Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
($ presented in 000's, except for bitcoin price)
The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the “Form 10-K”). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in other parts of this Quarterly Report on Form 10-Q, as well as those identified in the “Risk Factors” section of our Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. See “Forward-Looking Statements.”
Company Overview
We are a bitcoin mining company. We independently own, lease and operate a large portfolio of data centers across the United States with locations in Georgia, Mississippi, Tennessee and Wyoming for a total contracted power capacity of approximately 987 megawatts (“MW”) as of June 30, 2025. We intend to continue our growth in these regions and are actively developing plans for additional capacity in Tennessee. We had an independent data center operation in Massena, NY subject to a hosting agreement that operated 50 MW, which expired on December 31, 2024. The parties commenced wind-down procedures upon expiration. All MW allocated to the Company have been vacated as of June 30, 2025. We have no intention to mine, purchase or hold any other crypto assets at this time or in the foreseeable future, and we did not hold any other crypto asset as of June 30, 2025.
We design our infrastructure to efficiently, profitably, and responsibly secure and support bitcoin, the world’s most recognized digital commodity. We cultivate trust and transparency among our employees, the communities where we operate, our public market stakeholders, and the people around the world who depend on bitcoin.
Bitcoin Mining
Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain”, which contains a record of every bitcoin transaction ever processed. The bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation. The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin. Users have full control over remitting bitcoin from their own sending addresses. All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each and every transaction. To be recorded on the blockchain, each bitcoin transaction is validated through a proof-of-work consensus method, which entails demonstrating sufficient computation through the “proof of work” process to validate transactions and post them on the blockchain. This process is called mining. Miners are rewarded with bitcoins, both in the form of newly created bitcoins and transaction fees paid in bitcoin, for successfully constructing a block with the required network difficulty and disseminating that block to the global network of nodes. The mining process now represents the largest distributed computing network on Earth due to demand for bitcoin, the commodity, and the revenues associated with securing it.
Factors such as access to specialized mining servers, energy, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. As of June 30, 2025, our operating mining units produced an average computing power of 45.3 exahash per second (“EH/s”), reaching a peak of 50 EH/s during the period. In bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the bitcoin network. We expect to continue increasing our computing power through 2025 and beyond as we expand our infrastructure at our owned sites in Tennessee, seek regional expansion opportunities, and evaluate strategic acquisition targets. A company’s computing power measured in hashrate is a significant factor in its bitcoin mining revenue.
We owned approximately 329,001 miners as of June 30, 2025, of which approximately 241,227 were in service as of June 30, 2025 and the remainder pertain to new machines ready to install in expansion opportunities, are being evaluated for relocation or are pending repair. Our miners range in age from 1-54 months and have an average age of approximately 13 months. Effective May 2024, we estimate the useful lives of our miners to be three years. We do not have scheduled downtime for our miners, however, we periodically perform unscheduled maintenance and curtailments on our miners, but such downtime has not historically been significant. When performing unscheduled maintenance, we will typically replace the miner with a substitute miner to limit overall downtime. The miners in service as of June 30, 2025 had a range of energy efficiency (watts per terahash – “w/th”) of 13.5 to 29.5 w/th with an average operating energy efficiency of 16.2 w/th.
We obtain bitcoin as a result of our mining operations, and we sell bitcoin from time to time to support our operations and strategic growth. We also will utilize our bitcoin as collateral for lending arrangements. Prior to April 2025, we did not engage in regular trading of bitcoin (other than as necessary to convert our bitcoin into U.S. dollars) or engage in hedging activities related to our holding of bitcoin. In April 2025, we launched our institutional grade in-house trading function as we shift to a balanced approach between monetizing new production and building long-term holdings which may include various derivative strategies to generate yield from our bitcoin holdings balance, and we plan to continue to integrate these strategies into our regular treasury management activities. Treasury management activities may serve cash management, strategic growth, or bitcoin balance hedging, incremental other income or other general corporate purposes. Currently, we do not use a formula or specific methodology to determine whether or when we will sell bitcoin that we hold, or the number of bitcoins we will sell. Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing the need for working capital, forecasts and monitoring the market in real time.
The value of bitcoin has historically been subject to wide swings. The following table provides a range of intraday low and intraday high bitcoin prices between October 1, 2023 through June 30, 2025.
|
|
|
|
|
|
|
|
|
Range of intraday bitcoin prices |
|
|
|
|
|
|
Quarterly Reporting Periods Ended |
|
Minimum Price |
|
|
Maximum Price |
|
December 31, 2023 |
|
$ |
26,521 |
|
|
$ |
45,000 |
|
March 31, 2024 |
|
$ |
38,501 |
|
|
$ |
73,836 |
|
June 30, 2024 |
|
$ |
56,500 |
|
|
$ |
72,777 |
|
September 30, 2024 |
|
$ |
49,050 |
|
|
$ |
70,000 |
|
December 31, 2024 |
|
$ |
58,864 |
|
|
$ |
108,389 |
|
March 31, 2025 |
|
$ |
76,555 |
|
|
$ |
109,358 |
|
June 30, 2025 |
|
$ |
74,421 |
|
|
$ |
112,000 |
|
As of June 30, 2025, we held 10,075 bitcoins of which, we held 99% in cold storage and 1% in hot wallets. The fair value of our bitcoin as of June 30, 2025 was $1,079,754 on our condensed consolidated balance sheets. Our bitcoin is classified on our balance sheet as either current or noncurrent. We also have 2,533 bitcoin that are held as collateral for our borrowings under our Coinbase Line of credit, which are classified in our balance sheet as Receivable from bitcoin collateral. Effective October 1, 2023, we adopted ASC 350-60, which requires bitcoin to be measured at fair value; as a result, the carrying value of each bitcoin we held at October 1, 2023 and each subsequent reporting period reflects the price of one bitcoin quoted on the active exchange, Coinbase, at the end of the reporting period. Therefore, decreases in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our bitcoin. See Note 2 - Summary of Significant Accounting Policies for more details on the impact of implementation in the Form 10-K.
As of June 30, 2025 and September 30, 2024, the Company did not hold any digital currency other than bitcoin.
We maintain real property holdings through our wholly owned and consolidated subsidiaries.
Results of continuing operations for the three and nine months ended June 30, 2025 and 2024
($ presented in 000's, except for bitcoin price and information set forth under the heading “Bitcoin Mining Operations”)
Bitcoin Mining Operations
Overview
We operate a fleet of servers commonly known as miners or ASICs (Application-Specific Integrated Circuits), which are computer chips customized for a specific use. In the case of bitcoin mining, ASICs calculate the SHA-256 algorithm as efficiently and quickly as possible in order to compete with other miners to solve blocks. Each calculation is a hash, and each machine’s computational power is measured in terahash processed per second (“th/s”). One terahash is equal to 1 trillion hashes. The more terahash we produce and contribute into the mining pool, the higher our percentage of the blockchain reward.
There are a variety of factors that influence our ability to mine bitcoin profitability. Our ability to mine profitability is dependent on successfully navigating these fluctuating variables, which include bitcoin’s value in USD (the volatility of which is described above), mining difficulty, block rewards and halving, global hashrate, power prices, fleet energy efficiency, data center energy efficiency and other factors.
The energy efficiency of a mining fleet helps drive profitability, because the most significant direct expense for bitcoin mining is power. We measure efficiency by the watts (or joules) of energy required to produce each terahash of processing power. We believe we operate a highly efficient fleet of miners.
The table below describes our fleet as of June 30, 2025 and 2024 and our miner efficiency and computing power as compared to the global computing power.
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As of |
|
Combined facilities |
|
June 30,
2025 |
|
|
June 30,
2024 |
|
Global hashrate (in terms of EH/s) (1) |
|
|
881.0 |
|
|
|
558.0 |
|
Miner efficiency (w/th) (2) |
|
|
16.2 |
|
|
|
22.3 |
|
CleanSpark average hashrate (in terms of EH/s) (3) |
|
|
45.3 |
|
|
|
20.4 |
|
CleanSpark percentage of total global hashrate |
|
|
5.14 |
% |
|
|
3.66 |
% |
|
|
|
|
|
|
|
(1) Total global hashrate obtained as of June 30, 2025 and 2024 were from Hashrate index (https://data.hashrateindex.com/network-data/network) using SMA 7 days and YCHARTS (https://ycharts.com/indicators/bitcoin_network_hash_rate), respectively. |
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|
|
(2) Watts of energy required to produce each terahash of processing power. Based on miner fleet operating at period end. |
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|
(3) The average hashrate obtained as of June 30, 2025, and 2024 were calculated from operating activity for the final month of the reporting period. |
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|
As of June 30, 2025, our operating hashrate was approximately 5.14% of the total global hashrate, and we received approximately the same percentage of the global blockchain rewards, which as of that date equaled approximately 23-24 bitcoin per day, excluding the bitcoin earned from network transaction fees. Ultimately, in order to mine profitably, we work to ensure that these mining rewards cover our direct operating costs.
The table below describes the average cost of mining each bitcoin for the three and nine months ended June 30, 2025 and 2024 and the total energy usage and cost per each kilowatt hour (“kWh”) utilized within our owned facilities.
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|
|
|
|
|
For the three months ended |
|
|
For the nine months ended |
|
Cost of Revenues - Analysis of costs to mine one bitcoin (per bitcoin amounts are actual) |
|
June 30,
2025 |
|
|
June 30,
2024 |
|
|
June 30,
2025 |
|
|
June 30,
2024 |
|
Cost of Mining - Owned Facilities |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of energy per bitcoin mined |
|
$ |
44,690 |
|
|
$ |
26,857 |
|
|
$ |
40,616 |
|
|
$ |
17,569 |
|
Other direct costs of mining - non energy utilities per bitcoin mined |
|
|
116 |
|
|
|
88 |
|
|
|
67 |
|
|
|
36 |
|
Cost to mine one bitcoin - Direct Energy Cost - Owned facilities |
|
$ |
44,806 |
|
|
$ |
26,945 |
|
|
$ |
40,683 |
|
|
$ |
17,605 |
|
Miner depreciation per bitcoin mined |
|
|
41,601 |
|
|
|
16,753 |
|
|
|
36,358 |
|
|
|
13,067 |
|
Financing costs per bitcoin mined |
|
|
21 |
|
|
|
208 |
|
|
|
58 |
|
|
|
214 |
|
Direct cost to mine including non-cash depreciation and financing costs - Owned facilities |
|
$ |
86,428 |
|
|
$ |
43,906 |
|
|
$ |
77,099 |
|
|
$ |
30,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average revenue of each bitcoin mined (1) |
|
$ |
98,753 |
|
|
$ |
66,048 |
|
|
$ |
92,090 |
|
|
$ |
51,479 |
|
Direct cost to mine one bitcoin as % of average bitcoin mining revenue - Including direct energy cost only |
|
|
45.4 |
% |
|
|
40.8 |
% |
|
|
44.2 |
% |
|
|
34.2 |
% |
Direct cost to mine one bitcoin as % of average bitcoin mining revenue - Including miner depreciation expense |
|
|
87.5 |
% |
|
|
66.5 |
% |
|
|
83.7 |
% |
|
|
60.0 |
% |
|
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Statistics |
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Owned Facilities |
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|
Total bitcoin mined at owned facilities (2) |
|
|
2,012 |
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|
|
1,435 |
|
|
|
5,767 |
|
|
|
4,931 |
|
Bitcoin mining revenue - Owned facilities - ($ in thousands) |
|
$ |
198,644 |
|
|
$ |
94,737 |
|
|
$ |
531,038 |
|
|
$ |
255,921 |
|
Total miners in service in owned facilities - as of the periods ended |
|
|
241,227 |
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|
|
138,493 |
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|
|
241,227 |
|
|
|
138,493 |
|
Total kWh utilized |
|
|
1,598,500,700 |
|
|
|
808,479,474 |
|
|
|
4,218,655,894 |
|
|
|
1,937,737,124 |
|
Total energy expense - ($ in thousands) |
|
$ |
89,895 |
|
|
$ |
38,545 |
|
|
$ |
234,212 |
|
|
$ |
86,644 |
|
Cost per kWh |
|
$ |
0.056 |
|
|
$ |
0.048 |
|
|
$ |
0.056 |
|
|
$ |
0.045 |
|
Energy expense as percentage of bitcoin mining revenue, net |
|
|
45.3 |
% |
|
|
40.7 |
% |
|
|
44.1 |
% |
|
|
33.9 |
% |
Other direct costs of mining - non energy utilities - ($ in thousands) |
|
$ |
233 |
|
|
$ |
126 |
|
|
$ |
389 |
|
|
$ |
170 |
|
Depreciation Expense - Miners Only - ($ in thousands) |
|
$ |
83,682 |
|
|
$ |
24,043 |
|
|
$ |
209,659 |
|
|
$ |
64,436 |
|
Accelerated Depreciation Expense - Miners Only - ($ in thousands) |
|
$ |
— |
|
|
$ |
7,261 |
|
|
$ |
— |
|
|
$ |
7,261 |
|
Direct miner financing costs - ($ in thousands) |
|
$ |
42 |
|
|
$ |
299 |
|
|
$ |
337 |
|
|
$ |
1,055 |
|
(1) Average revenue of each bitcoin mined is calculated by dividing the sum of bitcoin mining revenue for our owned facilities by the total number of bitcoin mined by our owned facilities during the respective periods. We have determined that Coinbase is the principal market for valuing bitcoin transactions and use the closing price of bitcoin at 23:59:59 UTC as the source of recording revenue. See the table “Range of intraday bitcoin prices” for information on the range of intraday bitcoin prices for quarterly periods since September 30, 2023.
(2) Includes mining rewards and transaction fees but excludes the reduction for pool operator fees.
Power prices are the most significant cost driver for our wholly owned locations, and energy expense represented 45.3% and 40.7% as expressed as a percentage of bitcoin mining revenues during the three months ended June 30, 2025 and 2024, respectively, and 44.1% and 33.9% as expressed as a percentage of bitcoin mining revenues during the nine months ended June 30, 2025 and 2024, respectively.
Energy prices can be highly volatile and global events can impact energy rates. We have a diverse portfolio of power contracts across our sites in the State of Georgia, Mississippi, Tennessee and Wyoming. The majority of these contracts are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs. Such prices are governed by power purchase agreements which vary by location, and said prices can change hour to hour. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms and polar vortices, which periodically increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates, at the request of grid operators in cases of emergencies or to support utility grid resiliency efforts. The average power prices we paid under our power contracts at our owned facilities were $0.056 and $0.048 per kWh for the three months ended June 30, 2025 and 2024, respectively, and were $0.056 and $0.045 per kWh, for the nine months ended June 30, 2025 and 2024 respectively.
The management and operations teams make real-time determinations on the need and timing during which we should curtail our operations. We curtail when power prices exceed the value we would receive for the corresponding fixed bitcoin reward in response to utility programs. This means if bitcoin’s value decreases or energy prices increase, our curtailment may increase; likewise, when bitcoin’s value increases and energy prices decrease, our curtailment may decrease. The management and operations teams manage these decisions on an hour-by-hour basis across all our sites. The Company did not have significant curtailment and maintained an average uptime greater than 90% during the nine months ended June 30, 2025. A large portion of the curtailment during the first quarter related to Hurricane Helene which affected our Georgia sites at the end of September 2024 to the beginning of October 2024. The southeast Georgia sites were shut down as the hurricane began impacting the region, thus at the beginning of the October 2024, these sites were operating on approximately 200 MW which gradually increased during the same week to its the full 365 MW capacity when utilities was restored to the communities.
The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners' expected useful life. Such non-cash depreciation amounts are recorded within the condensed consolidated statement of operations and comprehensive income as “Depreciation and Amortization”. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a “per bitcoin” basis, calculated by dividing miner depreciation expense in our owned facilities by the number of bitcoin mined in the owned facilities. On a “cost per bitcoin” ratio, miner depreciation expense was 41,601 and 16,753 for the three months ended June 30, 2025 and 2024, respectively, and $36,358 and $13,067 for the nine months ended June 30, 2025 and 2024, respectively. The number of bitcoin received by all the miners, including the Company, was reduced by 50% effective April 19, 2024 when the bitcoin algorithm halved the rewards from 6.25 per block to 3.125 per block increasing depreciation expense on a comparable per bitcoin basis as it takes more miners to produce the same number of bitcoin.
We have financing costs for a limited number of miners in our miner fleet and such costs are recorded within Interest Expense in our condensed consolidated statement of operations and comprehensive income. The table above presents financing costs per bitcoin calculated by dividing direct interest expense on our miner financing agreement by the number of bitcoin mined in our owned facilities. On a cost per bitcoin ratio, financing costs were $21 and $208 for the three months ended June 30, 2025 and 2024, respectively and were $58 and $214 for the nine months ended June 30, 2025 and 2024, respectively.
The table below describes the average cost of mining each bitcoin for the three and nine months ended June 30, 2025 and 2024 and the total energy usage and cost per each kWh utilized within our hosted facilities. As of March 31, 2025, we no longer operated mining at hosted facilities. Accordingly, the there were no bitcoin operations in hosted facilities in the three months ended June 30, 2025 and is therefore is not presented in the table below.
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|
|
|
For the three months ended |
|
|
For the nine months ended |
|
Cost of Revenues - Analysis of costs to mine one bitcoin (per bitcoin amounts are actual) |
|
June 30,
2024 |
|
|
June 30,
2025 |
|
|
June 30,
2024 |
|
Cost of Mining - Hosted Facilities |
|
|
|
|
|
|
|
|
|
Direct hosting fees expense per one bitcoin |
|
$ |
46,138 |
|
|
$ |
76,269 |
|
|
$ |
30,971 |
|
Miner depreciation per bitcoin mined |
|
|
28,328 |
|
|
|
4 |
|
|
|
23,091 |
|
Direct cost to mine including non-cash depreciation - Hosted facilities |
|
$ |
74,466 |
|
|
$ |
76,273 |
|
|
$ |
54,062 |
|
|
|
|
|
|
|
|
|
|
|
Average revenue of each bitcoin mined (1) |
|
$ |
66,048 |
|
|
$ |
78,856 |
|
|
$ |
51,479 |
|
Direct cost to mine one bitcoin as % of average bitcoin mining revenue - Direct Hosting fees only |
|
|
69.9 |
% |
|
|
96.7 |
% |
|
|
60.2 |
% |
Direct cost to mine one bitcoin as % of average bitcoin mining revenue - Including miner depreciation expense |
|
|
112.7 |
% |
|
|
96.7 |
% |
|
|
105.0 |
% |
|
|
|
|
|
|
|
|
|
|
Statistics |
|
|
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|
|
|
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|
|
Hosted Facilities |
|
|
|
|
|
|
|
|
|
Total bitcoin mined at owned facilities (2) |
|
|
141 |
|
|
|
147 |
|
|
|
696 |
|
Bitcoin mining revenue - Hosted facilities - ($ in thousands) |
|
$ |
9,371 |
|
|
$ |
11,623 |
|
|
$ |
33,772 |
|
Total miners in service in hosted facilities - as of the periods ended |
|
|
14,012 |
|
|
|
- |
|
|
|
14,012 |
|
Total kWh utilized |
|
|
103,089,261 |
|
|
|
144,786,545 |
|
|
|
315,113,352 |
|
Total hosting fee expense - ($ in thousands) |
|
$ |
6,509 |
|
|
$ |
11,242 |
|
|
$ |
21,560 |
|
Hosting fee per kWh |
|
$ |
0.063 |
|
|
$ |
0.078 |
|
|
$ |
0.068 |
|
Hosting fee expense as percentage of bitcoin mining revenue, net |
|
|
69.5 |
% |
|
|
96.7 |
% |
|
|
63.8 |
% |
Depreciation Expense - Miners Only - ($ in thousands) |
|
$ |
3,997 |
|
|
$ |
1 |
|
|
$ |
16,075 |
|
(1) Average revenue of each bitcoin mined is calculated by dividing the sum of bitcoin mining revenue for hosted facilities by the total number of bitcoin mined within the hosted facilities during the respective periods. We have determined that Coinbase is the principal market for valuing bitcoin transactions and use the closing prices as of 23:59:59 UTC as the source of recording revenue. See the table “Range of intraday bitcoin prices” for information on the range of intraday bitcoin prices for quarterly periods since September 30, 2023.
(2) Includes mining rewards and transaction fees but excludes the reduction for pool operator fees.
For our co-locations, hosting fees (which comprise direct operating costs of the third-party operator with energy as the largest cost) and profit sharing were a combined 69.9% as a percentage of bitcoin mining revenues during the three months ended June 30, 2024 (as there was no fees or profit sharing for the three months ended June 30, 2025), and 96.7% and 60.2% as a percentage of bitcoin mining revenues during the six months ended June 30, 2025 and 2024, respectively. In connection with our decision to terminate our hosting arrangements, we incurred $665 of non-recurring fees for the transition and vacating the location, included in the hosting fees.
At our hosted facilities, the hosting fee as compared to kWh utilized in the hosted facilities was $0.063 per kWh for the three months ended June 30, 2024 (as there was no fees for the three months ended June 30, 2025), and was $0.078 and $0.068 per kWh for the nine months ended June 30, 2025 and 2024, respectively. The Company did not have significant curtailment greater than 20% of total operating time during the nine months ended June 30, 2025.
On a “cost per bitcoin” ratio, miner depreciation expense was $4 and $23,091 for the nine months ended June 30, 2025 and 2024, respectively. The decrease presented was mainly due to the miners being nearly fully depreciated as of September 30, 2024.
Results of continuing operations for the three months ended June 30, 2025 and 2024
($ presented in 000's, except for average bitcoin price)
Bitcoin mining revenue
We earned $198,644 in bitcoin mining revenue during the three months ended June 30, 2025, which was an increase of $94,536, or 91%, as compared with $104,108 for the three months ended June 30, 2024. Bitcoin mining revenues are recorded net of bitcoin mining fees charged by our sole mining pool operator (Foundry) that equaled approximately 0.25% of gross bitcoin mining revenues for the three months ended June 30, 2025, and are determined by two main drivers: quantity of bitcoin mined and the price of bitcoin on the date the bitcoin is mined. During the three months ended June 30, 2025, we mined 2,012 bitcoin (gross of Foundry fees) with an average bitcoin price of $98,736 as compared to 1,580 bitcoin with an average bitcoin price of $65,891 during the three months ended June 30, 2024. The increase in bitcoin mining revenue for the three months ended June 30, 2025 was attributable to the increase in the average bitcoin price and total bitcoin mined during the period as compared to the three months ended June 30, 2024. This occurred as we increased the number of our miners in operation, which rose to 241,227 compared to 152,505, an expansion of 88,722 or 58% between June 30, 2024 and June 30, 2025. The increase in our miners in operation increases our hashrate, which is our total computational power, and which when understood in the context of global hashrate, determines how much bitcoin we are able to mine.
Cost of revenues (exclusive of depreciation and amortization expense)
Our cost of revenues was $90,128 for the three months ended June 30, 2025, an increase of $44,948, or 99%, as compared with $45,180 for the three months ended June 30, 2024. These costs were primarily related to energy costs to operate the miners within our owned facilities, which were $89,895 for the three months ended June 30, 2025, an increase of $51,350, or 133%, as compared to $38,545 for the three months ended June 30, 2024. The increase in energy costs was due to the expansion of our operations since June 30, 2024 and the increase in the volume of miners operating in our owned locations. We continually evaluate energy and bitcoin prices and periodically will curtail our mining operations when it is advantageous to do so.
We also incurred no hosting and profit-sharing fees for the three months ended June 30, 2025, a complete decrease of $5,598 for hosting fees, and $911 for profit-sharing fees as compared to the three months ended June 30, 2024. The hosting fees and profit-sharing fees were primarily the result of our co-location agreement with Coinmint. The hosting fees decreased period over period due to the expiration of the hosting agreement, subsequent wind-down procedures and removal of miners during the three months ended March 31, 2025.
Professional fees
Professional fees, which consisted primarily of legal, accounting and consulting fees, were $3,004 for the three months ended June 30, 2025, a decrease of $1,364, or 31%, from $4,368 for the three months ended June 30, 2024. This decrease was primarily attributable to legal and other professional consulting fees during the three months ended June 30, 2025. Legal expenses were $996 for the three months ended June 30, 2025, as compared to $2,493 for the three months ended June 30, 2024. Other professional fees, namely accounting and consulting, were $2,008 for the three months ended June 30, 2025, as compared to $1,875 for the three months ended June 30, 2024, representing an increase of $133. The increase in accounting fees was primarily related to tax services and consulting.
Payroll expenses
Payroll expenses were $16,398 for the three months ended June 30, 2025, a decrease of $752, or 4%, from $17,150 for the three months ended June 30, 2024. Our payroll expenses include all compensation related expenses for our employees and mainly include salaries, wages, payroll-related taxes and benefits and non-cash stock-based compensation. Payroll expenses, excluding non-cash stock-based compensation, were $11,911 for the three months ended June 30, 2025, representing a decrease of 16% from $14,204 for the three months ended June 30, 2024, mainly attributed to the reduction in bonus accruals in the three months ended June 30, 2025, partially offset by increased headcount due to expansion of operational locations.
Stock-based awards granted to certain employees are a significant portion of our payroll-related costs. Stock-based compensation, which is a non-cash expense, was $4,488 for the three months ended June 30, 2025, an increase of $1,542, or
52%, from $2,946 for the three months ended June 30, 2024. The increase in stock-based compensation was mainly attributed to the granting of 2,212,486 restricted stock units in April 2025.
General and administrative expenses
General and administrative expenses increased to $16,566 for the three months ended June 30, 2025 from $8,235 for the three months ended June 30, 2024, representing an increase of $8,331 or 101%. This increase was primarily attributable to increases in corporate overhead, including, but not limited to, property taxes and insurance premiums (primarily due to the substantial increase in owned assets), rent, maintenance, and marketing expenses as we focused on increasing visibility in the current period.
(Gain) loss on fair value of bitcoin
Gain on fair value of bitcoin for the three months ended June 30, 2025 was $268,651 as compared to a loss on fair value of bitcoin of $48,338 for the three months ended June 30, 2024, a change of $316,989 or 656%. We measured crypto assets within the scope of ASC Topic 350-60 - Intangibles - Goodwill and Other - Crypto Assets at fair value in accordance with ASC Topic 820 - Fair Value Measurement and included the gains and losses from remeasurement in net income. The gain for the three months ended June 30, 2025 pertains to the change in bitcoin's fair value from approximately $82,500 per bitcoin on March 31, 2025 to approximately $107,200 per bitcoin on June 30, 2025. Meanwhile the loss for the three months ended June 30, 2024 pertains to the change in bitcoin's fair value from approximately $71,300 per bitcoin on March 31, 2024 to $62,700 per bitcoin on June 30, 2024.
Depreciation and amortization
Depreciation and amortization expense increased to $94,880 for the three months ended June 30, 2025, from $40,727 for the three months ended June 30, 2024, an increase of $54,153, or 133%. Depreciation expense increased by $53,659, or 133%, during the three months ended June 30, 2025, to $93,858 from $40,199, mainly due to an increase in miners and mining-related equipment being placed in service during the comparative period. Additionally, effective May 1, 2024, all miners would be adjusted to a useful life of 3 years, a reduction from 5 years.
Amortization expense for the three months ended June 30, 2025 was $1,023, an increase of $495, or 94%, from $528 for the three months ended June 30, 2024. The increase in amortization expense is primarily due to the Company's acquisition of software in the amount of $7,000 throughout the current year.
Other income (expenses)
Other income was $29,334 for the three months ended June 30, 2025, compared with other income, net of $3,341 for the three months ended June 30, 2024, which is a change of $25,993 or 778%.
Gain on bitcoin collateral was the primary reason for the increase in other income (expense) since in the prior year there was no collateral held by Coinbase. The gain in the fair value of collateral of $31,354 for the three months ended June 30, 2025 pertains to the change in the underlying collateral due to bitcoin's fair value from approximately $82,500 per bitcoin on March 31, 2025 to approximately $107,200 per bitcoin on June 30, 2025.
Interest income in the three months ended June 30, 2025 decreased by $2,283 to $355 from $2,638 for the three months ended June 30, 2024 due to lower balance of cash retained in short term interest bearing accounts and the interest earned on the note receivable from GRIID (See Note 5 - Note Receivable from GRIID).
Interest expense in the three months ended June 30, 2025 increased by $2,969 to $3,454 from $485 for the three months ended June 30, 2024 due to the amortization of deferred insurance costs from the Convertible Note, the promissory note, and equipment line of credit, which the Company did not have as of June 30, 2024.
Net income (loss)
Net income for the three months ended June 30, 2025 was $257,390, as compared to net loss of $236,242 for the three months ended June 30, 2024, for the reasons stated above.
Results of continuing operations for the nine months ended June 30, 2025 and 2024
($ presented in 000's, except for average bitcoin price)
Bitcoin mining revenue
We earned $542,662 in bitcoin mining revenue during the nine months ended June 30, 2025, which was an increase of $252,969, or 87%, as compared with $289,693 for the nine months ended June 30, 2024. Bitcoin mining revenues are recorded net of bitcoin mining fees charged by our sole mining pool operator that equaled approximately 0.19% of gross bitcoin mining revenues for the nine months ended June 30, 2025 and are determined by two main drivers: quantity of bitcoin mined and the price of bitcoin on the date the bitcoin is mined. During the nine months ended June 30, 2025, we mined 5,914 bitcoin with an average bitcoin price of $91,765 as compared to 5,628 bitcoin with an average bitcoin price of $51,472 during the nine months ended June 30, 2024. The increase in bitcoin mining revenue for the nine months ended June 30, 2025 was attributable to the increase in the quantity of bitcoin mined and the average bitcoin price as compared to the nine months ended June 30, 2024. The quantity increase was attributable to the 88,722 miners in operation between June 30, 2024 and June 30, 2025, representing a 58% increase period over period. The increase in miners in operation increases our hashrate, which is our total computational power, and which when understood in the context of global hashrate, determines how much bitcoin we are able to mine.
Cost of revenues (exclusive of depreciation and amortization expense)
Our cost of revenues was $245,842 for the nine months ended June 30, 2025, an increase of $137,468, or 127%, as compared with $108,374 for the nine months ended June 30, 2024. These costs were primarily related to energy costs to operate the miners within our owned facilities, which were $235,638 for the nine months ended June 30, 2025, an increase of $148,994 or 172% as compared to $86,644 for the nine months ended June 30, 2024. The increase in energy costs was due to the rise in the volume of miners operating in our owned locations as well as the increase in average cost per kWh, which approximated $0.056/kWh for the nine months ended June 30, 2025 as compared to an average cost of $0.045/kWh for the nine months ended June 30, 2024. We continually evaluate energy and bitcoin prices and periodically will curtail our mining operations when it is advantageous to do so.
We also incurred hosting fees of $9,087 and profit-sharing fees of $698 for the nine months ended June 30, 2025, a decrease of $8,650, or 49%, and decrease of $3,125, or 82%, as compared to $17,737 and $3,823, respectively, for the nine months ended June 30, 2024. The hosting fees and profit-sharing fees were primarily the result of our co-location agreement with Coinmint. The hosting fees decreased period over period due to the expiration of the hosting agreement, subsequent wind-down procedures and removal of miners during the nine months ended June 30, 2025.
Professional fees
Professional fees, which consisted primarily of legal, accounting and consulting fees, were $9,872 for the nine months ended June 30, 2025, a increase of $1,723, or 21%, from $8,149 for the nine months ended June 30, 2024. Legal expenses were $3,482 for the nine months ended June 30, 2025, as compared to $3,438 for the nine months ended June 30, 2024. This increase was attributable to other professional fees due to increased fees of external accounting services engaged to assist with increased complexities in areas such as auditing, tax, and Sarbanes-Oxley compliance (among other accounting related services). These fees increased to $6,389 by approximately $1,679 during the nine months ended June 30, 2025, as compared to $4,710 of during the nine months ended June 30, 2024.
Payroll expenses
Payroll expenses were $52,522 for the nine months ended June 30, 2025, an increase of $3,231, or 7%, from $49,291 for the nine months ended June 30, 2024. Our payroll expenses include all compensation related expenses for our employees and mainly include salaries, wages, payroll-related taxes and benefits and non-cash stock-based compensation. Payroll expenses, excluding non-cash stock-based compensation, were $41,913 for the nine months ended June 30, 2025, representing an increase of 58% from $26,595 for the nine months ended June 30, 2024, mainly attributed to an increase in employee headcount.
Stock-based awards granted to certain employees are a significant portion of our payroll-related costs. Stock-based compensation, which is a non-cash expense, was $10,609 for the nine months ended June 30, 2025, a decrease of $12,087, or 53%, from $22,696 for the nine months ended June 30, 2024. The decrease in stock-based compensation was mainly attributed vesting of a market-based restricted stock awards during the nine months ended June 30, 2024. Additionally, there is no grant date or service inception date for the 2025 LTIP and accordingly there is no expense recognized in the nine months ended June 30, 2025.
General and administrative expenses
General and administrative expenses increase to $38,356 for the nine months ended June 30, 2025 from $20,058 for the nine months ended June 30, 2024, representing an increase of $18,298 or 91%. This increase was primarily attributable to increases in corporate overhead, including, but not limited to, property taxes and insurance premiums (primarily due to the substantial increase in owned assets), rent, and marketing expenses as we focused on increasing visibility in the current period.
Gain on fair value of bitcoin, net
Gain on fair value of bitcoin, net for the nine months ended June 30, 2025 was $359,190 as compared to $107,406 for the nine months ended June 30, 2024, an increase of $251,784 or 234%. The gain for the nine months ended June 30, 2025 pertains to the change in bitcoin's fair value from approximately $63,300 per bitcoin on September 30, 2024 to approximately $107,200 per bitcoin on June 30, 2025. Meanwhile the gain for the nine months ended June 30, 2024 pertains to the change in bitcoin's fair value from approximately $29,960 per bitcoin on September 30, 2023 to $62,700 per bitcoin on June 30, 2024.
Depreciation and amortization
Depreciation and amortization expense increase to $240,010 for the nine months ended June 30, 2025, from $102,761 for the nine months ended June 30, 2024, an increase of $137,249 or 134%. Depreciation expense increased by $135,718, or 134%, during the nine months ended June 30, 2025, from $101,198 to $236,916, due to mainly due to an increase in miners and mining-related equipment being placed in service during the comparative period. Additionally, effective May 1, 2024, all miners would be adjusted to a useful life of 3 years, a reduction from 5 years.
Amortization expense for the nine months ended June 30, 2025 was $3,094, an increase of $1,531, or 98%, from $1,563 for the nine months ended June 30, 2024. In the nine months ended June 30, 2025, the Company acquired software in the total amount of $7,000, which was the primary cause for the increase in amortization expense.
Other income (expenses)
Other income, net was $71,555 for the nine months ended June 30, 2025, compared with other income, net of $3,347 for the nine months ended June 30, 2024, which is an increase of $68,208 or 2,038%. Other income for the nine months ended June 30, 2025 consisted primarily of gain on bitcoin collateral returned of $73,847. The Company did not have any bitcoin collateral in the nine months ended June 30, 2024.
Interest income in the nine months ended June 30, 2025 decreased to $3,845 from $5,909 for the nine months ended June 30, 2024, an increase of $2,064 due to decrease in interest rates.
Interest expense in the nine months ended June 30, 2025 increased by $4,723 to $6,280 from $1,557 for the nine months ended June 30, 2024 due to the amortization of deferred insurance costs from the Convertible Note, the promissory note, and equipment line of credit, which the Company did not have as of June 30, 2024.
Income tax expense (benefit)
Income tax expense for the nine months ended June 30, 2025 was $24,281 as compared to an income tax expense for the nine months ended June 30, 2024 of $3,499. The effective tax rate for the nine months ended June 30, 2025 was 6.2% and was an -4.4% for the same period in the prior year.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act ("OBBBA"). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740, “Income Taxes”, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, the Company will evaluate all deferred tax balances under the newly enacted tax law in periods subsequent to June 30, 2025 and identify any other future changes required to its financial statements as a result of the OBBBA. We are currently assessing its impact on our consolidated financial statements.
Net income (loss)
Net income for the nine months ended June 30, 2025 was $365,389, as compared to net loss of $83,598 for the nine months ended June 30, 2024, for the reasons stated above.
Non-GAAP Measure
We present Adjusted EBITDA, which is not a measurement of financial performance under GAAP. Our non-GAAP “Adjusted EBITDA” excludes (i) impacts of interest, taxes, and depreciation; (ii) our share-based compensation expense, unrealized gains/losses on securities, and changes in the fair value of contingent consideration with respect to previously completed acquisitions, all of which are non-cash items that we believe are not reflective of our general business performance, and for which the accounting requires management judgment, and the resulting expenses could vary significantly in comparison to other companies; (iii) non-cash impairment losses related to long-lived assets; (iv) realized gains and losses on sales of equity securities, the amounts of which are directly related to the unrealized gains and losses that are also excluded; (v) legal fees related to litigation and various transactions, which fees management does not believe are reflective of our ongoing operating activities; (vi) gains and losses on disposal of assets, the majority of which are related to obsolete or unrepairable machines that are no longer deployed; (vii) gains and losses related to discontinued operations that would not be applicable to our future business activities; and (viii) severance expenses.
We previously excluded non-cash impairment losses related to bitcoin and realized gains and losses on sales of bitcoin from our calculation of Adjusted EBITDA but have determined such items are part of our normal ongoing operations and will no longer be excluding them from our calculation of Adjusted EBITDA.
Management believes that providing this non-GAAP financial measure that excludes these items allows for meaningful comparisons between the Company's core business operating results and those of other companies, and provides the Company with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time. In addition to management's internal use of non-GAAP Adjusted EBITDA, management believes that Adjusted EBITDA is also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis. Management believes the foregoing to be the case even though some of the excluded items involve cash outlays and some of them recur on a regular basis (although management does not believe any of such items are normal operating expenses necessary to generate our bitcoin related revenues). For example, we expect that share-based compensation expense, which is excluded from Adjusted EBITDA, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers and directors. Additionally, management does not consider any of the excluded items to be expenses necessary to generate our bitcoin-related revenue.
The Company's Adjusted EBITDA measure may not be directly comparable to similar measures provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. The Company's Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to operating (loss) income or any other measure of performance derived in accordance with GAAP. Although management utilizes internally and presents Adjusted EBITDA, we only utilize that measure supplementally and do not consider it to be a substitute for, or superior to, the information provided by GAAP financial results.
Accordingly, Adjusted EBITDA is not meant to be considered in isolation of, and should be read in conjunction with, the information contained in our condensed consolidated financial statements, which have been prepared in accordance with GAAP.
The following is a reconciliation of our non-GAAP Adjusted EBITDA to its most directly comparable GAAP measure (i.e., net income (loss)) for the periods indicated:
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($ in thousands) |
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For the Three Months Ended June 30, |
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|
For the Nine Months Ended June 30, |
|
Reconciliation of non-GAAP Adjusted EBITDA |
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2025 |
|
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2024 |
|
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2025 |
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2024 |
|
Net income (loss) |
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$ |
257,390 |
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|
$ |
(236,242 |
) |
|
$ |
365,389 |
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$ |
(83,598 |
) |
Impairment expense - other |
|
|
— |
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|
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— |
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— |
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|
|
396 |
|
Impairment expense - fixed assets |
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— |
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|
|
189,235 |
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|
|
— |
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|
|
189,235 |
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Depreciation and amortization |
|
|
94,880 |
|
|
|
40,727 |
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|
|
240,010 |
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|
|
102,761 |
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Share-based compensation expense |
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4,488 |
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|
2,946 |
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|
10,609 |
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|
|
22,696 |
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Loss (gain) on derivative securities |
|
|
430 |
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|
|
(1,188 |
) |
|
|
1,549 |
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|
|
1,005 |
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Interest income |
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(355 |
) |
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(2,638 |
) |
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(3,845 |
) |
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(5,909 |
) |
Interest expense |
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3,454 |
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|
485 |
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|
6,280 |
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|
|
1,557 |
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Other income |
|
|
(1,509 |
) |
|
|
— |
|
|
|
(1,692 |
) |
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|
— |
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Loss (gain) on disposal of assets |
|
|
156 |
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|
|
(47 |
) |
|
|
(2,865 |
) |
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2,281 |
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Income tax expense (benefit) |
|
|
18,107 |
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(9,495 |
) |
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|
24,281 |
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3,499 |
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Fees related to financing & business development transactions |
|
|
22 |
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2,862 |
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|
|
653 |
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|
3,038 |
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Litigation & settlement related expenses |
|
|
638 |
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|
|
686 |
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|
1,179 |
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|
|
1,186 |
|
Severance and other expenses |
|
|
— |
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— |
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|
12 |
|
|
|
102 |
|
Non-GAAP Adjusted EBITDA* |
|
$ |
377,701 |
|
|
$ |
(12,669 |
) |
|
$ |
641,560 |
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|
$ |
238,249 |
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* We have not excluded our net gain on fair value of bitcoin $268,651 and net loss of $48,338 in the three months ended June 30, 2025 and 2024, respectively, and net gain $359,190 and $107,406 in the nine months ended June 30, 2025 and 2024, respectively, which we now record in our condensed consolidated statement of operations and comprehensive income as provided in ASC 350-60, as discussed in the Form 10-K.
Liquidity and Capital Resources
($ presented in 000's)
Our primary requirements for liquidity and capital are working capital, capital expenditures, loan payments, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business. Our principal sources of liquidity have been and are expected to be our cash and cash equivalents, bitcoin inventory, proceeds from our convertible note and line of credit.
As of June 30, 2025, we had total current assets of $1,210,140, consisting of cash and cash equivalents, prepaid expenses and other current assets, bitcoin, investment in debt security and related derivative asset, and total assets in the amount of $3,101,817. Our total current liabilities and total liabilities as of June 30, 2025 were $276,819 and $954,929, respectively. We had working capital of $933,321 as of June 30, 2025. With the recent launch of our bitcoin treasury function in April 2025, we have begun to use a portion of the bitcoin we mine to fund operations and to fund capital expenditures. In addition, we have $635,295 zero-coupon convertible notes outstanding and a $200,000 line of credit with Coinbase as discussed in Note 9 - Loans and Note 16 - Subsequent Events.
Based on our current plans and business conditions, we believe that existing cash and cash equivalents and bitcoin, together with cash generated from operations and our future investing activities, will be sufficient to satisfy our anticipated cash requirements for the next 12 months and for the reasonably foreseeable future until we reach consistent profitability, and we are not aware of any trends or demands, commitments, events or uncertainties that are reasonably likely to result in a decrease in the liquidity of our assets. We are likely to require additional capital to respond to technological advancements, competitive dynamics or technologies, business opportunities, challenges, acquisitions or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In particular, the ongoing impacts of inflation and fluctuations in interest rates, global conflicts including increases in tariffs, have resulted in, and may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.
Material Cash Requirements
We are a party to many contractual obligations involving commitments to make payments to third parties. These obligations impact our short-term and long-term liquidity and capital resource needs. Certain contractual obligations are reflected on the condensed consolidated balance sheets as of June 30, 2025, while others are considered future commitments. Our contractual obligations primarily consist of cancelable purchase commitments with various parties to purchase goods or services, primarily miners and equipment, entered into in the normal course of business and operating leases. For information regarding our other contractual obligations, refer to Note 14 - Commitments and Contingencies in this Quarterly Report on Form 10-Q for the period ended June 30, 2025, and Note 18 - Commitments and Contingencies included in our Annual Report on Form 10-K as filed with the SEC on December 3, 2024.
We regularly evaluate opportunities to expand our business, including through potential acquisitions of businesses or assets. We will evaluate a variety of sources of capital in connection with financing any future possible acquisitions, including the incurrence of debt, sales of stock or bitcoin, or using cash on hand. We may also use the Company’s stock as transaction consideration, as we have done in the past.
Operating Activities
The Company generates non-cash revenue through mining bitcoin, which it retains the majority based on its long-term value strategy, while funding all operating expenses with cash. As a result, net cash used in operating activities for the nine months ended June 30, 2025 was $341,623 primarily due to cost of revenues of $245,842, payroll expenses of $52,522 and general and administrative expenses of $38,356, in spite of a net income of $365,389, due to the increase of the non-cash gains in the held bitcoin balance. Changes in operating assets and liabilities used a net total of $8,833 of cash.
Operating activities from continuing operations for the nine months ended June 30, 2024, resulted in a net cash outflow of $150,539. This was primarily driven by net income of $83,598, which included significant non-cash revenue and gains, in the form of bitcoin. The non-cash adjustments to reconcile net income to net cash included $102,761 for depreciation and amortization and $22,696 for stock-based compensation, offset by $289,693 of non-cash bitcoin mining revenues. Additionally, changes in operating assets and liabilities resulted in a net cash outflow of $6,835.
Investing Activities
Investing activities from operations used $441,154 during the nine months ended June 30, 2025, as compared with using $503,698 for the nine months ended June 30, 2024. Our payments on miners (including miner deposits) of $382,285, purchase of fixed assets of $133,986, and payment for the asset acquisition of the LaFayette, Tennessee, and Twin Cities locations of $1,413, $8,105, and $5,490, respectively were the main components of our investing cash outflow for the nine months ended June 30, 2025. This was partly offset by cash received from proceeds from the sales of bitcoin of $127,625, the acquisition of GRIID of $1,411 and by cash proceeds received from the sale of miners of $42,832.
Financing Activities
Cash flows generated from financing activities of continuing operations during the nine months ended June 30, 2025 amounted to $696,514 compared to $754,624 for the nine months ended June 30, 2024. Our cash flows from financing activities for the nine months ended June 30, 2025 consisted primarily of proceeds from the convertible note and line of credit totaling $812,195 and proceeds from underwritten offerings of $186,808, partially offset by the repurchase of common stock of $145,000, aggregate payments for capped call transactions of $90,350, and payments on loans in the amount of $58,513. Our cash flows from financing activities for the nine months ended June 30, 2024 mainly consisted of proceeds from underwritten offerings of $780,043.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses. We evaluate our estimates and assumptions on an ongoing basis and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for the judgments we make about the carrying value of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and statement of cash flows.
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 other than as described in Note 2 - Summary of Significant Accounting Policies in our unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
Please refer to Note 2 - Summary of Significant Accounting Policies in our unaudited condensed consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following discussion about the Company’s market risk exposures involves forward-looking statements. Actual results could differ materially from those discussed in the forward-looking statements.
Market Price Risk of Bitcoin. The Company holds a significant amount of bitcoin; therefore, we are exposed to the impact of market price changes in bitcoin on its bitcoin holdings. This exposure would generally manifest itself in the following areas:
•The Company accounts for its bitcoin holdings at fair value and records changes in fair value throughout the periods being reported.
•Declines in the fair market value of bitcoin will impact the cash value that would be realized if the Company were to sell its bitcoin for cash, therefore having a negative impact on its liquidity.
At June 30, 2025, the Company held approximately 10,075 bitcoin on hand and the equivalent of 2,533 bitcoins receivable as a result of collateral held by third parties. As of June 30, 2025, the fair value of a single bitcoin was approximately $107,173, causing the fair value of the Company's bitcoin holdings and receivable from collateral on that date to approximate $1,080 and $271 million, respectively. A 10% increase or decrease in the fair value of bitcoin as of June 30, 2025, would have increased or decreased the total cash value that could be realized if the Company were to sell its bitcoin and related receivables by approximately $135 million in total.
Market Price Risk of Bitcoin-Linked Derivative Instruments.
As of June 30, 2025, we held bitcoin-linked derivative assets with a combined fair value of approximately $7.7 million. A 10% change in the fair value of these derivative instruments, holding all other variables constant, would result in an approximate $0.8 million increase or decrease in the total fair value of the derivatives and a corresponding impact to net income.
Item 4. Controls and Procedures
Limitation on Effectiveness of Controls and Procedures
We maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
On October 30, 2024, the Company completed its acquisition of GRIID. The Company is currently integrating GRIID into our overall internal control over financial reporting process and, consistent with interpretive guidance issued by the Staff of the SEC, is excluding the business from our evaluation of disclosure controls and procedures as of June 30, 2025. In accordance with such guidance, an assessment of recent business combinations may be omitted from management’s assessment of internal control over financial reporting for one year following the acquisition. This acquisition constituted approximately 5% of the Company’s total consolidated assets and approximately 12% of the Company’s consolidated revenues are generated from the locations acquired from GRIID as of and for the nine months ended June 30, 2025, respectively.
Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2025, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting described below.
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses that have been previously reported have been identified and included in management's assessment:
•The Company did not design and maintain effective information systems general controls over program change management, logical access and segregation of duties for our general ledger. Specifically, we did not maintain documentation to support the operation of our controls over change management for the Company’s general ledger, and the assignment or permissions to users which allowed certain users to create new users and assign those users existing predefined roles in the general ledger, which could result in an override of existing internal controls over financial reporting. The existence of this material weakness affected the design of internal controls related to various assertions in certain financial statement line items such that internal controls were not effective for cash and cash equivalents, bitcoin, receivable from bitcoin collateral, note receivable from GRIID, property and equipment, deposits on miners, accounts payable, accrued liabilities, loans payable, deferred income taxes, stockholders' equity, bitcoin mining revenue, cost and expenses, share-based payments, and income tax expense.
•The Company did not design and maintain effective controls to address the accounting for property plant and equipment, and deposits on miners.
These material weaknesses did not result in any identified material misstatements to the condensed consolidated financial statements, and there were no changes to previously released financial results.
Remediation Efforts to Address the Material Weaknesses
The Company’s Board of Directors and management take internal control over financial reporting and the integrity of its condensed consolidated financial statements seriously.
Changes to internal controls over financial reporting require operation for a sufficient period of time in order for management to evaluate and test the operating effectiveness. Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the following material weaknesses are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include the following:
Material weakness over design of information systems general controls over our general ledger
The remediation actions taken include the following:
•Removed users’ access within the general ledger system that allowed a user to create users and also perform accounting transactions. Updated roles in the general ledger system to ensure no actively assigned roles have ability to create users and perform accounting functions;
•Implemented monthly reviews of user access logs by individuals who do not perform accounting transactions in the general ledger;
•Redesigned and implemented relevant complementary user entity controls identified in third-party service organization system organization and control reports;
•Expanded the management and governance over IT system controls, including the hiring of a Systems Analyst and an IT Analyst;
•Redesigned and implemented controls over the completeness and accuracy of information used in the operation of controls, including data used in the preparation of condensed consolidated financial statements; and
•Redesigned and implemented controls over logical access, including user access provisioning, termination, and periodic review for all financial reporting systems.
The Company is currently in the process of testing the design, implementation and operating effectiveness of internal controls related to the various assertions in certain financial statement line items that were affected by the material weakness related to information systems general controls to determine whether internal controls are effective for cash and cash equivalents, bitcoin, receivable from bitcoin collateral, note receivable from GRIID, property and equipment, deposits on miners, accounts payable, accrued liabilities, loans payable, deferred income taxes, stockholders' equity, bitcoin mining revenue, cost and expenses, share-based payments, and income tax expense.
Material weakness design of property plant and equipment and deposits on miners
The planned remediation actions include the following:
•Redesign and implementation of controls related to the counting of received property, plant and equipment;
•Design and implement controls over the completeness and accuracy of information used in the operation of controls, including data used in the preparation of condensed consolidated financial statements;
•Implement controls related to the miner receiving process to ensure adequate documentation is maintained to support the accounting for miners in transit and period-end balances; and
•Conduct training related to documentation, policies and procedures for shipping, receiving and counting of property, plant and equipment.
While these remedial actions are designed and implemented to correct the unremediated material weaknesses, changes to internal controls over financial reporting require operation for a sufficient period of time in order for management to evaluate and test the operating effectiveness. Management will continue to monitor and evaluate the effectiveness of these changes for a sufficient period of time prior to concluding that these controls are designed and operating effectively, and the material weakness regarding the design of property plant and equipment and deposits on miners can be considered remediated.
Changes in Internal Control over Financial Reporting
The Company is integrating GRIID into our overall internal control over financial reporting process. At this time, we anticipate that the scope of our assessment of our internal control over financial reporting for our fiscal year ending September 30, 2025 will include GRIID’s internal control over financial reporting. Except for the remedial measures described above, and the GRIID Acquisition, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.