Datacentrex, Inc. 10-K

item 7. management’s discussion and analysis of financial condition and results of operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this Annual Report. In addition to historical information, the following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Note on Forward-looking Statements” for a discussion of the uncertainties and assumptions associated with these statements. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this Annual Report on Form 10-K. 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 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 full fiscal year ended December 31, 2025, which represents the Company’s inaugural year of mining operations. There was no comparable activity in the prior-year period. 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 December 31, 2025, the Company held over $4.5 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. - 50 - Fiscal Year 2025 Operational Highlights Fiscal year 2025 represented the Company’s inaugural year of digital asset mining operations, during which the Company scaled from initial deployment to a fully operational mining platform. Key operational highlights for the year include: Fleet Scaling and Deployment. 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. During the second quarter, the Company evaluated additional colocation partners and deployed approximately 1,000 additional units across two new domestic colocation sites. In the third quarter, in response to changes in the tariff environment and to capture lower operating expenses, the Company relocated the original fleet of approximately 1,500 miners back to the United States and distributed them across two facilities. In the fourth quarter, the Company deployed an additional 520 rigs, bringing the total operating fleet to 3,094 Scrypt ASIC miners as of December 31, 2025, deployed across four geographically diversified colocation facilities, all located in the United States. Hashrate and Power Capacity. As of December 31, 2025, the Company’s fleet of 3,094 operating Scrypt ASIC miners had an average nameplate capacity of approximately 14 GH/s per unit, representing aggregate deployed hashrate of approximately 43.3 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 year ended December 31, 2025, the Company generated revenues of approximately $7.0 million from digital asset mining operations, with cost of revenue of approximately $3.6 million and gross profit of approximately $3.4 million. The Company reported a net loss attributable to common stockholders of approximately $8.5 million, driven primarily by depreciation expense of $7.5 million on mining equipment (amortized over a two-year useful life), professional fees, stock-based compensation, and other operating expenses associated with building operational infrastructure during the Company’s first year of operations. The Company generated positive Adjusted EBITDA of approximately $0.6 million for the period. Corporate Transaction. On December 15, 2025, the Company consummated the Transaction, issuing an aggregate of 13,835,188 shares of Common Stock and 16,239.812 shares of Series D Convertible Preferred Stock (convertible into 16,239,812 shares of Common Stock) to the stockholders of Doge. Following the Transaction, the Company changed its name to Datacentrex, Inc. and its shares continued to trade on the Nasdaq Capital Market under the ticker symbol “DTCX.” 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. - 51 - RESULTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2025 The following table sets forth certain selected consolidated statements of operations data for the year ended December 31, 2025. For the Year ended December 31, 2025 Revenues $ 6,963,477 Cost of Revenue 3,559,564 Gross Profit 3,403,913 Operating Expenses 11,322,284 Loss from Operations (7,918,371 ) Total Other Income (Expense) (584,514 ) Net Loss $ (8,502,885 ) Revenues The Company generated revenues of $6,963,477 for the years ended December 31, 2025. The Company was incorporated and commenced operations, specifically its digital mining operations in fiscal year 2025 and therefore had no activity in 2024. Cryptocurrency mining are impacted significantly by volatility in coin prices, as well as increases in the Blockchain’s Network Hash Rate resulting from the growth in the overall quantity and quality of rigs utilizing the Scrypt mining algorithm working to solve blocks on the blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Summary of Mining Results The following table presents additional information about our cryptocurrency mining activities in coins and amounts during the year ended December 31, 2025. Name Abbreviation Coins Amount (USD) Bells Coin BEL 14,421 $ 2,554 BTC Nicehash BTC 0 4,860 Dingocoin DINGO 31,489,640 1,004 Dogecoin DOGE 32,647,445 6,092,437 Ethereum ETH 0 11 Junkcoin JKC 29,574 837 Lukycoin LKY 12,446 2,959 Litecoin LTC 8,999 856,190 Pepe PEPE 46,470,242 397 Shibacoin SHIC 124,327,343 2,228 235,000,110 $ 6,963,477 - 52 - Cost of Revenue Cost of revenue for the year ended December 31, 2025 approximately $3.560 million consisted primarily of direct production costs of the mining operations, including utilities and fees paid to one of the Company’s colocation agreement hosts ($3.353 million) and value added tax expense ($206,000), but excluding depreciation and amortization, which are separately stated. Operating expenses For the year ended December 31, 2025 the Company incurred operating expenses of $11,332,284. Operating expenses consisted mainly of office expenses of $802,667, contract labor of $155,676, professional fees of $954,679, depreciation expense of $7,503,386 and stock based compensation of $1,389,989. Office expenses are primarily attributable to the Company moving colocation locations during the year and shipping mining equipment between locations. Contract labor and professional fees is related to operational activity for the company’s first year operations and the reverse recapitalization consummated during the year. Depreciation expense is attributable to in-service mining equipment which is amortized over two-year useful life. Stock based compensation is attributable to expense under the employee’s equity plan for eligible employees. Net Loss from operations The Company realized a net loss from operations before income taxes of $7,918,371 for the year ended December 31, 2025 which is attributed to the reasons stated above in the section “Operating Expenses.” Other income (expense) For the year ended December 31, 2025, the Company had ($584,514) in other income (expense). This included the net unrealized and realized loss on digital assets (cryptocurrencies) of ($443,696) during the year ended December 31, 2025 $(140,818) of net interest expense. Net Loss Before Income Taxes The Company realized a net loss before income taxes of $8,502,885 for the year ended December 31, 2025, and is due to the reasons stated above in the preceding sections. Liquidity and capital resources As of December 31, 2025, the Company had cash in the amount of $38,919,486. Of the cash held at December 31, 2025, $36,408,077 relates to Doge (the accounting acquirer) and $2,511,409 relating to Thumzup (the legal acquirer) and Thumzup Inc. which is excluded from the statement of cash flows as discussed in Note 2 of the consolidated financial statement. As of December 31, 2025, the Company had stockholders’ equity of $66,247,252. The Company’s accumulated deficit was $(8,502,885) as of December 31, 2025. The Company used net cash in operating activities of $6,447,474 for the year ended December 31, 2025. For the year ended December 31, 2025, cashflows were impacted by depreciation of $7,503,386, digital asset mining revenue of $6,963,477, stock based compensation of $1,389,989, net unrealized and realized loss on digital assets, $443,696, loss on sale of equipment $395, change in prepaid expense of $198,707, change in other assets of $621,660 and change in accrued expenses of $501,789. Net cash used in investing activities for the year ended December 31, 2025 was $24,866,515. During the year ended December 31, 2025, we invested $25,938,181 in mining equipment, received $29,990 proceeds from sale of equipment, deposited $3,600,100 on mining equipment to be received and received $4,641,776 in proceeds from sale of digital assets. - 53 - There was cash generated by financing activities for the year ended December 31, 2025 of $70,233,475. For the year ended December 31, 2025, this was comprised of $8,550,000 in proceeds from long term debt, offset by repayments of $8,550,000, cash acquired in reverse recapitalization of $42,140,304, proceeds from the issuance Class A-1 units of $17,945,000, proceeds from the issuance of Class A-2 units net of issuance costs of $10,422,402, and the repurchase of treasury stock of $274,321. Capital Resources As of December 31, 2025, we had cash and cash equivalents on hand of $38,919,486. 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 mine cryptocurrency and the spot or market price of the cryptocurrency we mine and raise additional funds as equity, debt or convertible securities. We expect to generate ongoing revenues from the production of cryptocurrencies, primarily Dogecoin currency rewards, for example, in our mining facilities and our ability to liquidate for currency rewards at future values will be evaluated from time to time to generate cash for operations. Generating Dogecoin and other currency rewards, for example, which 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 cryptocurrency 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. 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 year ended December 31, 2025, the Company incurred $3,353,355 of colocation and hosting-related service expenses, which are included in cost of revenues 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 (such as non-recurring transactions mentioned above) that impact the comparability of financial results from period to period. 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. - 54 - Reconciliations of Adjusted EBITDA to the most comparable U.S. GAAP financial metric as of December 31, 2025 is presented in the table below: Net Loss $ (8,502,885 ) Depreciation 7,503,386 Stock based compensation 1,389,989 Interest expense, net 140,818 Adjusted EBITDA 531,308 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. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer evaluated the effectiveness of Doge’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and regulations promulgated thereunder) as of December 31, 2025. Based on this evaluation, our management concluded that our disclosure controls and procedures were effective as of December 31, 2025. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls, and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.   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. For a more detailed discussion, see the section entitled “Risk Factors.” - 55 - 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. Off-Balance Sheet Arrangements During the years presented, we did not have any off-balance sheet arrangements. 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 3. Summary of Significant Accounting Policies in our Notes to consolidated financial statements included elsewhere herein. - 56 - Other than as discussed above and elsewhere in this Annual Report on Form 10-K, 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.” Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Company is not required to provide the information required by this Item as it is a smaller reporting company. item 8. financial statements and supplementary data The information for this Item 8 is included following the “Index to Financial Statements” on page F-1 of this Annual Report. item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.