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

Our miners are designed to mine Bitcoin and may not be readily adaptable to other uses, a sustained decline in Bitcoin value could adversely affect our business and results of operations.

We have invested substantial capital in acquiring miners using ASIC chips designed specifically to mine Bitcoin using the 256-bit secure hashing algorithm (“SHA-256”) as efficiently and as rapidly as possible based on our assumption that we will be able to use them to mine Bitcoin and generate revenue from our operations. Therefore, our Bitcoin mining operations focus exclusively on mining Bitcoin, and our Bitcoin mining revenue is based on the value of Bitcoin we mine. Accordingly, if the value of Bitcoin declines and fails to recover, for example, because of the development and acceptance of competing blockchain platforms or technologies, including competing cryptocurrencies which our miners may not be able to mine, the revenue we generate from our Bitcoin mining operations will likewise decline. Moreover, because our miners use these highly specialized ASIC chips, we may not be able to successfully repurpose them in a timely manner, if at all, to other uses, following a sustained decline in Bitcoin value or if the Bitcoin blockchain stops using SHA-256 for solving blocks. This would result in a material adverse effect on our business and could potentially impact our ability to continue as a going concern.

We may not have adequate sources of recovery if our Bitcoin holdings are lost, stolen or destroyed.

We rely on BitGo to facilitate the custody of our Bitcoin. If our Bitcoin holdings are lost, stolen or destroyed under circumstances rendering a party, including BitGo, liable to us, the responsible party may not have the financial resources sufficient to satisfy our claim. For example, as to a particular event of loss, the only source of recovery for us might be limited, to the extent identifiable, to other responsible third parties (e.g., a thief or terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfy a valid claim of ours. While BitGo maintains insurance coverage of such types and amounts as BitGo asserts to be commercially reasonable for its custodial services provided under our custody agreement with BitGo, including certain commercial crime insurance of limited aggregate principal amount which covers losses stemming from fraud, security breach, hack and asset theft, such insurance coverage may be insufficient to protect us against all losses of our Bitcoin holdings held in custody with BitGo, whether or not stemming from security breaches, cyberattacks or other types of unlawful activity.

We may engage in strategic acquisitions and other arrangements that could disrupt our business, cause dilution to our shareholders, reduce our financial resources and harm our operating results.

We may engage in strategic transactions as part of our growth strategy, in the future, we expect to seek additional opportunities to grow our mining operations, including through purchases of miners and 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. Future acquisitions will likely require us to issue common shares that would dilute our current shareholders’ percentage ownership, assume or otherwise be subject to liabilities of an acquired company, record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, incur large acquisition and integration costs, immediate write-offs, and restructuring and other related expenses and/or become subject to litigation.

The benefits of an acquisition may also take considerable time to develop, and we cannot be certain that any particular acquisition will produce the intended benefits in a timely manner or to the extent anticipated or at all. We may experience difficulties integrating the operations, technologies and personnel of an acquired company or be subjected to liability for the target’s pre-acquisition activities or operations as a successor in interest. Such integration may divert management’s attention from normal daily operations of our business. Future acquisitions may also expose us to potential risks, including risks associated with entering markets in which we have no or limited prior experience, especially when competitors in such markets have stronger market positions, the possibility of insufficient revenues to offset the expenses we incur in connection with an acquisition and the potential loss of, or harm to, our relationships with employees and suppliers as a result of integration of new businesses.

We may not be able to timely complete our future strategic growth initiatives or within our anticipated cost estimates, if at all.

As part of our efforts to grow our hashrate and remain competitive in the market, we have completed a self-owned infrastructure for our 8 MW site in Iowa and invested in additional new mining equipment. We are also reliant on third parties for our expansion efforts, including providers of infrastructure equipment, who may be burdened by delays in manufacturing, supply chain problems, less access to capital due to macro-economic conditions, or inflation. This could increase our costs and/or delay our expansion and acquisition efforts. If we are unable to complete our planned expansions or acquisitions on schedule and within our anticipated cost estimates, our deployment of newly purchased mining equipment may be delayed, which could affect our competitiveness and our results of operation, which could have a material adverse effect on our financial condition and the market price for our securities.

We may experience increased compliance costs as a result of future strategic acquisitions.

Future strategic acquisitions could carry substantial compliance burdens, which may limit our ability to realize the anticipated benefits of such acquisitions, and may require our management and personnel to shift their focus to such compliance burdens and away from their other functions. Such increased costs and compliance burdens could affect our ability to realize the anticipated benefits of such strategic acquisitions, and our business, results of operations and financial condition may suffer as a result.

On February 9, 2026, we filed an Articles of Amendment to effect a share consolidation (also known as a reverse stock split) of our issued and outstanding common shares in the ratio of 1-for-10. The share consolidation was effective on February 9, 2026. Our common shares began trading on an adjusted basis on the Nasdaq Capital Market at the opening of trading on February 10, 2026. On February 26, 2026, we received notification from the Nasdaq Listing Qualifications Department that we are in compliance with the Listing Rule.

In 2025, we mined 111.6 Bitcoin, which represented a decrease of 61.0% over the 286.3 Bitcoin we mined in 2024. The decrease was primarily due to the April 2024 halving event, our transition to lower-cost hosting sites, and refreshing our fleet with newer-generation machines. Based on our existing operations and expected deployment of miners we have purchased, we anticipate continuing to increase exahash throughout 2026. We do not have scheduled downtime for our miners. We periodically perform both scheduled and unscheduled maintenance on our miners. Depending on the type of repair, the miner may run at a reduced speed or be taken offline. We use software programs to monitor the performance of our machines. The miners owned as of December 31, 2025 have an average efficiency (joules per terahash – “J/th”) of 22.0 J/th compared to an average efficiency of 27.1 J/th in 2024. We expect efficiency to improve in 2026 to approximately 19.0 J/th. The miner efficiency is an indication of how efficiently we can earn Bitcoin and minimize cost to run the miner. Currently, we intend only to mine Bitcoin and we hold no other cryptocurrency other than Bitcoin. We do not have any power purchase agreements for the supply of power.

As of December 31, 2025, we held approximately 37.3 Bitcoin. The fair value of our Bitcoin as of December 31, 2025 was approximately $3.3 million on our consolidated balance sheet.

•On March 5, 2026, we and Cathedra Bitcoin Inc. (“Cathedra”), entered into a definitive agreement to combine the two companies, in an all-stock transaction, to create a high density computing power infrastructure company focused on high-performance compute, digital assets, energy optimization, and development of power and infrastructure. The strategic combination is anticipated to enable near-term vertical integration, positioning the new entity to accelerate scalable, high-efficiency deployment across North America by leveraging a focus on low-cost power, and operational efficiency. Under the terms of the definitive arrangement agreement, entered into on March 5, 2026 (the “Arrangement Agreement”), we have agreed to acquire all of the issued and outstanding shares of Cathedra (the “Transaction”), subject to customary closing conditions, including regulatory, court, and shareholder approvals, such that upon consummation of the Transaction, Cathedra will be a wholly-owned subsidiary of the Company. If the Arrangement Agreement is terminated in certain specified circumstances, we or Cathedra would be required to pay the other party a termination fee of $0.5 million.

•On March 4, 2026, we granted 472,222 RSUs and 45,532 RSAs with an aggregate fair value of $0.7 million.

•During March 2026, under the AGP Agreement we issued 256,142 common shares for $0.4 million of net proceeds.

•On February 9, 2026, we filed an Articles of Amendment to effect a share consolidation (also known as a reverse stock split) of our issued and outstanding common shares in the ratio of 1-for-10. The share consolidation was effective on February 9, 2026. Our common shares began trading on an adjusted basis on the Nasdaq Capital Market at the opening of trading on February 10, 2026. All share and per share amounts have been restated for all periods presented to reflect the share consolidation.

•On February 9, 2026, we sold approximately 7,700 older generation miners included in property and equipment for 437 newer generation miners with a value of $1.1 million.

We had revenue of $11.2 million during 2025 compared to $16.6 million during 2024. The $5.4 million decrease in revenue is primarily due to the April 2024 halving event, and the process of removing our older mining equipment and replacing it with newer generation machines, offset by an increase in the fair value of Bitcoin. The refreshing of our mining equipment is expected to be an ongoing process through the beginning of 2026 which may result in further fluctuations in exahash. During the years ended December 31, 2025 and 2024, all of our revenue was derived from Bitcoin mining.

General and administrative expenses were $8.3 million and $12.4 million for the years ended December 31, 2025 and 2024, respectively. The $4.1 million decrease was primarily due to a decrease of $2.0 million in share-based compensation primarily related to forfeited awards, a decrease in legal fees of $1.4 million related to the resolution of the Gryphon Digital Mining, Inc. litigation, a decrease of $0.7 million in employee and related expenses primarily related to a decrease in headcount, a $0.5 million decrease in insurance expense, and a $0.2 million decrease in directors’ fees. These decreases were offset by an increase of $0.8 million in costs related to strategic business growth efforts.

Impairment of property and equipment was $7.2 million and $1.1 million for the years ended December 31, 2025 and 2024, respectively. For the year ended December 31, 2025, an impairment of $7.2 million was recorded for the expected sales value of mining equipment primarily due to the decline in Bitcoin price. For the year ended December 31, 2024, an impairment of $1.1 million was recorded related to idle mining equipment not expected to return to use.

Change in fair value of Bitcoin was a loss of $0.3 million and a gain of $0.7 million for the years ended December 31, 2025 and 2024, respectively. The aggregate gain or loss was the change in fair value of Bitcoin held, as well as the gains and losses from when Bitcoin was sold.

Warrant Inducement. On October 16, 2025, we entered into a warrant inducement agreement with an existing institutional investor to us for the immediate exercise of the November 19, 2024 warrants to purchase 436,823 common shares (the “Existing Warrants”) of the Company. The Existing Warrants had an exercise price of $15.00 and were exercised at a reduced exercise price of $9.40 for total gross cash proceeds of $4.1 million, before deducting financial advisor fees and other transaction expenses of $0.4 million. We used the net proceeds from the offering for the purchase or upgrade of our Bitcoin mining fleet, and other general corporate purposes.

Net cash provided by investing activities. During 2025, we received $9.0 million from proceeds from the sale of Bitcoin, $8.0 million from proceeds from the sale of investment in equity securities, and $0.6 million for the sale of miners originally included in mining equipment, offset by $7.5 million of payments for the purchase of property and equipment consisting of newer generation mining machines and infrastructure for our Iowa Site completed in 2025. During 2024, we received $11.4 million from proceeds from the sale of investment in equity securities and $1.5 million from proceeds from the sale of Bitcoin, offset by $7.1 million of payments for the purchase of property and equipment consisting of newer generation mining machines and $1.8 million in payments for construction in progress primarily for our Iowa Site completed in 2025.

Net cash provided by financing activities. During 2025, we received $3.7 million of net proceeds from a warrant inducement transaction, and we received $0.7 million of net proceeds from the issuance of common shares through our At-the-Market Offering program. During 2024, we received $5.4 million, net, from the issuance of common shares and warrants.

Our expansion into AI and HPC data-center infrastructure is subject to substantial development, financing, operational, technological and market risks, and we may not successfully implement or realize the anticipated benefits of this strategy.

Our business strategy includes diversifying our operations beyond Bitcoin mining by pursuing opportunities involving AI, HPC and other high-density computing applications. Developing, converting and operating facilities for these applications is capital intensive and requires substantial operational and financial resources, specialized technical expertise, qualified personnel, reliable and significant power capacity, advanced cooling and networking systems, specialized computing equipment and relationships with customers, utilities, equipment suppliers, contractors and other third parties. We have limited experience developing or operating AI or HPC data-center infrastructure at scale, and there can be no assurance that we will be able to develop the necessary capabilities, obtain the necessary resources or successfully execute this strategy.

The development, expansion or conversion of our existing or planned facilities for AI or HPC applications may be delayed, disrupted or cost more than anticipated. Such projects may be adversely affected by, among other things, delays in obtaining financing, permits, regulatory approvals, power commitments or utility interconnections; delays in the delivery or installation of equipment; difficulties integrating new equipment into existing infrastructure; shortages of skilled labor, materials, electrical equipment, servers, graphics processing units, cooling systems or other components; defects in design, engineering or construction; failures by contractors, vendors or other counterparties to perform their obligations; changes in applicable laws or regulations; and diversion of management’s attention and other resources. Actual project costs may exceed our budgets, and we may not have sufficient capital to complete a project as planned or at all. Delays, cost overruns or other development difficulties could prevent or delay our ability to generate revenue from a facility and could materially adversely affect our business, financial condition and results of operations.

We may be required to commit substantial capital and operational resources to develop or convert facilities before securing customer contracts or other binding commitments. We may be unable to attract customers, enter into contracts on commercially acceptable terms or generate sufficient customer demand to support the facilities and capacity that we develop. Even if we enter into customer contracts, such contracts may not generate the revenue or returns we anticipate, may require us to make significant additional investments or may expose us to customer concentration and counterparty credit risks. Customers may delay or reduce their deployment requirements, terminate or elect not to renew their agreements, seek to renegotiate pricing or other terms or otherwise fail to perform their contractual obligations.

The markets for AI and HPC infrastructure are rapidly evolving and highly competitive. We may compete against established data-center operators, cloud-service providers, technology companies and other Bitcoin mining companies seeking to diversify into similar businesses, many of which have substantially greater financial, technical, operational and personnel resources, longer operating histories and stronger customer relationships than we do. Competition for suitable sites, power capacity, equipment, financing, customers and qualified personnel may increase our costs and limit our ability to execute our strategy.

Technological developments and customer requirements in these markets may change rapidly. Facilities and equipment that we develop or acquire may become obsolete or may not satisfy future requirements relating to computing density, power availability, cooling, networking, security, redundancy, latency, efficiency or other technical specifications. We may be required to make significant additional capital expenditures to modify or replace our infrastructure and equipment, and we may be unable to do so on a timely or cost-effective basis.

AI and HPC customers may also require highly reliable infrastructure and may require us to satisfy service-level, uptime, security and performance commitments. Power outages, cooling-system failures, network disruptions, equipment failures, cybersecurity incidents, construction defects, natural disasters or other interruptions could prevent us from satisfying these commitments. Such events could result in service credits, contractual claims, loss of revenue, termination or non-renewal of customer agreements, damage to customer equipment, litigation and reputational harm. Contractual limitations on our liability may not be enforceable or may not adequately protect us from these losses.

If we are unable to successfully develop, finance, market and operate AI or HPC infrastructure, we may not realize the anticipated benefits of our diversification strategy. We could incur substantial costs without generating corresponding revenue, be required to abandon or modify projects, recognize impairment charges relating to facilities or equipment or divert resources from our existing operations. Any of these events could materially adversely affect our business, financial condition, results of operations and prospects.

Our mining equipment has been subject to impairment charges, and we may be required to recognize additional impairment losses in the future.

During the three and six months ended June 30, 2026, we recorded an impairment charge of $7.0 million for property and equipment related to the decline in Bitcoin prices. Our mining equipment may become impaired as a result of changes in market or operating conditions, reduced mining profitability, technological obsolescence, reduced expected mining output or changes in expected future economic benefits. If any of these factors deteriorate, or if additional mining equipment becomes idle or is not expected to return to use, we may be required to recognize additional impairment charges, which could adversely affect our financial condition and results of operations.

The conversion of our facilities from bitcoin mining to artificial intelligence and high-performance computing use is expected to result in the loss of favorable state and local tax treatment, which would increase our operating costs.

A substantial portion of our operations is located in the state of Kentucky. Kentucky law provides certain tax exemptions for qualifying commercial cryptocurrency mining operations, including exemptions from sales and use taxes on electricity and certain tangible personal property and the utility gross receipts license tax. We currently benefit from these exemptions at our Kentucky facilities.

These exemptions do not apply to artificial intelligence, high-performance computing, or general data center operations. Accordingly, as we convert facilities from bitcoin mining to artificial intelligence and high-performance computing use, we expect to lose these exemptions with respect to the converted capacity. The loss of these exemptions would increase our electricity costs at the affected facilities. In addition, artificial intelligence and high-performance computing equipment, which generally carries a higher assessed value than bitcoin mining equipment, is expected to increase our tangible personal property tax liability.

The Kentucky Qualified Data Center Incentive Program provides a state sales and use tax exemption on qualifying computing equipment only. It does not exempt electricity or reduce local property tax, school tax, or occupational tax. Participation is subject to various eligibility and other conditions. We have not determined whether we will apply for that program, and we can provide no assurance that we would qualify or that its benefits would be material relative to the exemptions we expect to lose.

Local zoning and permitting requirements, moratoriums on data center development, and community opposition may delay, restrict, or prevent the development, conversion, expansion, or continued operation of our facilities.

Our operations involve large numbers of high-powered computers and supporting infrastructure that consume substantial amounts of electricity, may consume water, and can generate noise. Data center development, including cryptocurrency mining and artificial intelligence and high-performance computing operations, has become the subject of increasing public attention and, in a number of communities across the United States, organized opposition.

A growing number of state, county, and municipal governments have adopted or are considering measures that restrict data center development. Such measures may include temporary moratoriums on new data center development or permitting while applicable regulatory standards are studied or revised and may be adopted in response to community opposition or concerns regarding environmental, infrastructure or other impacts.

Communities that have not previously adopted zoning standards specific to data centers may do so, and the standards ultimately adopted may be more restrictive than those in effect at the time a site was acquired, developed, or placed into service. Such standards may include setback requirements measured from property lines, limits on facility size or footprint, screening, landscaping and berming requirements, noise limits measured at the property line, water use restrictions, decommissioning bond requirements, and restrictions on particular construction methods or building types. Depending on how such standards are formulated, they may materially restrict, or in some cases effectively preclude, the development or expansion of data center facilities on parcels that would otherwise be suitable.

If standards of this kind were adopted in a jurisdiction in which we operate, facilities we operate today could fail to obtain or retain legal nonconforming use status, could be required to be modified at significant cost, or could become subject to operating restrictions. Approvals we require may be subject to public hearing processes that are lengthy, uncertain in outcome, and susceptible to organized opposition, and adverse action in one jurisdiction may influence the approach taken by others, including jurisdictions in which we operate or may seek to operate.

These matters could result in delays in or denial of permits and approvals; requirements that we implement costly noise, screening, water, or other mitigation measures; restrictions on operating hours or the scale of our operations; obligations to post decommissioning bonds or provide other financial assurances or community commitments as a condition of approval; fines or penalties; litigation; reputational harm; and, in certain circumstances, the curtailment or shutdown of facilities that cannot satisfy applicable requirements. Any of the foregoing could delay or prevent execution of our conversion and growth strategy, increase our costs, reduce our operating capacity, and materially adversely affect our business, financial condition, results of operations, and prospects.

Our Rights Agreement includes terms and conditions that could discourage a takeover or other transaction that stockholders may consider favorable.

On August 7, 2026, our Board of Directors adopted a shareholder rights plan, pursuant to the Rights Agreement. The Rights Agreement is intended to ensure, to the extent possible, that all shareholders of the Company are treated fairly in connection with a take-over bid or other acquisition of Voting Shares that could result in a person becoming the beneficial owner of 20% or more of the outstanding Voting Shares of the Company. Pursuant to the Rights Agreement, one Right will attach to each Voting Share outstanding as of the close of business on August 20, 2026, the Record Time, and to each Voting Share issued after the Record Time and prior to the earlier of the Separation Time and the Expiration Time. From and after the Separation Time and prior to the Expiration Time, each Right entitles its holder to purchase one common share of the Company at an exercise price equal to three times the market price of a common share determined as of the Separation Time, subject to adjustment in accordance with the Rights Agreement. Upon the occurrence of certain triggering events, each Right, other than Rights beneficially owned by an Acquiring Person or certain related persons, will entitle its holder to purchase common shares having an aggregate market value equal to twice the exercise price of the Right. Alternatively, in certain circumstances, the Company may exchange each outstanding Right, other than Rights that have become void under the Rights Agreement, for one common share, subject to adjustment. The Rights will expire on August 10, 2027, unless earlier redeemed, exchanged or otherwise terminated in accordance with the Rights Agreement.

The Board of Directors adopted the Rights Agreement to protect the interests of the Company’s shareholders. In general terms, subject to the terms and exceptions set forth in the Rights Agreement, the Rights Agreement is designed to impose significant dilution upon any person that becomes an Acquiring Person by acquiring beneficial ownership of 20% or more of the outstanding Voting Shares of the Company without complying with the Rights Agreement. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a take-over bid, merger, arrangement or other business combination or acquisition involving the Company that is not approved by the Board.

The Rights Agreement is intended to protect shareholders’ interests, including by providing the Board of Directors sufficient time to make informed judgments and take actions that the Board of Directors determines are in the best interests of the Company and its shareholders. Nevertheless, the Rights Agreement may be considered to have certain anti-takeover effects, including potentially discouraging a third party from attempting to obtain a substantial position in the Voting Shares or seeking to obtain control of the Company and discouraging a take-over attempt that shareholders may consider favorable or that could result in a premium over the market price of the Company’s common shares. Even in the absence of a take-over attempt, the Rights Agreement may adversely affect the prevailing market price of the Company’s common shares if it is viewed as discouraging take-over attempts in the future.

For additional information regarding the Rights Agreement, refer to Note 16 Subsequent Events to the condensed consolidated financial statements.

We are a digital infrastructure company that owns, operates and is expanding scalable power and data center assets for high-performance computing, artificial intelligence (“AI”) workloads, and digital asset infrastructure. We commenced operations of our Bitcoin mining business in January 2022. Following our business combination with Cathedra Bitcoin Inc. completed on June 1, 2026, we own and operate the power and data center infrastructure underlying a substantial portion of our fleet, rather than relying on third-party hosting providers. We generate revenue from both proprietary Bitcoin mining operations and effective June 1, 2026, from hosting services provided to third parties under hosting agreements and are evaluating, on a site-by-site basis, the suitability of our sites for high-performance computing (“HPC”) and AI infrastructure workloads.

We have approximately 53 megawatts (“MW”) of operating power capacity across five data centers located in Iowa, Kentucky and Tennessee. Vertically integrating with self-owned and self-operated facilities allows us to reduce our reliance on third-parties and decrease our overall cost to mine a Bitcoin. We also have a development pipeline exceeding 100 MW of potential expansion opportunities. In addition to our proprietary mining operations, we provide hosting services to third parties, including a 30 MW co-mining arrangement with Bitdeer across three sites in Tennessee and Kentucky, which we expect to provide more predictable revenue to complement the variability of our proprietary mining results. We are actively assessing the highest-value applications for our power capacity, including digital asset mining, hosting, and HPC and AI infrastructure workloads Our longer-term objective is expanding access to power and data center capacity to support our transition to AI and HPC infrastructure. We believe our existing, energized power positions primarily across the Tennessee Valley Authority region offer a faster and more capital disciplined path to deployment than sites still awaiting interconnection or lengthy construction schedules, and we are pursuing a modular development approach intended to convert smaller sites more quickly than large campus projects. We intend to differentiate our platform through execution, site readiness and proactive community engagement, while continuing to grow the scale of our power and data center portfolio.

We obtain Bitcoin as a result of our mining operations, and when necessary, we sell Bitcoin to support our operations and strategic growth. We mine Bitcoin in states that do not have any material state-specific regulatory restrictions on the mining of Bitcoin. However, it is possible that these states or other states in which we may seek to operate may create laws that would impede Bitcoin mining. We do not currently plan to engage in regular trading of Bitcoin other than sales to convert our Bitcoin into U.S. dollars. Decisions to hold or sell our Bitcoin are made by management based on real-time market monitoring and forward looking forecasts. Our treasury strategy is to utilize Bitcoin interchangeably with U.S. dollars, and we will sell Bitcoin as needed to fund working capital requirements or potential growth commitments.

We have refreshed a significant portion of our fleet with newer-generation machines to improve efficiency and reduce our cost to mine. In February 2026, we completed the sale of older generation mining equipment not in service for proceeds of $1.2 million, which was applied to the purchase of new mining equipment. As of June 30, 2026, we held approximately 20.5 Bitcoin. The fair value of our Bitcoin as of June 30, 2026 was approximately $1.2 million on our condensed consolidated balance sheet.

On June 25, 2026, our Board of Directors unanimously approved, and recommended that our shareholders approve, a proposed change of our name to DarkHorse Technologies Inc., and we have reserved the ticker symbol “DRK” with Nasdaq for use upon shareholder approval and effectiveness of the name change. The proposed name change will be submitted to shareholders for a vote at a special meeting scheduled for August 24, 2026, and remains subject to shareholder approval.

Recent Developments

As previously announced, on March 5, 2026, we entered into a definitive agreement with Cathedra Bitcoin Inc. (“Cathedra”), a company that builds, develops and operates power infrastructure facilities for use in high-density computing, to combine in an all-stock transaction. On June 1, 2026, the business combination was effected by way of a plan of arrangement under the Business Corporations Act (British Columbia), pursuant to which S3D Acquisition Corp., our wholly-owned subsidiary, acquired all of the issued and outstanding shares of Cathedra in a share-for-share transaction, and Cathedra became a wholly-owned subsidiary of the Company (the “Combination”). For purchase consideration, we issued 2,405,300 common shares and 1,387,117 preferred shares of the Company with an aggregate fair value of $7.3 million. Immediately following the closing, former Cathedra security holders held approximately 33% of the voting rights in the combined company, compared with approximately 67% held by Sphere’s pre-existing shareholders.

Co-Mining Agreement

On May 28, 2026, an agreement was entered into with Bitdeer Technologies (“Bitdeer”) to host 30 megawatts of capacity at three of our data center sites in Tennessee and Kentucky. These agreements offer contracted mining economics while we assess broader digital infrastructure opportunities, including AI applications. Bitdeer will deploy its SEALMINER A2 Pro Air mining hardware at these sites, with net mining proceeds shared between us and Bitdeer. Each agreement has an initial term of 12 months, renewable for an additional 12 months unless either party elects otherwise, allowing flexibility as we explore optimal uses of our power-backed infrastructure. Subsequent to June 30, 2026, we installed the first of three sites with the remaining two expected to be fully installed before November 2026.

We generated revenues of $2.5 million and $3.0 million, respectively, during the second quarter of 2026 and 2025. The decrease in revenue of $0.5 million is primarily due to a decline in the fair value of Bitcoin; offset by revenue of $0.4 million beginning June 1, 2026 from our acquisition. We expect to expand our revenue mix and utilization going into the second half of 2026. During the second quarter of 2026 and 2025, we mined 29.0 and 30.9 Bitcoin, respectively, representing a 6.1% decrease.

Direct cost of revenue totaled $2.3 million in both the second quarter of 2026 and 2025. The 2026 amount includes $0.8 million of costs attributable to revenue from the acquisition completed on June 1, 2026.

Impairment of Property and Equipment

Impairment of property and equipment was $7.0 million and nil for the second quarter of 2026 and 2025, respectively. For the second quarter of 2026, an impairment of $7.0 million was recorded for the estimated market value of mining equipment primarily due to the change in market conditions and decline in Bitcoin prices.

Impairment of intangible assets was $0.6 million and nil for the second quarter of 2026 and 2025, respectively. For the second quarter of 2026, the Company recorded an impairment charge of $0.6 million to supplier agreements related to the decline in Bitcoin prices.

Change in Fair Value of Bitcoin

Change in fair value of Bitcoin was a loss of $0.2 million and a gain of $0.5 million for the second quarter of 2026 and 2025, respectively. The gain or loss was the change in fair value of Bitcoin held, as well as the gain or loss from when Bitcoin was sold.

Non-Operating Income and Expenses

Investment Gain

Investment loss was nil and gain of $4.3 million for the second quarter of 2026 and 2025, respectively, and related to our equity investment in Core Scientific Inc.

The First Six Months of 2026 Compared with the First Six Months of 2025

Revenue

We generated revenues of $4.4 million and $5.8 million during the first six months of 2026 and 2025, respectively. The decrease in revenue of $1.4 million is primarily due to a decline in the fair value of Bitcoin, and the process of removing older mining equipment and replacing it with newer generation machines resulting in fewer machines mining and less Bitcoin mined. The decrease is offset by revenue of $0.4 million beginning June 1, 2026 from our acquisition. We expect to expand our revenue mix and utilization going into the second half of 2026. During the six months ended June 30, 2026 and 2025, we mined 54.3 and 61.3 Bitcoin, respectively, representing a 11.4% decrease.

Operating Expenses

Cost of Revenue (exclusive of depreciation and amortization expense)

Direct cost of revenue totaled $3.9 million and $4.5 million, respectively, in the first six months of 2026 and 2025. The $0.6 million decrease was primarily driven by lower hosting fees related to older machines taken offline, sold, and replaced with newer generation machines, as well as lower cost of revenue at our Iowa site. The first six months of 2026 included $0.8 million of costs attributable to revenue from the acquisition completed on June 1, 2026.

General and Administrative Expense

General and administrative expenses were $7.3 million and $5.3 million for the first six months of 2026 and 2025, respectively. The increase of $2.0 million was primarily due to an increase of $2.1 million in costs related to our acquisition completed during the second quarter, $0.8 million increase in share-based compensation, and $0.2 million increase in investor relations. These increases were offset by a decrease in legal fees of $0.9 million related to the resolution of the Gryphon Digital Mining, Inc. litigation, and a decrease of $0.2 million in insurance expense.

Depreciation and Amortization Expense

Depreciation and amortization expense was $2.5 million and $3.3 million for the first six months of 2026 and 2025, respectively. The decrease of $0.8 million was primarily due to less depreciation related to our Bitcoin mining machines due to the disposal of machines.

Impairment of Property and Equipment

Impairment of property and equipment was $7.0 million and nil for the first six months of 2026 and 2025, respectively. For the first six months of 2026, an impairment of $7.0 million was recorded for the estimated market value of mining equipment primarily due to the change in market conditions and decline in Bitcoin prices.

Impairment of intangible assets was $0.6 million and nil for the first six months of 2026 and 2025, respectively. For the first six months of 2026, the Company recorded an impairment charge of $0.6 million to supplier agreements related to the decline in Bitcoin prices.

On July 31, 2026, we entered into an Amended and Restated Sales Agreement (the “Amended ATM Agreement”) with A.G.P. and Maxim Group LLC (“Maxim” and, together with A.G.P., the “Sales Agents”) for the purpose of amending the ATM Agreement to provide for the addition of Maxim as a sales agent thereunder and to effect conforming changes related thereto. The Amended ATM Agreement otherwise retains all material terms of the original ATM Agreement. The Amended ATM Agreement provides for the sale of common shares having an aggregate offering price of up to $10.3 million (the “Placement Shares”) in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended.

The Amended ATM Agreement can be terminated by either party by giving two days written notice. We expect that any proceeds received from the facility will be used primarily for working capital and general corporate purposes and in furtherance of our corporate strategy which may include to accelerate efficiency, for the purchase/upgrade of our mining fleet, and vertical integration of infrastructure.

Contingent Compensation Obligations. The employment agreements for our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) provide for retention bonuses of $1.6 million and $1.1 million, respectively, contingent upon the achievement of specified operational milestones. If the operational milestone is achieved at any time within two years, or by June 1, 2028, the bonus becomes payable in 12 equal monthly installments, in either cash or common shares, at our discretion. In addition, under the CFO’s employment agreement, if certain conditions constituting “good reason” occur prior to January 1, 2027, the CFO’s $1.1 million amount would become payable over an 18‑month period beginning after the operational milestone is achieved.

On July 31, 2026, the CFO delivered formal notice that the conditions of good reason under his employment agreement had been met in connection with his transition from CEO to CFO following the consummation of the Combination. The notice states that it was provided solely to preserve the CFO’s future rights to receive the $1.1 million payment and that he does not currently intend to resign. To trigger the conditional severance payment, the CFO would be required to formally resign by November 28, 2026, and the operational milestone would also need to be achieved, as specified in his employment agreement.

No liability has been recorded as of June 30, 2026. However, the potential future payment could represent a material cash commitment depending on the timing of milestone achievement and the form of settlement elected. We will continue to evaluate the likelihood of achieving the milestone and assess any resulting impact on liquidity, capital resources, and future cash flows.

Power Supply Agreements. We maintain long‑term prepaid electric power supply agreements with regional utilities to support its data‑center operations. Under these agreements, we prepay monthly power charges and maintain cash security deposits. As of June 30, 2026, our aggregate monthly power prepayment is $0.9 million.