RUM Group Inc.: Form 10-Q for the period ended Jun 30, 2026

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with RUM Group Inc’s (“RUM” or the “Company”) unaudited condensed consolidated interim financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report and those discussed in our other filings with the SEC. Additionally, our historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented in U.S. dollars.

Overview

RUM Group Inc. (“RUM” or the “Company”) is a holding company that operates an online video platform and a cloud and AI infrastructure business. The Company’s video platform enables creators to manage, distribute, and monetize their content by connecting them with brands, publishers, and directly to their subscribers and followers. The Company’s cloud and AI infrastructure business provides compute, data center capacity, and related blockchain infrastructure services. Our registered office is 444 Gulf of Mexico Drive, Longboat Key, Florida, 34228. Our shares of Class A common stock and warrants are traded on The Nasdaq Global Market (“Nasdaq”) under the symbols “RUM” and “RUMBW”, respectively.

Significant Events and Transactions

On February 7, 2025, Tether, the largest company in the digital assets industry and the most widely used dollar stablecoin across the world, purchased 103,333,333 shares of the Company’s Class A Common Stock at a price per share of $7.50, totaling $775 million in gross proceeds to the Company. As part of the closing of this transaction, the Company completed a tender offer to purchase 70,000,000 shares of its Class A Common Stock at a price of $7.50 per share for a total of $525 million, excluding fees and expenses related to the tender offer.

On November 10, 2025, the Company announced a $100 million advertising commitment from Tether, representing $50 million advertising commitment per year over a two-year period beginning in the first quarter of 2026.

On June 4, 2026, the Company announced that it had entered into a multi-year agreement under which Together AI will purchase dedicated GPU cloud capacity powered by NVIDIA HGX B300 systems.

On June 17, 2026, the Company announced the closing of the acquisition of Northern Data, a leading provider of AI and high-performance computing (HPC) infrastructure. Following the closing of this acquisition, the Company acquired approximately 85% of Northern Data’s outstanding shares. Refer to Note 3, Business Combinations, to our condensed consolidated interim financial statements included elsewhere in this Quarterly Report.

Given favorable market conditions and Northern Data’s reported near capacity GPU utilization, the Company and Tether mutually agreed not to enter into the customer agreement originally contemplated by the Tether transaction support agreement, dated November 10, 2025, by and between the Company and Tether, which would have provided for the purchase by Tether of GPU services in an amount up to $75 million per year over a two-year initial term at a fixed price per GPU hour, which price would have represented a significant discount to current prevailing GPU rates.

Revenues

We generate revenues from Audience Monetization and Other Initiatives.

Audience Monetization includes advertising fees on the Rumble platform; subscription fees earned primarily from consumer product offerings such as Rumble Premium; Locals and badges; revenues generated from content that is licensed by third parties; pay-per-view; and fees from tipping and platform hosting fees. Advertising fees are generated by delivering digital video and display advertisements as well as cost-per-message-read advertisements.

Other Initiatives includes digital advertisements that are placed on the Company’s network of third-party publisher websites or mobile applications; and cloud. Cloud includes cloud computing and infrastructure services, including colocation services, together with professional services and license agreements related to Rumble Player.

Refer to Note 2, Summary of Significant Accounting Policies, to the Company’s condensed consolidated interim financial statements included in the Quarterly Report and annual consolidated financial statements for the year ended December 31, 2025 (the “Annual Financial Statements”).

Expenses

Expenses primarily include cost of services, general and administrative, research and development, sales and marketing, acquisition-related transaction costs, amortization and depreciation, and change in fair value of digital assets. The most significant components of our expenses on an ongoing basis are programming and content, service provider costs, and staffing-related costs.

We expect to continue to invest substantial resources to support our growth and anticipate that each of the following categories of expenses will increase in absolute dollar amounts for the foreseeable future.

Cost of Services (Exclusive of Amortization and Depreciation)

Cost of services consists of costs related to obtaining, supporting and hosting the Company’s product offerings. These costs primarily include:

• Programming and content costs related to compensation, including share-based compensation, from whom video and other content are licensed. These costs are paid to these providers based on revenues generated or in fixed amounts. In certain circumstances, we incur additional costs related to incentivizing top content creators to promote and join our platform; and
• Other cost of services, such as third-party service provider costs, including data center, power, networking and support service costs, as well as payment processing fees and costs paid to publishers.

General and Administrative Expenses

General and administrative expenses consist primarily of payroll and related expenses, which include bonuses and share-based compensation for our executives and certain other employees. General and administrative expenses also include legal and professional fees, business insurance costs, operating lease costs and other costs. As a public company, we expect to continue to incur material costs related to compliance with applicable laws and regulations, including audit and accounting fees, legal, insurance, investor relations and other costs.

Research and Development Expenses

Research and development expenses consist primarily of payroll and related expenses, which include bonuses and share-based compensation for our employees on our engineering and development teams. Research and development expenses also include consultant fees related to our development activities to originate, develop and enhance our platforms.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of payroll and related expenses, which include bonuses and share-based compensation for our employees associated with our sales and marketing functions. Sales and marketing expenses also include consultant fees and direct marketing costs related to the promotion of our platforms and solutions. We expect our sales and marketing expenses to increase over time as we promote our platform and brand, increase marketing activities, and grow domestic and international operations.

Acquisition-related Transaction Costs

Acquisition-related transaction costs consist of professional fees and other expenses incurred in connection with acquisition-related initiatives.

Amortization and Depreciation

Amortization and depreciation represent the recognition of costs of assets used in operations, including property and equipment and intangible assets, over their estimated service lives.

Change in Fair Value of Digital Assets

Changes in fair value of digital assets reflect gains or losses arising from the remeasurement of our bitcoin investment.

Non-Operating Income and Other Items

Interest Income (Expense)

Interest income consists of interest earned on our cash and cash equivalents, which we invest in highly liquid instruments such as money market funds, treasury bills and term deposits, together with interest from other investment arrangements. Interest expense primarily relates to our note payable and other borrowing arrangements.

Other Income (Expense)

Other income (expense) consists of miscellaneous income earned and expenses incurred outside of the normal course of business as well as foreign exchange gains and losses on transactions denominated in currencies other than the respective entities’ functional currencies.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration reflects gains or losses arising from the periodic remeasurement of the contingent consideration receivable recognized in connection with the acquisition of Northern Data.

Change in Fair Value of Warrant Liability

We account for our outstanding warrants in accordance with ASC 815-40, under which the warrants issued in connection with the Business Combination do not meet the criteria for equity classification, and must be recorded as liabilities. As these warrants meet the definition of a liability under ASC 815, they are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, with any subsequent changes in fair value recognized in the consolidated statement of operations in the applicable period of change.

Change in Fair Value of Derivative

The forward purchase contracts, as well as the embedded derivatives in both the notes payable and the funding arrangement, do not meet the criteria for equity classification and must be recorded as liabilities in accordance with guidance contained in ASC 815-40, Derivatives and Hedging Contracts in Entity’s Own Equity (“ASC 815-40”). Because these derivatives meets the definition of a liability under ASC 815, Derivatives and Hedging (“ASC 815”), they are measured at fair value at inception and at each reporting date in accordance with the guidance in ASC 820, Fair Value Measurement (“ASC 820”), with any subsequent changes in fair value recognized in the consolidated statement of operations in the applicable period of change.

Income Tax (Expense) Benefit

Income tax (expense) benefit consists of the estimated federal, state, and foreign income taxes incurred in the U.S. and other jurisdictions in which we operate.

Deferred Tax (Expense) Benefit

Deferred tax (expense) benefit represents the net change in our deferred tax assets and liabilities. It arises from temporary differences between the financial reporting bases and tax bases of assets and liabilities, as well as from net operating loss carryforwards and other tax attributes.

Key Business Metrics

To analyze our business performance, determine financial forecasts and help develop long-term strategic plans, we have historically used the key business metrics described below. See “Transition of Key Business Metrics” below for further information relating to our reporting of these metrics in future periods.

Monthly Active Users (“MAUs”)

We use MAUs as a measure of audience engagement to help us understand the volume of users engaged with our content on a monthly basis. MAUs represent the total web, mobile app, and connected TV users of Rumble for each month, which allows us to measure our total user base calculated from data provided by Google, a third-party analytics provider. Google defines “active users” as the “[n]umber of distinct users who visited your website or application.” We have used the Google analytics systems since we first began publicly reporting MAU statistics, and the resulting data have not been independently verified.

As of July 1, 2023, Universal Analytics (“UA”), Google’s analytics platform on which we historically relied for calculating MAUs using company-set parameters, was phased out by Google and ceased processing data. At that time, Google Analytics 4 (“GA4”) succeeded UA as Google’s next-generation analytics platform, which has been used to determine MAUs since the third quarter of 2023. Although Google has disclosed certain information regarding the transition to GA4, Google does not currently make available sufficient information relating to its new GA4 algorithm for us to determine the full effect of the switch from UA to GA4 on our reported MAUs. Because Google has publicly stated that metrics in UA “may be more or less similar” to metrics in GA4, and that “[i]t is not unusual for there to be apparent discrepancies” between the two systems, we are unable to determine whether the transition from UA to GA4 has had a positive or negative effect, or the magnitude of such effect, if any, on our reported MAUs. It is therefore possible that MAUs that we reported based on the UA methodology (“MAUs (UA)”) for periods prior to July 1, 2023, cannot be meaningfully compared to MAUs based on the GA4 methodology (“MAUs (GA4)”) in subsequent periods.

MAUs (GA4) represent the total web, mobile app, and connected TV users of Rumble for each month, which allows us to measure our total user base calculated from data provided by Google. Connected TV users were not counted within MAUs within MAUs (UA) for periods prior to July 1, 2023, and we believe the number of such users was immaterial in those prior periods. We also believe that fewer than 1 million MAUs in the current period are from connected TV, making them similarly immaterial. Google’s parameters for measuring “active users” appear to exclude many, but not all, users who access content on Rumble through “embedded” videos on domains other than rumble.com, and we are unable to determine the exact number of users who access “embedded” content within our total number of MAUs. In addition, MAUs (GA4) may rely on statistical sampling and may be based on estimates of data that Google is missing “due to factors such as cookie consent.”

As with our earlier MAU reporting, there is a potential for minor overlap in the resulting data due to users who access Rumble’s content through the web, our mobile apps, and connected TVs in a given measurement period; however, given that we believe this minor overlap to be immaterial, we do not separately track or report “unique users” as distinct from MAUs. Our reported MAUs have not historically included users of Locals. However, starting in mid-May 2024, Locals users began using Rumble’s single sign-on technology to access their accounts, which we expected would reduce the number of Locals users not included in our MAU reporting. We also do not separately report the number of users who register for accounts in any given period, which is different from MAUs.

Like many other major online platforms, we rely on significant paid advertising in order to attract users to our platform; however, we cannot be certain that all or substantially all activity that results from such advertising is genuine. Spam activity, including inauthentic and fraudulent user activity, if undetected, may contribute to some amount of overstatement of our performance indicators, including reporting of MAUs by Google. We continually seek to improve our ability to estimate the total number of spam-generated users, and we eliminate material activity that is substantially likely to be spam from the calculation of our MAUs. We will not, however, succeed in identifying and removing all spam.

On June 11, 2026, we implemented a consent management platform for users to decline tracking technologies and cookies, including for analytics purposes, in accordance with applicable privacy laws. As a result, the number of viewers we can directly measure in Google Analytics has been reduced. However, we enabled Google Consent Mode, which uses statistical modeling to estimate the activity of non-consenting users based on the observed behavior of consenting users and other signals, without the use of tracking cookies. Because our reported MAUs consist of directly measured users and modeled estimates as of that date, MAU figures for the three months ended June 30, 2026 and future periods may not be directly comparable to previously reported figures. The modeled component of our MAUs is inherently an estimate and is subject to limitations (e.g., we have limited visibility into, and do not independently verify, the methodology of Google Consent Mode’s behavioral modeling).

Our MAUs (GA4) were 57 million on average in the second quarter of 2026, an increase of 2% from the first quarter of 2026. We believe that the increase is driven by marketing investment in Rumble Shorts and international expansion.

Average Revenue Per User (“ARPU”)

We use ARPU as a measure of our ability to monetize our user base. Quarterly ARPU is calculated as quarterly Audience Monetization revenue divided by MAUs for the relevant quarter (as reported by Google Analytics). ARPU does not include Other Initiatives revenue.

ARPU was $0.48 in the second quarter of 2026, an increase of 20% from the first quarter of 2026. The increase from the first quarter of 2026 is attributable to higher advertising revenue.

We regularly review, have adjusted in the past, and may in the future adjust our processes for calculating our key business metrics to improve their accuracy, including through the application of new data or technologies or product changes that may allow us to identify previously undetected spam activity. As a result of such adjustments, our key business metrics may not be comparable period-over-period.

Transition of Key Business Metrics

Historically, we have reported MAUs and ARPU as key operating metrics for our video business. We use MAUs as a measure of audience engagement to understand the volume of users engaged with our content on a monthly basis. MAUs represent the total web, mobile app, and connected TV users of Rumble for each month, calculated from data provided by Google, a third-party analytics provider. We use ARPU as a measure of our ability to monetize our user base. Quarterly ARPU is calculated as quarterly Audience Monetization revenue divided by MAUs for the relevant quarter (as reported by Google Analytics) and does not include Other Initiatives revenue.

With the completion of our acquisition of Northern Data AG on June 17, 2026, the Company has taken a major step toward becoming a significant participant in the AI infrastructure business, and now operates two distinct businesses: our video platform (“Rumble”) and our AI and cloud infrastructure business (“Quake AI”). While both businesses are core to the Company’s strategy, their economics and capital profiles are materially different, including different revenue models and capital requirements. As a result, the manner in which management evaluates the Company’s business has changed, and management has determined that consolidated audience-based metrics such as MAUs and ARPU are no longer meaningful measures of the Company’s overall performance.

Accordingly, the Company will report MAUs and ARPU as key business metrics for the last time for the quarterly period ended June 30, 2026. Beginning with our third fiscal quarter of 2026, the Company intends to present its results of operations for each of its two businesses, Rumble and Quake AI, on a revenue and operating-income basis. Management believes this presentation will align the Company’s external reporting with the manner in which management now operates the business, and reflects the management team’s focus on profitable growth across the two business units. As the AI infrastructure business scales, the Company will evaluate and introduce additional operating metrics as appropriate.

Results of Operations

The following table sets forth our results of operations data for the periods presented:

Comparisons for three months ended June 30, 2026 and 2025:

The following table sets forth our unaudited condensed consolidated interim statements of operations for the three months ended June 30, 2026 and 2025 and the dollar and percentage change between the two periods:

* NM - Percentage change not meaningful.

Revenues

Revenues increased by $15.3 million to $40.4 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, of which $5.6 million was attributable to an increase in Audience Monetization revenues and $9.7 million attributed to higher Other Initiatives revenues. The increase in Audience Monetization revenues was driven by $5.9 million in advertising revenue and $0.2 million from licensing and platform hosting fees, offset by a $0.5 million decrease in subscription revenue. The increase in Other Initiatives revenue was due to the acquisition of Northern Data, which from the date of acquisition contributed $10.1 million from cloud computing and colocation services. Excluding Northern Data, Other Initiatives revenue decreased by $0.4 million, reflecting reduced advertising inventory being monetized by our publisher network and a decline in cloud services revenue.

Cost of Services

Cost of services increased by $4.1 million to $30.6 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The increase was driven by $2.1 million of higher programming and content costs and $2.5 million of incremental data center-related expenses associated with the acquisition of Northern Data, partially offset by a $0.5 million decrease in other cost of services.

General and Administrative Expenses

General and administrative expenses increased by $4.7 million to $16.3 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was driven by the acquisition of Northern Data, which contributed $5.0 million of payroll and related expenses and other administrative costs. Excluding Northern Data, the remaining variance reflects a $0.9 million increase in payroll and related expenses and a $0.4 million increase in other administrative costs, partially offset by a $1.6 million decrease in professional fees.

Research and Development Expenses

Research and development expenses increased by $2.0 million to $6.8 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was due to an increase in payroll and related expenses of $1.1 million and higher costs associated with computer software, hardware, and other expenditures used in research and development-related activities of $0.9 million.

Sales and Marketing Expenses

Sales and marketing expenses increased by $2.5 million to $10.4 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was attributable to higher marketing and public relations spend of $1.2 million, increased payroll and related expenses of $1.1 million, and other sales and marketing-related expenditures of $0.2 million.

Acquisition-related Transaction Costs

Acquisition-related transaction costs increased by $ 25.9 million to $28.3 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase is driven by professional fees and other expenses incurred in connection with acquisition-related initiatives.

Amortization and Depreciation

Amortization and depreciation increased by $12.7million to $14.9 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase is driven by $12.1 million of additional depreciation and amortization directly related to the Northern Data acquisition, as well as $0.4 million from depreciation on our property and equipment as we continue to build out our infrastructure and $0.2 million increase in amortization from intangible assets.

Change in Fair Value of Digital Assets

Change in fair value of digital assets expense increased by $7.6 million to $2.4 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The change in fair value of digital assets reflects the remeasurement of our bitcoin investment to its fair value at each reporting period.

Interest Income

Interest income decreased by $2.2 million to $0.7 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The decrease was due to a $1.2 million reduction in interest income from the Company’s investments in money market funds, treasury bills, and term deposits, with the remaining variance attributable to interest expense on notes payable, partially offset by additional interest income generated in connection with the acquisition of Northern Data.

Other Expense

Other expense increased by $4.8 million to $4.8 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025. The increase was driven by foreign currency fluctuations arising from the remeasurement of monetary balances denominated in currencies other than the respective entities’ functional currencies.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration expense decreased by $0.5 million to $0.5 million for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The change in fair value of contingent consideration reflects the remeasurement of contingent consideration receivable recognized in connection with the Northern Data acquisition at each reporting period.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability decreased by $0.8 million, resulting in a loss of $5.7 million for the three months ended June 30, 2026. The warrant liability arose in connection with the warrants offered as part of the Business Combination. As these warrants meet the classification of a financial liability in accordance with ASC 815-40, the related warrant liability was measured at its fair value, determined in accordance with ASC 820, at each reporting period. The fair value of this warrant liability was measured using the fair value of the Company’s warrants listed on the Nasdaq. The decrease in the change in fair value of warrant liability was directly attributable to changes in the trading price of the Company’s warrants.

Change in Fair Value of Derivative

Change in fair value of derivative increased by $0.3 million, resulting in a gain of $0.3 million for the three months ended June 30, 2026. The derivative arose in connection with the embedded derivatives in both the notes payable and the funding arrangement. As the embedded derivatives meet the classification of a financial liability in accordance with ASC 815-40, the related derivatives were measured at its fair value, determined in accordance with ASC 820, at each reporting period. The increase in the change in fair value of the derivative reflects the remeasurement of these derivatives during the period.

Comparisons for six months ended June 30, 2026 and 2025:

The following table sets forth our unaudited condensed consolidated interim statements of operations for the six months ended June 30, 2026 and 2025 and the dollar and percentage change between the two periods:

* NM - Percentage change not meaningful.

Revenues

Revenues increased by $17.0 million to $ 65.8 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025, of which $8.1 million was attributable to an increase in Audience Monetization revenues and $8.9 million attributed to higher Other Initiatives revenues. The increase in Audience Monetization revenues was driven by $7.0 million in advertising revenue, $0.8 million higher subscription revenue, and $0.3 million from licensing and platform hosting fees. The increase in Other Initiatives revenue was due to the acquisition of Northern Data, which from the date of acquisition contributed $10.1 million from cloud computing and colocation services. Excluding Northern Data, Other Initiatives revenue decreased by $1.2 million related to the reduction in advertising inventory being monetized by our publisher network.

Cost of Services

Cost of services increased by $1.0 million to $57.6 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was attributable to $2.5 million of incremental data center-related expenses associated with the acquisition of Northern Data, partially offset by a $1.5 million decrease in programming, content, and other cost of services.

General and Administrative Expenses

General and administrative expenses decreased by $1.6 million to $26.7 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The decrease was primarily driven by a $5.8 million reduction in payroll and related expenses and a $2.0 million reduction in professional fees, partially offset by a $1.2 million increase in other administrative expenses. The decrease in payroll and related expense was attributable to the absence of prior-year one-time items, including a one-time $4.8 million increase in compensation costs related to the departures of an executive and a director; a one-time $2.3 million increase in payroll taxes associated with stock options exercised related to the tender offer in the first quarter of 2025 stemming from the strategic investment from Tether; offset by a $1.7 million decrease in share-based compensation in the first quarter of 2025 related to contingent shares issued in connection with the Callin acquisition. The remaining variance was attributable to lower payroll and related expenses. Additionally, the decrease in general and administrative expenses was partially offset by the acquisition of Northern Data, which contributed $4.5 million of payroll and related expenses and other administrative costs.

Research and Development Expenses

Research and development expenses increased by $2.9 million to $12.5 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was due to an increase in payroll and related expenses of $1.7 million and higher costs associated with computer software, hardware, and other expenditures used in research and development-related activities of $1.2 million.

Sales and Marketing Expenses

Sales and marketing expenses increased by $7.4 million to $19.0 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was attributable to higher marketing and public relations spend of $5.0 million as well as an increase in payroll and related expenses of $2.4 million.

Acquisition-related Transaction Costs

Acquisition-related transaction costs increased by $30.8 million to $33.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was driven by professional fees and other expenses incurred in connection with acquisition-related initiatives.

Amortization and Depreciation

Amortization and depreciation increased by $13.4 million to $20.3 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was driven by $12.1 million of additional depreciation and amortization directly related to the Northern Data acquisition, as well as $1.0 million from depreciation on our property and equipment as we continue to build out our infrastructure and $0.3 million increase in amortization from intangible assets.

Change in Fair Value of Digital Assets

Change in fair value of digital assets increased by $10.0 million to $6.5 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The change in fair value of digital assets reflects the remeasurement of our Bitcoin investment to its fair value at each reporting period.

Interest Income

Interest income decreased by $2.5 million to $2.6 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025. The decrease was due to a $1.5 million reduction in interest income from the Company’s investments in money market funds, treasury bills, and term deposits, with the remaining variance attributable to interest expense on notes payable, partially offset by additional interest income generated in connection with the acquisition of Northern Data.

Other Expense

Other expense increased by $4.8 million to $4.9 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The increase was driven by foreign currency fluctuations arising from the remeasurement of monetary balances denominated in currencies other than the respective entities’ functional currencies.

Change in Fair Value of Contingent Consideration

Change in fair value of contingent consideration expense decreased by $0.5 million to $0.5 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The change in fair value of contingent consideration reflects the remeasurement of contingent consideration receivable recognized in connection with the Northern Data acquisition at each reporting period.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability decreased by $14.1 million, resulting in a gain of $1.3 million for the six months ended June 30, 2026. The warrant liability arose in connection with the warrants offered as part of the Business Combination. As these warrants meet the classification of a financial liability in accordance with ASC 815-40, the related warrant liability was measured at its fair value, determined in accordance with ASC 820, at each reporting period. The fair value of this warrant liability was measured using the fair value of the Company’s warrants listed on the Nasdaq. The decrease in the change in fair value of warrant liability was directly attributable to changes in the trading price of the Company’s warrants.

Change in Fair Value of Derivative

Change in fair value of derivative decreased by $9.4 million, resulting in a gain of $1.6 million for the six months ended June 30, 2026, compared to a gain of $9.7 million for the six months ended June 30, 2025. The decrease reflects a gain in the current period on the remeasurement the embedded derivatives in both the notes payable and the funding arrangement, compared to a gain in the prior-year period on the remeasurement of derivatives associated with forward purchase contracts entered into in connection with the Tether transaction, each classified as a financial liability under ASC 815-40 and measured at fair value in accordance with ASC 820.

Liquidity and Capital Resources

Our principal sources of liquidity are cash on hand and funds previously raised. The primary short-term requirements for liquidity and capital are to fund general working capital and capital expenditures.

As of June 30, 2026, our cash and cash equivalents balance was $203.3 million. Cash and cash equivalents consist of cash on deposit with banks and amounts held in money market funds, treasury bills, and term deposits.

Our corporate treasury diversification strategy, under which we allocate a portion of excess cash reserves to bitcoin, reflects management’s view of bitcoin as a strategic asset and supports the Company’s broader expansion into cryptocurrency-related activities. From a liquidity and capital resources standpoint, we consider our bitcoin holdings to be part of our pool of liquid assets that can be deployed, together with cash and cash equivalents, to fund operations and strategic initiatives as needed. As of June 30, 2026, our bitcoin holdings were valued at $17.2 million and consisted of 293.14 bitcoin. Other digital assets held by the Company are generally not intended to be used as near-term sources of liquidity and are therefore excluded from this liquidity analysis.

As we have consistently stated, we are using a substantial portion of funds to acquire content by providing economic incentives to a small number of content creators. As of June 30, 2026, we had entered into programming and content agreements with a minimum contractual cash commitment of approximately $32 million. A significant amount of these minimum contractual cash commitments will be paid over 12 to 24 months, commencing in 2026.

In addition, as our cloud infrastructure business continues to grow, we expect to undertake additional capital investments over time to support our operational and strategic objectives in this area.

The following table presents a summary of the unaudited condensed consolidated interim statements of cash flows for the six months ended June 30, 2026 and 2025.

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2026 primarily consisted of net loss adjusted for certain non-cash items, including $20.3 million in amortization and depreciation, $12.4 million in share-based compensation, $6.5 million in losses from changes in the fair value of digital assets, $5.7 million in unrealized foreign exchange losses, $3.7 million in non-cash lease expense, $1.0 million in provision for credit losses and $0.5 million in losses from changes in the fair value of contingent consideration, partially offset by $0.3 million in gains from changes in the fair value of derivatives, $1.5 million in net trade and barter revenue and expense and $1.3 million in gains from changes in the fair value of warrants, as well as changes in operating assets and liabilities. The increase in net cash used in operating activities during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due to changes in net loss adjusted for certain non-cash items, offset in part by changes in operating assets and liabilities, as well as the inclusion of Northern Data’s operating results and working capital balances following the acquisition.

Investing Activities

Net cash provided by investing activities for the six months ended June 30, 2026 consisted of $51.0 million in cash acquired in connection with the acquisition of Northern Data, offset by $43.2 million in purchases of capital assets and $2.8 million in purchases of intellectual property. The decrease in net cash provided by investing activities during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was due to cash acquired in connection with the acquisition of Northern Data, partially offset by an increase in purchases of capital assets and purchases of intellectual property.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2026 consisted of the issuance of $36.2 million in pre-funded warrants to purchase shares of Class A Common Stock, completed in connection with the acquisition of Northern Data. The transaction incurred $11.5 million in share issuance costs. Additionally, the net cash provided by financing activities includes $2.9 million from proceeds related to stock options exercised and employee stock purchase plan contributions, offset by $1.5 million in taxes paid from the net share settlement of share-based compensation. The decrease in net cash provided by financing activities compared to the six months ended June 30, 2025 was due to the proceeds from the strategic investment from Tether in the prior year period, partially offset by the proceeds from the issuance of pre-funded warrants in connection with the acquisition of Northern Data as well as the proceeds from stock options exercised and employee stock purchase plan contributions.

Summary of Quarterly Results

Information for the most recent quarters presented are as follows:

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with U.S. GAAP, we use certain non-U.S. GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-U.S. GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. We use the non- U.S. GAAP financial measure of Adjusted EBITDA, which is defined as net income (loss) excluding interest income (expense), net, other income (expense), net, provision for income taxes, depreciation and amortization, share-based compensation expense, acquisition-related transaction costs, change in fair value of warrants, change in fair value of digital assets, and change in the fair value of derivative. The Company’s management believes that it is important to consider Adjusted EBITDA, in addition to net income (loss), as it helps identify trends in our business that could otherwise be masked by the effect of the gains and losses that are included in net income (loss) but excluded from Adjusted EBITDA.

Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of Adjusted EBITDA rather than net income (loss), the nearest U.S. GAAP equivalent. As a result of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net income (loss) and our other financial results presented in accordance with U.S. GAAP. The following table presents a reconciliation of net income (loss), the most directly comparable financial measure calculated and presented in accordance with U.S. GAAP, to Adjusted EBITDA:

Reconciliation of Adjusted EBITDA

Critical Accounting Policies and Estimates

We prepare our unaudited condensed consolidated interim financial statements in accordance with accounting principles generally accepted in the United States of America. The preparation of the unaudited condensed consolidated interim financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We evaluate our estimates on a continuous basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

We believe that the following key accounting policies require significant judgments and estimates used in the preparation of our unaudited condensed consolidated interim financial statements. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Accordingly, we believe that these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

For further information on the summary of significant accounting policies and the effect on our unaudited condensed consolidated interim financial statements, see Note 2, Summary of Significant Accounting Policies, to the Annual Financial Statements.

Acquisitions (Business Combination vs Asset Acquisition)

The Company evaluates whether acquired net assets should be accounted for as a business combination or an asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If so, the transaction would be accounted for as an asset acquisition. If not, the Company would apply its judgment to determine whether the acquired net assets meet the definition of a business by considering if the set includes an acquired input, process, and the ability to create outputs.

Property and Equipment and Intangible Assets

The Company acquired property and equipment as well as intangible assets in connection with the acquisition of Northern Data. A valuation was performed to determine the estimated fair value of these assets related to the acquisition. Judgment is required to estimate the fair value of these property and equipment and identifiable intangible assets. We may use quoted market prices, prices for similar assets, present value techniques, and other valuation techniques to prepare these estimates. We may need to make estimates of future cash flows and discount rates as well as other assumptions in order to implement these valuation techniques. Due to the degree of judgment involved in our estimation techniques, our estimate may result in significant differences in the estimation of fair value.

Contingent Consideration Receivable

In connection with the acquisition of Northern Data, the Company recognized a contingent consideration. A valuation was performed to determine the estimated fair value of the contingent consideration receivable using a scenario-weighted income approach that reflects four outcome scenarios and incorporates key unobservable inputs including scenario weightings, estimated selling dates, estimated selling prices, forecasted net profits, as well as changes in key market data such as foreign exchange rates, and weighted average cost of capital. Because these estimates require significant judgment in selecting and applying the underlying assumptions, the resulting fair value measurement may differ materially from the actual amounts ultimately realized.

Notes Payable and Derivative Liability

The Company issued a euro-denominated note payable to Tether that contains a conversion feature, which was assessed as an embedded derivative requiring bifurcation from the host contract. The fair values of both the note and the related derivative were estimated using a binomial lattice model based on a modified Cox-Ross-Rubinstein framework. Because these valuation techniques involve significant judgment in the selection of assumptions and inputs, the resulting estimates of fair value could differ materially from actual outcomes.

Share-based Compensation

The Company issues equity awards such as stock options and restricted stock units to certain of its employees, directors, officers and consultants. We account for equity awards by recognizing the fair value of share-based compensation expense on a straight-line basis over the service period of the award.

For equity awards with a service condition, the fair value is estimated on the grant date using the Black-Scholes option pricing model, which takes into account the following inputs: stock price, expected term, volatility, and risk-free interest rate.

For equity awards with a market condition, the fair value is estimated on the grant date using a Monte Carlo simulation methodology that includes simulating the stock price using a risk-neutral Geometric Brownian Motion-based pricing model. Changes in the estimated inputs or using other option valuation methods may result in materially different option values and share-based compensation expense.

For equity awards with a performance condition, the Company assesses the likelihood of the performance condition underlying an award being met and recognizes a share-based compensation expense associated with that award only if it is probable the performance condition will be met. Where the performance condition underlying an award is a change in control, the Company would consider the performance condition to be probable only when it occurs.

Income Taxes

The Company is subject to income taxes in the United States and other foreign jurisdictions. Significant judgment is required in determining our provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws.

Uncertain tax positions are accounted for using a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain income tax positions. The Company reviews its nexus in various tax jurisdictions and the Company’s tax positions related to all open tax years for events that could change the status of its tax liability, if any, or require an additional liability to be recorded. Such events may be the resolution of issues raised by a taxing authority, expiration of the statute of limitations for a prior open tax year or new transactions for which a tax position may be deemed to be uncertain. Those positions, for which management’s assessment is that there is more than a 50 percent probability of sustaining the position upon challenge by a taxing authority based upon its technical merits, are subjected to the measurement criteria.

Trade and Barter Transactions

The Company engages in trade and barter transactions whereby the Company and its counterparty exchange media campaigns or other promotional services. The Company reviews each transaction to ensure the advertising it receives has economic substance and records revenue in an amount equal to the fair value of the products and services received unless this is not reasonable to estimate, in which case the consideration is measured based on the standalone selling price of the advertising inventory promised or delivered to the customer. Trade and barter revenue is recognized when the performance obligation is fulfilled and follows the same pattern of recognition as the Company’s normal advertising revenue. Trade and barter expense is recorded when goods or services are consumed. The trade and barter expense is recorded in sales and marketing expenses in the unaudited condensed consolidated interim statements of operations.

New Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, to our Annual Financial Statements for the years ended December 31, 2025 and 2024.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to elect to adopt new or revised accounting standards under private company adoption timelines. Accordingly, the timing of our adoption of new or revised accounting standards will not be the same as other public companies that are not emerging growth companies or that have opted out of using such extended transition period and our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

We are exposed to certain market risks as part of our ongoing business operations.

Credit and Concentration Risk

We are exposed to credit risk on our cash, cash equivalents, and accounts receivable. We place cash and cash equivalents with financial institutions with high credit standing, and we place excess cash in money market funds, treasury bills, and term deposits. We are exposed to credit risk on our accounts receivable in the event of default by a customer. We bill our customers under customary payment terms and review customers for their creditworthiness. The term between invoicing and payment due date is not significant. For the three months ended June 30, 2026, one customer accounted for $6,730,859 or 10% of the Company’s total revenue. For the three months ended June 30, 2025, no one single customer accounted for 10% or more of the Company’s total revenue. As of June 30, 2026, three customers accounted for 51% of the Company’s total accounts receivable. As of December 31, 2025, no single customer represented 10% or more of the Company’s total accounts receivable.

Interest Rate Risk

We are exposed to interest rate risk on our cash and cash equivalents. As of June 30, 2026, we had cash and cash equivalents of $203.3 million, consisting of investments in money market funds, treasury bills, and term deposits for which the fair market value would be affected by changes in the general level of interest rates. However, due to the short-term maturities and the low-risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our cash, cash equivalents and marketable securities.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report. Based on this review and evaluation, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

On June 17, 2026, we completed the acquisition of Northern Data, as a result of which we acquired approximately 85% of Northern Data’s outstanding shares (see Note 3 to the condensed consolidated interim financial statements for additional information). Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year following the acquisition while integrating the acquired business. Accordingly, we have excluded Northern Data from our assessment of disclosure controls and procedures and internal control over financial reporting for the period covered by this report. We are in the process of integrating Northern Data into our internal control over financial reporting framework and expect to complete that integration within one year of the closing of the acquisition date.

Changes in Internal Controls over Financial Reporting

Except as noted above with respect to the Northern Data acquisition, there were no changes in our internal control over financial reporting during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because the ND Business Combination has now been consummated and Northern Data’s business is expected to constitute a significant portion of our business, additional significant risks may apply to the combined business as detailed in the “Risk Factors” section of our Registration Statement on Form S-4 (File No. 333-295008) filed in connection with the ND Business Combination, which was initially filed with the SEC on April 13, 2026 and subsequently declared effective on April 14, 2026, including the risks relating to Northern Data’s business contained therein, which “Risk Factors” section is incorporated by reference herein. Except as set forth therein and below, there have been no material changes to the risk factors described under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. Such risk factors could materially adversely affect our business, financial condition, results of operations, and prospects. You should carefully consider the risks, uncertainties and cautionary statements described therein, together with the other disclosures in this Quarterly Report on Form 10-Q and in our other public filings with the SEC. Any such risks and uncertainties, as well as risks and uncertainties not currently known to us or that we currently deem to be immaterial, may materially adversely affect our business, financial condition and operating results.

Risks Related to Our Business

Our development and construction of new data center facilities involves significant risks, including increasing public and community opposition to data center development and exposure to a highly-evolving regulatory landscape, which could delay, increase the cost of, or prevent the completion of our planned projects and subject us to potential legal liabilities.

Our strategy contemplates the development and construction of one or more new data center facilities, and we expect to continue to evaluate additional development opportunities in the future. Data center development is a complex, capital-intensive, multi-year undertaking that exposes us to numerous risks, many of which are outside of our control, including: construction delays and budget overruns; increased prices for, or limited availability of, raw materials, building supplies, and long-lead-time equipment such as generators, switchgear, transformers, and cooling infrastructure; the availability and cost of skilled construction labor, and labor disputes or work stoppages involving our contractors and subcontractors; the availability of construction and permanent financing on acceptable terms, or at all; unanticipated environmental, geological, or other site-specific conditions; delays in, or the failure to obtain, necessary entitlements, permits, and approvals, including zoning, siting, land use, building, environmental, water, and utility permits and interconnection or other approvals from public agencies and utility companies; and the availability of sufficient electrical power and related transmission and distribution infrastructure on commercially reasonable terms and within our anticipated timelines.

In addition, data center development has become the subject of increasing public attention and, in a growing number of communities, organized local opposition. Residents, advocacy organizations, and other stakeholders in communities where data centers are proposed or under development have raised concerns regarding, among other things, electricity consumption and the potential impact of large-load customers on local utility rates and grid reliability; water usage, particularly in water-stressed regions; noise, traffic, light, and other quality-of-life impacts; effects on property values and community character; environmental and land use impacts; and the perceived imbalance between the scale of data center investment and the number of permanent local jobs created. This opposition has become increasingly organized and well-publicized across the industry, and has contributed to the delay, modification, and cancellation of data center projects proposed by other developers, as well as to the adoption or consideration by state and local governments of moratoria, restrictive zoning ordinances, enhanced permitting and disclosure requirements, water- and energy-use restrictions, limitations on the use of back-up power sources, and other measures that could hinder our ability to develop, upgrade, expand or rebuild existing data centers or construct new data centers. Specifically, drought conditions in certain markets have resulted in water usage restrictions and proposals to further restrict water usage, and our data center facilities could face restrictions on water usage, water efficiency mandates, or higher water prices. In addition, local officials who support data center projects have, in some instances, faced significant political pressure, and land use decisions favorable to data center developers have been, and may in the future be, challenged through litigation, referenda, and other legal and political processes.

Our current and future development projects have been and will likely continue to be the subject of similar public scrutiny or opposition. Although we have invested significant time and resources into developing positive relationships with local communities, community opposition could result in the delay, suspension, redesign, downsizing, relocation, or abandonment of one or more of our planned projects; the denial, revocation, or conditioning of permits and approvals necessary for construction or operation; the imposition of costly mitigation measures, community benefit commitments, or operating restrictions as a condition to approval; protracted administrative proceedings or litigation; increased pre-development, construction, and operating costs; and reputational harm to our company and our brand, whether arising from our own projects or from negative public sentiment toward the data center industry generally. Opposition directed at our utility providers, our development partners, or the customers our facilities are intended to serve could have similar effects on our projects, even where our own facilities are not the direct subject of such opposition. Because we may commit substantial capital and contractual obligations, including land acquisition, equipment procurement, power supply arrangements, and customer commitments, in advance of receiving all required approvals, delays or failures in the development process could result in stranded or impaired assets, loss of deposits or prepayments, liability to customers or other counterparties for failure to deliver capacity on anticipated timelines, and loss of anticipated revenue. Any of the foregoing could materially and adversely affect our business, results of operations, financial condition, and prospects.

The regulatory landscape surrounding the high-performance computing (“HPC”) and AI industries is evolving rapidly. These developments may affect our business and operations in ways that are difficult to predict. Regulators are increasingly scrutinizing the development and operation of data centers regarding energy consumption, land use, carbon emissions, water usage, environmental impacts, data-sovereignty considerations, and national-security-related issues. New requirements, such as permitting requirements, energy standards, carbon-reduction mandates, sustainability reporting rules, or operational restrictions specific to data centers, AI infrastructure, or high-density compute environments, may be imposed. To the extent we have not complied with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, financial condition, and prospects.

Further, AI data compute customers increasingly are looking to pass through their regulatory obligations and other liabilities to their outsourced data center providers, and we may not be able to limit our liability or damages in the event of loss suffered by such customers, whether as a result of our breach of an agreement or otherwise.

Our substantial indebtedness following the ND Business Combination, and additional indebtedness we expect to incur in connection with our AI infrastructure and data center business, could adversely affect our financial condition and limit our operational flexibility.

In connection with the closing of the ND Business Combination, on June 18, 2026, Rumble Freedom First Holding Designated Activity Company (“Irish HoldCo”), as borrower, and Tether, as lender, entered into that certain secured Credit Agreement (the “Credit Agreement”) in connection with Tether transferring 50% of its receivable under an existing floating rate loan, dated as of November 2, 2023 (as amended, supplemented or modified from time to time) (the “Existing ND Loan”), by and between Tether and Northern Data. Irish Holdco is a newly formed Irish private limited company and indirect wholly-owned subsidiary of the Company and the borrower group under the Credit Agreement comprises Irish Holdco and its subsidiaries. The Credit Agreement provides for a secured five-year term facility with commitments of €317,533,401. This facility matures on the five-year anniversary of June 18, 2026 and bears interest at a margin of 3.00%, payable quarterly, plus EURIBOR.

In addition to the Credit Agreement described above, we also expect to incur substantial additional indebtedness to finance the development, construction, and operation of data centers and the acquisition of related equipment, including high-performance computing hardware. Our transition from operating without leverage to operating with substantial indebtedness presents risks that are new to our business.

The Credit Agreement could require us to dedicate a significant portion of our cash flow from operations to debt service, reducing funds available for working capital, capital expenditures, and other corporate purposes; limit our ability to obtain additional financing on favorable terms, or at all; increase our vulnerability to adverse economic and industry conditions, including changes in demand for AI computing capacity; expose us to interest rate risk to the extent our borrowings bear interest at variable rates; and place us at a competitive disadvantage relative to competitors with greater financial resources or lower cost of capital.

The Credit Agreement contains, and future financing arrangements that we may incur to facilitate and expand our AI infrastructure and data center business may contain, covenants that restrict our ability to incur additional indebtedness, create liens, dispose of assets, make investments, pay dividends, and require us to maintain specified financial ratios. Failure to comply could result in an event of default, which could lead to acceleration of the affected indebtedness and, through cross-default provisions, other indebtedness, including obligations we have guaranteed. In addition, given the capital-intensive nature of data center development, our financing needs could be substantial and recurring, and any construction delay, cost overrun, or an inability to refinance maturing obligations on acceptable terms could materially and adversely affect our business, financial condition, and results of operations. External factors such as inflation, monetary policy, or other market conditions could impact our cost of borrowing and could make it more difficult to obtain the financing that is required to construct the facilities and generation and transmission assets we develop to support future data center contracts on favorable terms, or at all. Any issuance of additional debt could negatively impact our credit ratings and overall cost of capital, which could in turn adversely affect our future results and liquidity.

Northern Data, together with its subsidiaries (the “ND Group”), is subject to certain pending tax audits and regulatory investigations which, if adversely determined, could result in additional tax assessments, penalties, interest charges, litigation, reputational damage, or increased compliance costs, any of which could have a material adverse effect on the ND Group’s business, financial position and results of operations.

The ND Group is subject to tax laws and regulations in multiple jurisdictions and may from time to time be involved in audits, inquiries, or investigations by tax authorities or other regulatory bodies. Such proceedings may relate to the interpretation and application of complex tax rules, including cross-border transactions, transfer pricing, withholding taxes or indirect tax matters. The outcome of any such proceedings is inherently uncertain and may result in additional tax assessments, penalties, interest charges, or other financial obligations that differ materially from the ND Group’s current expectations or provisions.

A VAT audit was conducted by the STA in relation to two subsidiaries of Northern Data – Decentric Europe B.V. (“Decentric”) and Hydro 66 Svenska AB (“Hydro 66 Svenska”) – while an audit of another subsidiary is ongoing Hydro 66 Services). The STA has issued decisions to Decentric and Hydro 66 Svenska in which it asserts that certain activities performed at the ND Group’s data center operations in Boden, Sweden, constituted cryptocurrency mining activities that it considers to be outside the scope of VAT, and therefore proposes to deny the deduction of input VAT previously claimed. The assessment amounts to approximately SEK 336 million (approximately USD 35 million) for Decentric and approximately SEK 209 million (approximately USD 21 million) for Hydro 66 Svenska, in each case including any potential penalties and interest. The ND Group has formally appealed both the decision regarding Decentric and the decision regarding Hydro 66 Svenska. Both entities applied for payment deferrals which the STA granted. The ND Group’s position is that the relevant activities involved the provision of infrastructure and related services to third parties, which Northern Data’s management board considers to constitute taxable supplies under Swedish VAT legislation. Northern Data’s management board also considers that certain conclusions reflected in the decisions may have been drawn from incomplete operational data and assumptions that do not fully reflect the underlying commercial arrangements.

Separately, the European Public Prosecutor’s Office (“EPPO”) has initiated an investigation relating to VAT-related matters involving, among others, certain former employees and directors of Northern Data and its subsidiaries Decentric, Hydro66 Svenska and Hydro66 Services. Public documentation associated with the investigation refers to potential VAT exposure of up to approximately EUR 110 million (approximately USD 125 million), excluding any potential penalties, surcharges or interest. NDAG believes the EPPO investigation relates to the same or similar VAT matters under investigation by the STA. The proceedings of the STA in connection with all entities referenced in the EPPO investigation remain ongoing. It is at the appeal stage for Decentric and Hydro66 Svenska. The Group has not received any formal assessment or proposed decision from the Swedish Tax Agency in relation to Hydro66 Services AB The ultimate outcome of these matters remains uncertain and may depend on the outcome of further administrative discussions, appeals processes, or judicial proceedings. Due to payment deferrals that were granted and the ongoing proceedings, the ND Group cannot currently reliably estimate the amount of any potential obligation that may ultimately arise.

The outcome of the aforementioned proceedings could result in additional tax assessments, penalties, interest charges, litigation, reputational damage, or increased compliance costs, any of which could have a material adverse effect on the ND Group’s business, financial position and results of operations. In addition, it cannot be excluded that tax or regulatory authorities in other jurisdictions may initiate further reviews or proceedings in connection with the ND Group’s international activities. Any such developments could further increase the ND Group’s exposure to financial and operational risks and could materially adversely affect the ND Group’s business, financial position and results of operations.