risks, if realized, could have a material adverse effect on our financial condition and results of operations.
Our recent strategic transactions, including the acquisition of Pier Two and the launch of MAVAN, may not be successfully integrated or generate the anticipated benefits, and our projected staking revenue figures are based on assumptions that may prove incorrect.
We completed the acquisition of Pier Two Holdings Pty Ltd in March 2026 for total preliminary consideration of $27.8 million and launched MAVAN later that month. The integration of Pier Two’s non-custodial staking infrastructure and personnel into MAVAN involves substantial execution risks, including risks related to the integration of technology systems and operational workflows, retention of key technical employees, regulatory compliance across multiple jurisdictions (including Australian and U.S. regulatory regimes), validator performance optimization, and our ability to attract and retain institutional staking customers. If we are unable to successfully integrate Pier Two’s operations or retain key personnel, we may not realize the anticipated benefits of the acquisition, which could impair the carrying value of the goodwill and intangible assets recognized in connection with the transaction. Furthermore, the annualized staking revenue figures and yield assumptions we have disclosed in connection with MAVAN’s operations are based on assumptions regarding staking yield rates, the proportion of our ETH holdings that are staked at any given time, validator uptime, and Ethereum network conditions—all of which are subject to change. Actual results may differ materially from these assumptions, and there can be no assurance that MAVAN will achieve the revenue levels or operational performance we anticipate.
Our revenue is highly concentrated in ETH staking and validation operations conducted through MAVAN, and any disruption to those operations, decline in staking yields, or adverse protocol change would have a disproportionate impact on our results of operations and financial condition.
For the three months ended May 31, 2026, revenue from staking and validation was $45.7 million, representing 98% of total revenue of $46.5 million for the quarter. For the nine months ended May 31, 2026, revenue from staking and validation was $56.9 million, representing 95% of total revenue of $59.9 million for the nine-month period. This extraordinary concentration of revenue in a single operating activity—Ethereum staking conducted principally through MAVAN—means that any disruption to MAVAN’s validator performance, any decline in Ethereum staking yield rates, or any adverse change to the Ethereum protocol’s reward mechanisms could result in a disproportionate and material decline in our total revenue, operating income, and cash flow from operations. Unlike a diversified revenue base, our reliance on a single yield-generation mechanism affords limited ability to offset declines in staking economics with revenue from other sources. In addition, because staking revenue is denominated in ETH, fluctuations in the market price of ETH directly affect the U.S. dollar-equivalent revenue recognized by the Company, compounding the impact of any reduction in yield rates. There can be no assurance that our revenue concentration in staking will decrease over time, and investors should consider that our results of operations are substantially dependent on the continued performance of MAVAN and favorable Ethereum staking economics.
Regulatory uncertainty regarding the classification and treatment of staking activities and staking rewards in the United States and abroad may subject us to additional compliance obligations, restrict our staking operations, or require changes to MAVAN’s business model as it expands to serve institutional clients.
The regulatory treatment of staking activities and staking rewards under U.S. federal and state securities laws, banking regulations, money transmission laws, and tax laws remains uncertain and continues to evolve. Regulators, including the Securities and Exchange Commission, the Commodity Futures Trading Commission, and various state regulators, have not provided definitive guidance on whether staking activities or staking rewards constitute securities transactions, commodity transactions, or money services business activities. If staking activities or staking rewards are classified as securities or are otherwise subject to registration, licensing, or reporting obligations, we could be required to register as a broker-dealer, investment adviser, money services business, or similar regulated entity, to modify MAVAN’s operations, or to curtail or cease certain staking activities. These risks are amplified as MAVAN expands beyond supporting our own ETH treasury to offering staking services to institutional investors, custodians, and ecosystem partners—an expansion that may subject the Company to additional or different regulatory regimes applicable to staking service providers, including fiduciary, custody, and consumer protection requirements not previously applicable to our operations. Regulatory developments in foreign jurisdictions, including Australia (where Pier Two is domiciled and operates), may similarly affect our ability to conduct staking operations or the economic terms on which staking is offered. Any adverse regulatory development could materially impair our staking revenue or require us to restructure MAVAN’s operations at significant cost.
We rely on third-party infrastructure providers and key personnel, including Ethereum Tower LLC under a long-term Management Services Agreement, to operate MAVAN’s validator nodes, and any failure of performance, termination of arrangements, or loss of key personnel could materially disrupt our staking operations.
MAVAN’s validator operations depend on the continued performance of third-party infrastructure providers and key personnel. Pursuant to a ten-year Management Services Agreement dated March 24, 2026, Ethereum Tower LLC provides management and operating services to MAVAN Holdings LLC in exchange for an irrevocable 2.00% membership interest in MAVAN Holdings LLC and a monthly fee calculated as a percentage of the Company’s native staking rewards attributable to ETH staked through MAVAN Holdings LLC. If Ethereum Tower LLC fails to perform its obligations, experiences operational failures, or is unable to retain qualified personnel, our validator operations could be disrupted, resulting in reduced staking rewards, increased risk of slashing events, or reputational harm. In addition, much of MAVAN’s technical expertise was obtained through the Pier Two acquisition, and there can be no assurance that we will be able to retain key technical and operational personnel acquired in that transaction, particularly given the competitive market for blockchain infrastructure talent. MAVAN also relies on third-party cloud computing, co-location, and network infrastructure providers for the hosting and connectivity of its validator nodes; any failure, security breach, or service interruption by such providers could result in extended validator downtime, slashing, or loss of staking rewards. We do not control the operations of these third parties and may have limited contractual remedies if they fail to perform.
MAVAN’s planned expansion from an internally-focused staking platform to a commercial staking-services provider serving third-party institutional investors, custodians, and ecosystem partners introduces new customer acquisition, competitive, service-level, and reputational risks not previously applicable to the Company’s business.
MAVAN was originally developed to support the Company’s own Ethereum treasury operations and has operated principally as an internal staking platform since its launch in March 2026. The Company has publicly disclosed its intention to expand MAVAN to serve institutional investors, custodians, and other ecosystem partners seeking institutional-grade staking infrastructure. This expansion introduces risks that were not previously applicable to the Company’s business, including the need to develop and maintain commercial-grade service-level agreements, manage customer onboarding and support, compete with established institutional staking service providers (including Coinbase Cloud, Figment, Kiln, and others), and protect the Company’s reputation in a market where validator downtime or slashing events affecting client assets could result in significant liability, loss of customer confidence, and competitive harm. The Company has limited operating history as a commercial staking-services provider, and there can be no assurance that MAVAN will successfully attract or retain institutional staking clients on terms favorable to the Company, or at all. Failure to successfully execute this expansion could limit the Company’s revenue diversification, impair the return on investment from the Pier Two acquisition, and adversely affect our competitive position in the rapidly evolving blockchain infrastructure services market.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information
under this item.
Management's Discussion & Analysis (MD&A)
Largest changes
“Goodwill and Intangible Assets Impairment. The Company records goodwill and identifiable intangible assets in connection with business combinations. As of May 31, 2026, the Company recorded goodwill of $15.0 million and intangible assets, net, of $11.1 million, primarily related to the Pier Two acquisition. Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate that impairment may exist, at the reporting unit level. …”see in full comparison
“The determination of the fair value of assets acquired and liabilities assumed requires management to make significant estimates and assumptions. The most significant judgments relate to the identification and valuation of acquired intangible assets, including estimates of future cash flows, discount rates, customer attrition rates, technology obsolescence, and the determination of useful lives used to calculate amortization expense. …”see in full comparison
“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.”see in full comparison
“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. …”see in full comparison
“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. …”see in full comparison
“The Company's primary sources of liquidity during the nine-months ended May 31, 2026, were proceeds from equity financing transactions, including the September 2025 issuance of common stock and warrants, and proceeds generated through its ATM equity program. During the period, the Company generated gross proceeds of $12,235,110 from equity financing transactions, consisting of (i) $11,869,870 in gross proceeds from the sale of 340,748,312 shares of common stock pursuant to the ATM Offering and (ii) $365,240 in gross proceeds from the September 2025 issuance of common stock and warrants.”see in full comparison
Full comparison: every changed paragraph (75)
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$24.5 billion 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.
Subsequent to May 31, 2026, we completed an underwritten public offering of our Series A Preferred Stock, generating net proceeds of $273.8 million. The offering further enhanced our liquidity and capital resources, and supports our digital asset treasury strategy, strategic investments and other general corporate purposes.
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.
Comparison
of Results of Operations for the Three Months Ended FebruaryMay 28,31, 2026 and 2025.
During
the three months ended FebruaryMay 28,31, 2026, revenues were $11,041,$46,535, compared to $1,517$2,052 during the three months ended FebruaryMay 28,31, 2025.
The increase in revenue was a result of the following:
•Revenue from staking and validation. During the three months ended May 31, 2026, revenue from staking and validation was $45,743, compared to $0 in the three months ended May 31, 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. Further, the Pier Two acquisition accounted for $3,527 in staking revenue for the three months ended May 31, 2026.
•Revenue from self-mining. During the three months ended May 31, 2026, revenue from self-mining was $624, compared to $813 in the three months ended May 31, 2025. The Company is maintaining its small BTC mining operations. However, mining revenue declined due to the lower value of BTC for the three months ended May 31, 2026 compared to the prior year period.
•Revenue from consulting. During the three months ended May 31, 2026, revenue from consulting was $168, as compared to $35 during the three months ended May 31, 2025. The increase in consulting revenue in 2026 was derived from one consulting agreement under which the Company is obligated to provide various operational, maintenance and consulting services, which saw more activity in 2026 as compared to the prior period.
•Revenue from leasing. During the three months ended May 31, 2026, revenue from the leasing of miners was $0, as compared to $1,075 during the three months ended May 31, 2025. The machine lease agreements expired on December 31, 2025 and were not renewed. Thus, the revenue associated with this activity is no longer recognized.
•Revenue from the sale of mining equipment. During the three months ended May 31, 2026, revenue from sale of mining equipment was $0, compared to $129 in the three months ended May 31, 2025. The decrease was a result of the Company ceasing sales of mining equipment.
Major
components of cost of sales include rent to house mining and hosting equipment, staking, electricity, depreciation, and supplies. During the three
months ended FebruaryMay 28,31, 2026, cost of sales was $1,426$5,726 compared to $1,440$1,742 during the three months ended FebruaryMay 28,31, 2025. The decrease
increase in cost of sales was related to self-mining with more Blockfusion expense incurred in the current period compared to the third period in the prior year. Further, the Company initiated native staking in November 2025, with the intent for staking to become a resultprimary yield generation strategy of the following:Company during the current fiscal year, which generated more costs of sales associated with staking. The increase was partially off-set by cost of sales associated with leasing decreasing as the leasing contract ended in Q2 2026.
In addition, cost of sales as a percentage of revenue increased during the three months ended May 31, 2026 period primarily due to the acquisition of Pier Two and the resulting impact on the Company's staking and validation operations, affecting comparability to prior periods.
•General and administrative expenses. General and administrative expenses were $37,270 in the three months ended May 31, 2026, compared to $744 in the three months ended May 31, 2025. The increase is primarily related to ETH custodian fees related to treasury operations and treasury management associated with the strategy to shift to staking revenue being the primary source of revenue. Further, this increase in general and administrative expenses was due to the increase in employee salaries and the increase in board of director monetary and stock-based compensation.
•Unrealized loss (gain) from the digital assets holdings. During the three months ended May 31, 2026, the Company recorded an unrealized loss of $15,404 related to changes in the fair value of our digital asset holdings, as compared to a loss of $34 for the three months ended May 31, 2025. The Company acquired ETH on top of its BTC holdings as part of our business expansion during the fourth quarter of fiscal year 2025. Thus, the major purchases of ETH drove the variance between the two quarters.
•Change in fair value of warrant liability. The Company recognized a $16,488 gain during the three months ended May 31, 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. Stockholders' Equity" of the Interim Statements for additional information.
•Net loss on derivative contracts. During the three months ended May 31, 2026, the Company recognized a net loss on derivative contracts of $(92,093), primarily attributable to losses on exercised option contracts of $14,026 and the net impact of option contracts that expired during the period of $78,601, partially offset by a gain of $534 related to changes in the fair value of open option contracts.The Company had no derivative activity during the three months ended May 31, 2025.
•Change in the fair value of equity method investment . The Company recognized a loss of $(1,177) during the three months ended May 31, 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 8. Stockholders' Equity" of the Interim Statements for additional information.
•Interest income (expense), net. Interest income was $5,300 in the three months ended May 31, 2026, as compared to an expense of $(72) during the three months ended May 31, 2025. The 2025 interest was related to the debt during the three months ended May 31, 2025 which was extinguished during fiscal 2025. The increase in interest income was associated with more cash from ATM capital that was placed into interest bearing bank accounts.
•Other income (expense). The Company recognized other income (expense) of $(248) during the three months ended May 31, 2026, as compared to $(83) during the three months ended May 31, 2025. The decrease in expense is because the Company had no loss on extinguishment of debt during the three months ended May 31, 2026, as compared to a loss of ($208) during the three months ended May 31, 2025. The 2025 loss was related to the Company’s Hash Rate Sale Agreement. The Company had no debt as of May 31, 2026.
During
the three months ended FebruaryMay 28,31, 2026, the Company recognized no income tax benefit or income tax expense.
Comparison
of Results of Operations for the SixNine Months Ended FebruaryMay 28,31, 2026 and 2025.
During
the sixnine months ended FebruaryMay 28,31, 2026, revenues were $13,335,$59,870, compared to $2,718$4,770 during the sixnine months ended FebruaryMay 28,31, 2025. The
increase in revenue was a result of the following:
•Revenue from staking and validation. During the nine months ended May 31, 2026, revenue from staking and validation was $56,924, compared to $0 in the nine months ended May 31, 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. Further, the Pier Two acquisition accounted for $3,527 in staking revenue for the nine months ended May 31, 2026.
•Revenue from self-mining. During the nine months ended May 31, 2026, revenue from self-mining was $845, compared to $2,814 in the nine months ended May 31, 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 nine months ended May 31, 2026.
•Revenue from consulting. During the nine months ended May 31, 2026, revenue from consulting was $565, as compared to $35 during the nine months ended May 31, 2025. All of the consulting revenue in 2026 was derived from its consulting agreement with KULR Technology Group, Inc., under which the Company is obligated to provide various operational, maintenance and consulting services from May 16, 2025 to May 15, 2026.
•Revenue from leasing. During the nine months ended May 31, 2026, revenue from the leasing of miners was $1,536, as compared to $1,075 during the nine months ended May 31, 2025. This was due to more activity within its leasing contracts with KULR Technology Group, Inc. for the nine month period ended May 31, 2026.
•Revenue from the sale of mining equipment. During the nine months ended May 31, 2026, revenue from the sale of mining equipment was $0, compared to $846 in the nine months ended May 31, 2025. The revenue recognized during the nine months ended May 31, 2025 was primarily related to the sale of ten transformers. No such revenue was recognized during the nine months ended May 31, 2026.
Major components of cost of sales include rent to house mining and hosting equipment, staking, electricity, depreciation, and supplies. During the nine months ended May 31, 2026, cost of sales was $8,177 compared to $4,393 during the nine months ended May 31, 2025. The increase in cost of sales was due in part to leasing costs resulting from the Machine Lease Agreement that Bitmine entered into 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. Further, the Company initiated 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, which generated more cost of sales associated with staking. This was partially offset by the Company continuing its strategy of winding down its proprietary self-mining exposure and deferring new site build outs during the nine months ended May 31, 2026 and the costs incurred during the nine months ended May 31, 2025 .
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:
•General and administrative expenses. General and administrative expenses were $335,662 in the nine months ended May 31, 2026, compared to $2,667 in the nine months ended May 31, 2025. The increase is primarily related to treasury activity associated with the Company's ETH strategy. Due to the large purchases of ETH throughout the year, the Company incurred significantly more of these treasury expenses. Further, this increase in general and administrative expenses was due to the increase in employee salaries and the increase in board of director monetary and stock-based compensation.
•Unrealized loss (gain) from the digital assets holdings. During the nine months ended May 31, 2026, the Company recorded an unrealized loss of $9,038,538 related to changes in the fair value of our digital asset holdings, as compared to a gain of $(25) for the nine months ended May 31, 2025. The Company acquired ETH on top of its BTC holdings as part of our business expansion during the last quarter of fiscal year 2025. Since the company now possesses ETH in addition to BTC, the company is more exposed to market fluctuations that result in unrealized losses or gains.
•Change in fair value of warrant liability. The Company recognized a $264,121 gain during the nine months ended May 31, 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. Stockholders' Equity" of the Interim Statements for additional information.
•Net loss on derivative contracts. During the nine months ended May 31, 2026, the Company recognized a net loss on derivative contracts of ($133,275), primarily attributable to losses on exercised option contracts of $79,278 and the net impact of option contracts that expired during the period of $54,512, partially offset by a $515 gain related to changes in the fair value of open option contracts. The Company had no derivative activity during the nine months ended May 31, 2025.
•Issuance costs related to warrant offering. The Company incurred an issuance cost of ($9,381) during the nine months ended May 31, 2026. These costs were incurred in connection with the warrant offering completed during the period and did not exist in the prior year.
•Change in the fair value of equity method investment . The Company recognized a $6,793 loss during the nine months ended May 31, 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 8. Stockholders' Equity" of the Interim Statements for additional information.
•Interest income (expense), net. Interest expense, net was $9,917 in the nine months ended May 31, 2026, as compared to $(200) in interest expense, net in the nine months ended May 31, 2025. The 2025 interest was related to the debt during the three months ended May 31, 2025 which was extinguished during fiscal 2025. The increase in interest income was associated with more cash from ATM capital that was placed into interest bearing bank accounts.
•Other income (expense). The Company recognized other income (expense) of $(480) during the nine months ended May 31, 2026, as compared to $(289) during the nine months ended May 31, 2025. The decrease in expense is because the Company had no loss on extinguishment of debt during the nine months ended May 31, 2026, as compared to a loss of $(289) during the nine months ended May 31, 2025. The 2025 loss was related to the Company’s Hash Rate Sale Agreement. The Company had no debt as of May 31, 2026.
During the nine months ended May 31, 2026, the Company recognized an income tax benefit of $92,295, primarily attributable to the reversal of the deferred tax liabilities associated with unrealized gains on digital assets recognized in prior periods that are now in a significant unrealized loss position. These unrealized losses resulted in the recognition of deferred tax assets, against which the Company recorded a 100% valuation allowance.
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.
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 measurementsmeasures 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.
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 areis detailed below.
The
reconciliation of Adjusted EBITDA for the three months ended FebruaryMay 28,31, 2026 and 2025 is as follows:
The
reconciliation of Adjusted EBITDA for the sixnine months ended FebruaryMay 28,31, 2026 and 2025 is as follows:
The
reconciliation of Adjusted EPS for the three months ended FebruaryMay 28,31, 2026 and 2025 is as follows:
The
reconciliation of Adjusted EPS for the sixnine months ended FebruaryMay 28,31, 2026 and 2025 is as follows:
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 hashratehash rate 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.”
As
of FebruaryMay 28,31, 2026, the Company had $879,577$340,289 in cash on hand and working capital of $869,527. Our primary sources of liquidity during
the six months ended February 28, 2026 included:$433,123.
The Company's primary sources of liquidity during the nine-months ended May 31, 2026, were proceeds from equity financing transactions, including the September 2025 issuance of common stock and warrants, and proceeds generated through its ATM equity program. During the period, the Company generated gross proceeds of $12,235,110 from equity financing transactions, consisting of (i) $11,869,870 in gross proceeds from the sale of 340,748,312 shares of common stock pursuant to the ATM Offering and (ii) $365,240 in gross proceeds from the September 2025 issuance of common stock and warrants.
Subsequent to May 31, 2026, the Company completed an underwritten public offering of 3,500,000 shares of its Series A Preferred Stock at a public offering price of $80.00 per share, generating net proceeds of $273.8 million after deducting underwriting discounts and offering expenses. The Series A Preferred Stock is listed on the New York Stock Exchange under the symbol "BMNP."
The Company intends to use available liquidity to support its digital asset treasury strategy, strategic investments, working capital requirements and general corporate purposes. Management continues to evaluate capital allocation opportunities, including direct digital asset acquisitions and investments in blockchain-related businesses and technologies that complement the Company's Ethereum-focused strategy.
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 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.
Net
cash used in operating activities was $316,599$(287,592) for the sixnine months ended FebruaryMay 28,31, 2026, compared to $311net cash provided by operating activities of $1,366 for the threenine months ended
February 28,May 31, 2025. The increasechange iswas driven primarily relatedby a net loss of $9,106,084 for the current period, which included $9,038,538 of unrealized losses on the Company's ETH treasury holdings recognized through net income. On a cash basis, operating outflows increased due to one time capital raising, advisory, legal, and other consulting fees. The increase
is also related to expenses associated with 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 $9,742,785$(12,102,446) for the sixnine months ended FebruaryMay 28,31, 2026, compared to $18$(18) for the threenine months ended
February 28,May 31, 2025. The increase in investing cash outflow was primarily driven by the $9,536,644$(11,687,493) 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.Holdings.
Net cash provided by financing activities was $12,218,362 for the nine months ended May 31, 2026, compared to the $(374) used in financing activities for the nine months ended May 31, 2025. This increase was primarily driven by the $11,869,870 of proceeds received from the ATM Offering. Refer to "Note 8. Stockholder’s Equity" within the financial statements for further details regarding these offerings.
•fees payable to industry-experienced third parties for managing the Company’s ETH holdings which are expected to be in the range from approximately $40,000 to $50,000 annually. The Company expects these costs to be more than offset by staking rewards generated from its ETH holdings. However, there can be no assurances that such staking rewards will be realized at anticipated levels;
•ongoing revenue participation payments under the Management Services Agreement with Eth Tower, which are based on the level of staking activity and related revenues generated by MAVAN Holdings;
•modest capital expenditures of approximately $1,500, primarily related to the for maintenance of existing technology platforms and infrastructure supporting the Company's operations;
BMNR insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 2 trade dates, 701 shares, about $15.4K) and open-market sales in 0 filings. Net open-market shares: 701 (purchases minus sales); net value about $15.4K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-07-23 | Edgeworth Jason A |
Option exercise | 4,749 | — | — |
| 2026-07-23 | Sechan Ii Robert J |
Option exercise | 4,749 | — | — |
| 2026-07-23 | Maloney Michael Stephen |
Option exercise | 3,999 | — | — |
| 2026-07-23 | Love Lori |
Option exercise | 4,374 | — | — |
| 2026-07-23 | Howe Olivia |
Option exercise | 4,749 | — | — |
| 2026-04-23 | Sechan Ii Robert J |
Option exercise | 4,749 | — | — |
| 2026-04-23 | Edgeworth Jason A |
Option exercise | 4,749 | — | — |
| 2026-04-23 | Howe Olivia |
Option exercise | 4,749 | — | — |
| 2026-04-23 | Maloney Michael Stephen |
Option exercise | 3,999 | — | — |
| 2026-04-23 | Love Lori |
Option exercise | 4,374 | — | — |
| 2026-04-20 | Love Lori |
Open-market purchase | 227 | $22.01 | $5.0K |
| 2026-04-16 | Love Lori |
Open-market purchase | 474 | $22.05 | $10.5K |
Well-known investors holding BMNR (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| ARK Investment Management (Cathie Wood) | 2026-06-30 | 8,811,588 | $117.3M | 0.76% | Reduced 9% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 3,302,118 | $44.0M | 0.03% | Reduced 73% |
| PRIMECAP Management | 2026-06-30 | 910,100 | $12.1M | 0.01% | New position |
| D. E. Shaw & Co. | 2026-06-30 | 308,101 | $4.1M | 0.0% | Reduced 50% |