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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with those statements. You should read the following discussion in conjunction with our consolidated financial statements and related notes which are included elsewhere in this Quarterly Report on Form 10-Q. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, those described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, as may be amended, supplemented or superseded from time to time by other reports we file with the SEC.

Overview

Datacentrex, Inc. (“Datacentrex,” the “Company,” “we,” “us,” or “our”) is a digital infrastructure and capital deployment company that owns and operates Scrypt-based proof-of-work (“PoW”) compute assets. On December 15, 2025, the Company consummated the acquisition of Dogehash Technologies, Inc. (“Doge”) through a reverse recapitalization (the “Transaction”), following which the combined company changed its name to Datacentrex, Inc. Doge, the accounting acquirer, had commenced digital asset mining operations prior to the Transaction.

The following discussion reflects the operations of Doge and its successors for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. The Company began the first quarter of 2025 with an initial deployment of approximately 1,500 Scrypt ASIC miners at a single colocation facility outside of the United States. Over the course of 2025, Doge deployed additional units in domestic colocation sites, relocated the original fleet of approximately 1,500 miners back to the United States and continued to deploy additional rigs. As of June 30, 2026, our total operating fleet consisted of 3,085 Scrypt ASIC miners deployed across four geographically diversified colocation facilities, all located in the United States with no material additions or removals during the quarter then ended.

We generate revenue by deploying owned Scrypt application-specific integrated circuit (“ASIC”) hardware to produce PoW hashrate, which we monetize primarily through a hashrate marketplace model with settlement typically denominated in Bitcoin. Our Scrypt compute contributes hashrate to the Litecoin blockchain, and through merged-mining architecture, simultaneously secures and validates additional Scrypt-based networks, including Dogecoin, without incremental energy consumption. The Company’s mining operations produce exposure to multiple digital asset networks from a single deployment of compute and power, with Dogecoin representing the largest share of protocol-native coin production during the period and Bitcoin representing the primary settlement asset received through marketplace monetization channels.

We manage a treasury of digital assets and cash intended to preserve capital, maintain liquidity, and enhance long-term value creation. As of June 30, 2026, the Company held over $5.9 million in digital assets, comprising a mix of Bitcoin accumulated through hashrate marketplace settlement and unsold Dogecoin and Litecoin from pool-based mining. Management expects that future treasury concentration will favor Bitcoin over time, consistent with the Company’s hashrate marketplace monetization model in which settlement is typically received in Bitcoin.

Our results are primarily driven by (i) realized revenue rate per unit of hashrate deployed, (ii) power cost and curtailment exposure at the facility level, (iii) uptime and operational execution, (iv) availability and replacement cycle dynamics for Scrypt ASIC supply, and (v) treasury and capital allocation decisions, including decisions regarding holding, converting, or deploying digital assets and cash.

We are not a protocol developer. We do not control any blockchain network and do not generate revenues from maintaining or updating any open-source network protocol. Our results depend on our ability to procure and operate compute infrastructure economically and to monetize that compute in a manner that produces attractive risk-adjusted returns.

The Company’s operations are principally operated remotely at various data centers throughout the United States. The Company’s principal address is 470 W 200 N STE 18, Salt Lake City, UT 84103 and its telephone number is (800) 403-6150. The Company’s website address is www.datacentrex.com (http://www.datacentrex.com). The information provided on the Company’s website or connected thereto does not constitute part of, and is not incorporated by reference into, this quarterly report on Form 10-Q.

Key Factors that Affect Operating Results

Key Operating Inputs

Digital asset market conditions. Our results are influenced by price, volatility, and liquidity in digital asset markets, including the assets associated with Scrypt networks and the settlement asset we receive through monetization channels. Adverse movements may reduce revenue and operating margins and impair liquidity.

Network difficulty and hashrate. PoW networks dynamically adjust mining difficulty based on total network hashrate. Increased network hashrate typically increases difficulty, which reduces expected rewards per unit of hashrate deployed and can pressure margins if power costs or monetization rates do not improve. Conversely, declines in network hashrate can reduce difficulty and improve expected economics for remaining miners.

Power costs and curtailment. Electricity is a primary input cost. Power rates, capacity charges, curtailment obligations, transmission constraints, and other ancillary costs can materially affect profitability. We may be required to curtail load or may voluntarily curtail load when economically advantageous or contractually required.

Uptime and operational execution. Because revenue depends on continuous operation of compute assets, uptime is a critical driver of realized results. Equipment failures, facility outages, maintenance, networking issues, and configuration errors can reduce uptime and revenue.

Hardware supply and replacement cycles. Scrypt ASIC supply is subject to vendor production schedules, logistics, and market availability. As competition evolves, miners may need to deploy newer hardware, replace components, or optimize existing fleets to remain competitive.

Counterparty performance. Our business depends on the performance of hosting providers, marketplace operators, custodians, and trading venues. Counterparty failures, cybersecurity incidents, or operational disruptions could materially affect results.

Cost Structure and Operating Leverage

The Company’s cost structure consists primarily of power costs, hosting-related expenses, and depreciation of capitalized mining equipment.

Power Costs

Electricity is the primary operating cost of the Company’s compute operations. Power consumption is variable based on the number of machines operating at any given time. However, under the Company’s existing colocation arrangements, the price of electricity is fixed pursuant to contractual agreements, and uptime and power delivery obligations are contractually defined.

If a hosting or colocation provider fails to deliver power in accordance with the terms of the applicable agreement, the Company may be entitled to monetary penalties or, in certain circumstances, to terminate the agreement without recourse to the host. As a result, while power usage fluctuates with operational decisions, power pricing and availability are substantially governed by contract.

Hosting and Operating Costs

Hosting-related costs include facility services, power delivery infrastructure, networking, and site-level operations provided by colocation partners. These costs may include both fixed and variable components depending on contractual terms and facility configuration.

Capitalized Hardware

Mining equipment is capitalized and depreciated over its estimated useful life. Hardware costs are not expensed as incurred, and operating margins are therefore sensitive to both depreciation expense and the economic productivity of deployed equipment.

Operating Leverage and Scale

Operating scale does not inherently improve margins under a pure hosting model. Meaningful margin expansion is primarily achievable through upstream integration into power ownership or power-adjacent infrastructure. If the Company were to acquire or control power generation, interconnection, or other upstream assets, margins could expand significantly due to reduced energy costs and improved control over the cost structure. There can be no assurance that such opportunities will be pursued or achieved.

Mining Equipment and Hosting Arrangements

Mining Equipment

Datacentrex owns a fleet of specialized Scrypt ASIC miners used to generate PoW hashrate. Since inception of the operating platform, the Company has invested in excess of $29 million in mining equipment and related infrastructure.

As of the consummation of the Merger, the Company operated more than 3,100 Scrypt ASIC miners, which are deployed across multiple colocation facilities. The Company may hold certain equipment in inventory, in transit, or in staging for deployment, and may acquire additional miners or components depending on expansion plans, equipment availability, and capital allocation priorities.

The economic performance of the Company’s mining equipment depends on a number of factors, including hardware reliability, uptime, network difficulty, power costs, and monetization rates. Over time, competitive dynamics may require replacement, refurbishment, or redeployment of equipment to maintain attractive operating economics.

Equipment Lifespan and Replacement Cycles

Scrypt ASIC miners have finite useful lives and are subject to technological obsolescence over time. However, the lifecycle dynamics of Scrypt mining equipment differ from those of SHA-256 mining equipment used in Bitcoin mining.

The Scrypt ASIC market is served by a limited number of manufacturers, and innovation cycles have historically occurred at a slower pace relative to Bitcoin mining hardware. As a result, Scrypt miners may retain economic usefulness for longer periods, and new hardware generations may not render prior generations obsolete as rapidly as in other PoW markets.

Management believes these dynamics can support longer economic lifespans and residual value for Scrypt mining equipment relative to certain other mining categories. Nonetheless, future technological developments, changes in network economics, or shifts in competitive dynamics could reduce the useful life or value of existing equipment.

Hosting and Colocation Arrangements

Datacentrex deploys its mining equipment primarily through third-party colocation and hosting arrangements. Under these arrangements, hosting providers supply physical space, electrical infrastructure, power delivery, and certain site services necessary to operate energy-intensive compute workloads. The Company retains ownership of its mining equipment and remains responsible for configuration, monitoring, maintenance coordination, and operational management, subject to the terms of applicable hosting agreements.

The Company currently operates under three colocation arrangements that provide access to electric power sourced from the Electric Reliability Council of Texas (ERCOT) grid, the Midcontinent Independent System Operator (MISO) grid, and the Georgia Power grid, respectively. These arrangements allow Datacentrex to diversify geographic exposure, grid risk, and operational dependencies while supporting deployment of its existing fleet. Hosting arrangements expose the Company to counterparty risk, including the risk that a hosting provider fails to perform its obligations, experiences operational disruptions, or becomes financially distressed. Hosting agreements may also include provisions related to curtailment, maintenance windows, capacity constraints, or other operational limitations that can affect uptime and revenue.

Management believes that deploying equipment across multiple facilities and grid regions reduces reliance on any single site or power market. However, diversification does not eliminate the risk of correlated events, including regional grid disruptions, extreme weather events, regulatory actions, or market-wide curtailment programs. The Company’s ability to expand operations depends on the availability of additional hosting capacity, power, and interconnection on acceptable terms, as well as access to capital and equipment supply.

Treasury, Liquidity, and Custody

We manage digital assets and cash as part of a dynamic treasury and capital allocation strategy intended to preserve capital, maintain liquidity, and enhance long-term value creation.

Under our hashrate marketplace monetization model, settlement is typically received in Bitcoin. Management has historically evaluated retaining Bitcoin-denominated proceeds as a treasury asset rather than immediately converting to fiat currency and expects that future treasury concentration may favor Bitcoin over time. From time to time, we may allocate a portion of Dogecoin exposure to pilot-stage, protocol-native yield opportunities within the Dogecoin ecosystem, including limited participation in Layer-2 networks. These activities remain exploratory and are not governed by a formal treasury policy adopted by our board of directors. We may modify, expand, suspend, or discontinue such pilot activities based on performance and risk assessment.

We utilize institutional custodians and trading platforms for custody and execution, including Anchorage Digital and Coinbase Prime, and are subject to risks associated with third-party custodians and trading venues, including cybersecurity risk, operational risk, legal and regulatory risk, and counterparty risk.

Infrastructure and Power Strategy

Power and physical infrastructure are foundational to our operating platform. Our current compute operations are deployed primarily through third-party colocation sites that provide access to power and the environment required to run energy-intensive compute.

Management evaluates opportunities to expand and, where attractive, vertically integrate upstream through acquisitions or developments involving powered land, interconnection capacity, electrical infrastructure, or operating data-center assets. Such opportunities may improve cost control and strategic flexibility but can require significant capital, permitting and regulatory execution, and operational integration.

We do not intend to limit our long-term opportunity set to cryptocurrency-related compute. Management believes our experience operating energy-intensive compute positions the Company to evaluate other compute-enabled or infrastructure-backed opportunities.

Strategy and Growth

Datacentrex is not positioned solely as a cryptocurrency mining company. Management views Scrypt compute as an initial operating platform that can generate cash flow and operational capabilities that may be leveraged across a broader strategic mandate.

We intend to maintain flexibility to pursue mergers, acquisitions, asset purchases, joint ventures, and strategic investments across digital infrastructure, compute-enabled services, energy-adjacent infrastructure, and other asset-backed operating businesses. We may evaluate opportunities both within and outside the digital asset ecosystem. Management may adjust strategic focus over time in response to market conditions, regulatory developments, capital availability, and risk-adjusted return opportunities.

Strategic Scope and Capital Allocation Boundaries

The Company’s strategy is designed to preserve flexibility while maintaining discipline in capital allocation. Although Datacentrex currently operates a Scrypt-based compute platform, management does not view the Company as permanently constrained to any single protocol, asset class, or operating model. Strategic decisions, including material expansions, acquisitions, divestitures, or entry into new lines of business, are subject to oversight by the Company’s board of directors. While management evaluates a broad range of potential opportunities, the Company does not intend to deploy capital indiscriminately or to pursue speculative investments unrelated to asset-backed operating businesses. Notwithstanding the foregoing, there can be no assurance that identified opportunities will be consummated or that any strategic initiative will be successful.

Second Quarter FY26 Operational Highlights

Key operational highlights for the quarter ended June 30, 2026 include:

Fleet Scaling and Deployment. The Company began the second quarter of 2026 with a total operating fleet of 3,085 Scrypt ASIC miners deployed across four geographically diversified colocation facilities, all located in the United States. The fleet remained stable during the quarter, with no material additions or removals and no changes to colocation arrangements or contracted power capacity.

Hashrate and Power Capacity. As of June 30, 2026, the Company’s fleet of 3,085 operating Scrypt ASIC miners had an average nameplate capacity of approximately 14 GH/s per unit, representing aggregate deployed hashrate of approximately 43.2 TH/s at full uptime. The fleet’s average nameplate power consumption was approximately 3.95 kW per unit, representing approximately 12.5 MW of total deployed power capacity across the Company’s four colocation facilities.

Revenue and Financial Performance. For the quarter ended June 30, 2026, the Company generated revenues of approximately $1.9 million from digital asset mining operations, with cost of revenue of approximately $1.7 million and gross profit of approximately $0.2 million. The Company reported a net loss attributable to common stockholders of approximately $5.5 million, driven primarily by depreciation expense of $3.3 million on mining equipment (amortized over a two-year useful life), stock-based compensation of $0.8 million, and general and administrative expenses associated with operating as a public company. Adjusted EBITDA, which is defined as net loss, adjusted for impacts of interest expense, income tax provision or benefit and depreciation and amortization, and non-cash stock-based compensation was approximately $(1.3) million for the period, reflecting the impact of net realized and unrealized losses on digital assets held in treasury during the period.

Our results are primarily driven by realized revenue rates per unit of hashrate deployed, power costs and facility-level economics, fleet uptime and operational execution, hardware supply and replacement cycle dynamics, digital asset market conditions, and treasury and capital allocation decisions. For a further discussion of these key operating inputs, see Item 1, “Business — Key Operating Inputs” and the discussion of results of operations below.

RESULTS OF OPERATIONS

Three months ended June 30, 2026 and 2025

The following table sets forth certain selected consolidated statements of operations data for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025.

Revenues

The Company generated revenues of $1,913,779 for the three months ended June 30, 2026, as compared to $1,928,587 for the three months ended June 30, 2025. Revenue was relatively consistent for the three months ended June 30, 2026 and 2025 due to steady levels of operating activity during both periods. Cryptocurrency mining revenues are significantly affected by volatility in digital asset prices, changes in the blockchain network hash rate, increases in the overall quantity and efficiency of rigs utilizing the Scrypt mining algorithm, and changes in the difficulty index associated with solving blocks on the blockchain.

Cost of Revenue

Cost of revenue for the three months ended June 30, 2026 of approximately $1,708,524 consisted primarily of direct production costs of the mining operations, including utilities and fees paid to the Company’s colocation agreement hosts, but excluding depreciation and amortization, which are separately stated. By comparison, cost of revenue for the three months ended June 30, 2025 of approximately $998,062 consisted primarily of direct production costs of the mining operations, including utilities and fees paid to the Company’s colocation agreement hosts. The increase of $710,462 reflects the increased power rates of the Company’s deployed mining fleet.

Operating expenses

For the three months ended June 30, 2026 the Company incurred operating expenses of $5,001,465, consisting of general and administrative expenses of $863,281, depreciation and amortization of $3,287,326, and stock-based compensation of $850,858. General and administrative expenses primarily reflect legal, accounting, and other professional fees, payroll and outside consultant fees, insurance, and public company compliance costs. Depreciation and amortization expense is primarily attributable to in-service mining equipment, which is amortized over a two-year useful life. Stock-based compensation reflects expense recognized under the Company’s equity incentive plan for eligible employees and directors. For the three months ended June 30, 2025 the Company incurred operating expenses of $2,355,630, consisting of general and administrative expenses of $193,099, depreciation and amortization of $2,162,531, and no stock-based compensation. The increase of $2,645,835 in operating expenses period over period is primarily attributable to increases in depreciation expense of $1,124,795 reflecting the substantially larger in-service mining fleet, stock-based compensation of $850,858, legal and accounting fees of approximately $254,000, and payroll and outside consultant fees of approximately $356,000.

Net Loss from operations

The Company realized a net loss from operations of $4,796,210 for the three months ended June 30, 2026, as compared to a net loss from operations of $1,425,105 for the three months ended June 30, 2025, which is attributed to the reasons stated above in the section “Operating Expenses.”

Other income (expense)

For the three months ended June 30, 2026, the Company had $672,147 in other expense, net. This included net unrealized and realized loss on digital assets of $1,269,425 and interest income, net, of $597,278. For the three months ended June 30, 2025, the Company had $104,125 in other expense, net, consisting of net unrealized and realized gain on digital assets of $72,381 and interest expense, net of $176,506.

Net Loss Before Income Taxes

The Company realized a net loss before income taxes of $5,468,357 for the three months ended June 30, 2026, as compared to $1,529,230 for the three months ended June 30, 2025. Our net losses were due to the reasons stated above in the preceding sections.

RESULTS OF OPERATIONS

Six Months Ended June 30, 2026 and 2025

The following table sets forth certain selected consolidated statements of operations data for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025.

Revenues

The Company generated revenues of $4,092,987 for the six months ended June 30, 2026 as compared to $2,088,212 for the six months ended June 30, 2025. The increase of $2,004,775 was driven primarily growth in the number of deployed units and expanded capacity, as well as the Company’s transition during 2026 to the hashrate marketplace monetization model under which settlement is typically received in Bitcoin.

Cost of Revenue

Cost of revenue increased by $2,300,820, to $3,374,852 for the six months ended June 30, 2026, from $1,074,032 for the six months ended June 30, 2025. Consistent with the three-month comparison, the increase was primarily attributable to the expansion of the Company’s deployed mining fleet, increased power rates and increased operating activity during 2026.

Operating expenses

For the six months ended June 30, 2026 the Company incurred operating expenses of $10,531,999, consisting of general and administrative expenses of $1,950,490, depreciation and amortization of $6,574,585, and stock-based compensation of $2,006,924. For the six months ended June 30, 2025 the Company incurred operating expenses of $2,746,981, consisting of general and administrative expenses of $394,970, depreciation and amortization of $2,352,011, and no stock-based compensation. The increase of $7,785,018 in operating expenses period over period is primarily attributable to increases in depreciation expense of $4,222,574 reflecting the substantially larger in-service mining fleet, stock-based compensation of $2,006,924, legal and accounting fees of approximately $416,000, insurance cost of approximately $250,000 and payroll and outside consultant fees of approximately $700,000.

Net Loss from operations

The Company realized a net loss from operations of $9,813,864 for the six months ended June 30, 2026, as compared to a net loss from operations of $1,732,801 for the six months ended June 30, 2025, which is attributed to the reasons stated above in the section “Operating Expenses.”

Other income (expense)

For the six months ended June 30, 2026, the Company had $1,806,200 in other expense, net. This included net unrealized and realized loss on digital assets of $2,481,598, other income of $6,467, and interest income, net, of $668,931. For the six months ended June 30, 2025, the Company had $105,024 in other expense, net, consisting of net unrealized and realized gain on digital assets of $71,482 and interest expense, net of $176,506.

Net Loss Before Income Taxes

The Company realized a net loss before income taxes of $11,620,064 for the six months ended June 30, 2026, as compared to $1,837,825 for the six months ended June 30, 2025. Our net losses were due to the reasons stated above in the preceding sections.

Liquidity and capital resources

As of June 30, 2026, the Company had cash and cash equivalents of $51,884,089, stockholders’ equity of $74,533,809, and working capital of $58,145,080.

The Company’s accumulated deficit was $20,122,949 as of June 30, 2026.

The Company used net cash in operating activities of $4,991,617 for the six months ended June 30, 2026. For the six months ended June 30, 2026, operating cash flows were impacted by depreciation and amortization of $6,574,585, stock-based compensation of $2,006,924, digital asset mining revenue of $4,092,987, net unrealized and realized loss on digital assets of $2,481,598, impairment of capitalized software of $60,092, increase in prepaid expense of $108,694, increase in other receivables of $16,873, and decrease in accounts payable and accrued expenses of $276,198.

By comparison, the Company used net cash in operating activities of $2,337,272 for the six months ended June 30, 2025. For the six months ended June 30, 2025, operating cash flows were impacted by depreciation and amortization of $2,352,011, digital asset mining revenue of $2,088,212, net unrealized and realized gain on digital assets of $71,482, increase in prepaid expense of $60,691, increase in other assets of $686,893, and increase in accounts payable and accrued expenses of $55,820.

Net cash provided by investing activities for the six months ended June 30, 2026 was $56,520 consisting of proceeds from the sale of digital assets. The Company did not purchase additional mining equipment or pay deposits on equipment to be received during the period.

By comparison, net cash used in investing activities for the six months ended June 30, 2025 was $23,988,068. During the six months ended June 30, 2025, the Company purchased $17,423,650 of mining equipment, paid $7,029,862 in deposits on mining equipment to be received, and received $465,444 in proceeds from sale of digital assets.

Cash provided by financing activities for the six months ended June 30, 2026 was $17,899,700, consisting of net proceeds from the Company’s March 2026 confidentially marketed public offering. The Company did not issue Class A-1 or Class A-2 Units during the six months ended June 30, 2026.

By comparison, cash provided by financing activities for the six months ended June 30, 2025 was $30,117,402, consisting of $5,250,000 of proceeds from long-term debt net of discount, repayments of long term debt of $3,500,000, $17,945,000 of proceeds from the issuance of Class A-1 Units and $10,422,402 of proceeds from the issuance of Class A-2 Units.

Capital Resources

June 30, 2026, we had cash and cash equivalents on hand of $51,884,089. We currently have minimal sources of liquidity such as arrangements with credit institutions that will have or are reasonably likely to have a current or future effect on our financial condition or immediate access to capital.

Revenue from Mining Operations

Funding our operations on a go-forward basis will rely significantly on our ability to continue to monetize our deployed Scrypt hashrate, the spot or market price of the digital assets we receive (primarily Bitcoin received as settlement through our hashrate marketplace monetization model, together with protocol-native rewards in Dogecoin, Litecoin and other Scrypt-based assets), and our ability to raise additional funds as equity, debt or convertible securities. Our ability to monetize digital asset rewards at amounts that exceed our production and overhead costs will determine our ability to report profit margins related to such mining operations, although accounting for our reported profitability is significantly complex. Furthermore, regardless of our ability to generate revenue from the sale of our digital assets, we may need to raise additional capital in the form of equity or debt to fund our operations and pursue our business strategy.

The ability to raise funds as equity, debt or conversion of cryptocurrency to maintain our operations is subject to many risks and uncertainties.

Summary of Mining Results

The following table presents additional information about our cryptocurrency mining activities in coins and amounts during the six months ended June 30, 2026.

The following table presents additional information about our cryptocurrency mining activities in coins and amounts during the six months ended June 30, 2025.

Contractual Obligations

The Company utilizes third-party data center facilities to support its digital asset mining operations. Specifically, the Company has entered into colocation and hosting services agreements with independent data center providers for the ongoing provision of rack space, electrical power capacity, network connectivity, and cooling infrastructure required to operate the Company’s mining hardware. For the six months ended June 30, 2026, the Company incurred approximately $3,374,852 of colocation and hosting-related service expenses, which are included in cost of revenue in the accompanying consolidated statements of operations.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we rely on Adjusted EBITDA to evaluate our business, measure our performance, and make strategic decisions. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss), adjusted for impacts of interest expense, income tax provision or benefit and depreciation and amortization, and non-cash stock-based compensation. You are encouraged to evaluate each of these adjustments and the reasons our Board and management team consider them appropriate for supplemental analysis.

Our board of directors and management team use Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense and income), asset base (such as depreciation and amortization), and other items that impact the comparability of financial results from period to period. We believe each of these adjustments provides useful information to investors for the following reasons: (i) interest expense is excluded because it is a function of our financing arrangements and capital structure rather than our core operating performance, and its exclusion facilitates comparisons with companies that have different capital structures; (ii) depreciation and amortization is excluded because it is a non-cash charge that reflects the cost of capital assets acquired in prior periods and does not directly correspond to the current period operating performance of our mining operations, and its exclusion allows investors to evaluate operating results independent of the timing and magnitude of capital expenditures; and (iii) stock-based compensation expense is excluded because it is a non-cash charge that varies significantly based on the timing, size, and nature of equity awards granted, as well as factors such as stock price volatility and forfeiture rates, which are not directly related to our underlying operational performance, and its exclusion enables investors to compare our results with those of other companies that may utilize different forms and levels of employee compensation.

Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in such presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in the future, and any such modification may be material. Adjusted EBITDA has important limitations as an analytical tool and you should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definition of this non-GAAP financial measure may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

Reconciliations of Adjusted EBITDA to the most comparable U.S. GAAP financial metric as of the three months ended June 30, 2026 and June 30, 2025, are presented in the table below:

Reconciliations of Adjusted EBITDA to the most comparable U.S. GAAP financial metric as of the six months ended June 30, 2026 and June 30, 2025, are presented in the table below:

Inflation

The Company’s results of operations have not been affected by inflation and management cannot predict the impact, if any, inflation might have on its operations in the future.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with U.S. GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenues, and expenses, to disclose contingent assets and liabilities on the dates of the consolidated financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting periods. The most significant estimates and assumptions include, but are not limited to, the accounting for digital assets, revenue recognition, useful lives of equipment and the evaluation allowance related to deferred tax assets. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates as a result of changes in our estimates. Some of our accounting policies require higher degrees of judgment than others in their application. We believe critical accounting policies as disclosed in this release reflect the more significant judgments and estimates used in preparation of our consolidated financial statements. For a summary of significant accounting policies, refer to Note 2 Summary of Significant Accounting Policies in our Notes to consolidated financial statements included elsewhere herein.

Known Trends, Events and Uncertainties

The Company is subject to risks and uncertainties common to companies in the digital asset mining industry. The following discussion highlights trends, events, and uncertainties that management believes are reasonably likely to have a material effect on the Company’s financial condition, results of operations, or liquidity.

Competition for Power and Infrastructure from AI and HPC Demand. The rapid growth in demand for data center capacity driven by artificial intelligence (“AI”) and high-performance computing (“HPC”) workloads has intensified competition for power infrastructure across the United States. Large-scale AI training and inference operations require reliable, high-density power at scale, and operators of these workloads have demonstrated willingness to pay power rates that exceed the economics available to digital asset miners under current market conditions. This trend is driving an industry-wide reassessment of the highest and best use of the electron, as power assets that were historically allocated to PoW mining are increasingly being evaluated for, or converted to, AI and HPC applications. We expect this dynamic to continue and potentially accelerate. As a colocation-based operator, the Company is exposed to rising competition for hosting capacity and power allocation, which could result in increased colocation costs, reduced availability of hosting at favorable rates, or pressure to relocate operations to lower-cost jurisdictions.

Tariff Uncertainty and ASIC Hardware Supply. The Company’s Scrypt ASIC mining hardware is manufactured primarily in China. During fiscal year 2025, evolving U.S. trade policy, including the imposition and adjustment of tariffs on Chinese-manufactured goods, materially impacted the Company’s deployment strategy. In the first quarter of 2025, the Company initially deployed its fleet at a colocation facility outside of the United States in part to mitigate tariff-related cost exposure. In the third quarter, following changes to the tariff environment, the Company relocated those miners to domestic facilities. The continued uncertainty surrounding U.S. tariff policy on ASIC mining hardware has disrupted supply chains across the industry, with many operators reducing or ceasing imports of rigs into the United States due to the adverse impact on equipment economics. Prolonged tariff uncertainty could constrain the Company’s ability to procure replacement or next-generation hardware on commercially favorable terms, increase capital expenditure requirements, and limit the Company’s ability to deploy rigs in jurisdictions with lower operating costs outside the United States.

Digital Asset Market Volatility and Network Difficulty. The Company’s revenues and the carrying value of its digital asset treasury are directly affected by the market prices of the digital assets it mines and holds, including Bitcoin, Dogecoin, and Litecoin. Digital asset prices have historically exhibited significant volatility and may be influenced by factors beyond the Company’s control, including macroeconomic conditions, investor sentiment, regulatory developments, technological changes, and the liquidity of digital asset markets. In addition, PoW mining economics are influenced by network difficulty, which adjusts dynamically based on total hashrate deployed across each respective blockchain. Increases in total network hashrate, whether driven by new entrants, fleet upgrades by existing miners, or changes in mining economics, increase mining difficulty and reduce expected rewards per unit of hashrate. During fiscal year 2025, the global Scrypt network hashrate experienced fluctuations that affected the Company’s per-unit mining economics. The Litecoin network is expected to undergo its next block reward halving event in August 2027, which would reduce the Litecoin block subsidy by 50% and may materially affect the mining economics of Scrypt-based operations.

Evolving Regulatory Environment. The regulatory environment for digital assets in the United States and globally continues to evolve. Legislative and regulatory actions at the federal and state level, including potential changes to the classification, taxation, or permissibility of digital asset mining, staking, or custody activities, could materially affect the Company’s operations and the broader market for digital assets. Changes in energy policy, environmental regulation, or reporting requirements applicable to data centers and PoW mining operations could also increase compliance costs or constrain operational flexibility. The Company monitors regulatory developments and engages with industry groups, but cannot predict the timing, scope, or impact of future regulatory actions.

Geopolitical and Macroeconomic Conditions. Ongoing geopolitical conflicts, including the conflicts between Russia and Ukraine and between Israel and Hamas, and broader macroeconomic uncertainty, including the effects of inflation, interest rate policy, and global trade tensions, may adversely affect digital asset markets, the cost and availability of capital, and the Company’s operating environment. Changes to U.S. policy implemented by the U.S. Congress or the executive branch, including policies affecting tariffs, international trade, taxation, and the regulatory environment, have impacted and may continue to impact the Company’s business and the broader economy in ways that are difficult to predict.

Other than as discussed above and elsewhere in this Quarterly Report on Form 10-Q, we are not currently aware of any trends, events, or uncertainties that are reasonably likely to have a material effect on our financial condition. For a further discussion of factors that may affect future operating results, see the section entitled “Risk Factors” in our most recent annual report on Form 10-K.

Recently Issued Accounting Pronouncements

Please refer to Note 2 — “Summary of significant accounting policies” for details.

Commitments and Contractual Obligations

The Company utilizes third-party data center facilities to support its digital asset mining operations. Specifically, the Company has entered into colocation and hosting services agreements with independent data center providers for the ongoing provision of rack space, electrical power capacity, network connectivity, and cooling infrastructure required to operate the Company’s mining hardware. For the six months ended June 30, 2026, the Company incurred approximately $3,374,852 of colocation and hosting-related service expenses, which are included in cost of revenue in the accompanying consolidated statements of operations.

Off-Balance Sheet Arrangements

During the periods presented, we did not have any off-balance sheet arrangements.

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, 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 Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2026.

As described in our Annual Report on Form 10-K for the year ended December 31, 2025, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025 based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, management determined that our internal control over financial reporting was effective as of December 31, 2025.

Changes in Internal Control over Financial Reporting

During the period covered by this Quarterly Report, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information under this item. Please refer to the section titled “Risk Factors” in our most recently-filed annual report on Form 10-K.