Ionic Digital Inc. 10-Q

Item 2. 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 together with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the Prospectus. Some of the information contained in this discussion and analysis, including information with respect to the Company’s plans and strategy for its business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Forward-Looking Statements” sections of this Quarterly Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Certain amounts may not foot due to rounding. 38 Table of Contents Overview We are a digital infrastructure solutions and cryptocurrency mining company. We began as a pure-play cryptocurrency mining company when we were formed in January 2024 to acquire all of the cryptocurrency mining assets of Celsius Mining. From our inception, our core objective has been to monetize our portfolio of powered digital infrastructure assets. Historically, we have monetized these assets by efficiently mining bitcoin. More recently, we have sought to achieve this objective by primarily leasing our digital infrastructure assets to hyperscalers, enterprise customers and other businesses for high-performance computing (“HPC”) and artificial intelligence (“AI”) cloud infrastructure. In October 2025, we announced our inaugural participation in the HPC/AI sector with a 126-month “triple net” lease with Nscale Ward County LLC (together, with its affiliates, “Nscale”), a global hyperscaler engineered for sovereign-grade AI infrastructure at our Ward County property in West Texas. In February 2026, we amended the lease. We refer to the lease, as amended, as the “Nscale Agreement.” We received our first payment under the Nscale Agreement in November 2025, and monthly fixed lease payments commenced in August 2026, which represent estimated total contracted revenues of approximately $1.9 billion, increasing to a potential $2.6 billion under the provisions of the amendment. Our future financial operating strategy is to prioritize stable, contracted cash flows from our digital infrastructure operations while continuing to generate revenue from bitcoin mining for as long as it remains profitable. Our existing cryptocurrency mining assets in Midland will continue to mine bitcoin for as long as such operations remain profitable, while we commence work to develop these locations into HPC/AI facilities. On July 28, 2026, the Company completed our direct listing of the Company’s Class A Common Stock. Trends and Key Factors Affecting Performance Ability to Access Power Capacity We are seeking to expand the energy capacity at our Ward County property to 700 MW, which we believe would advance the monetization of our owned powered digital infrastructure assets. In addition to the 234 MW currently leased to Nscale, the Nscale Agreement contractually obligates Nscale to lease an additional 89 MW, when such capacity becomes available. Any expanded power capacity at our Ward County property is subject to regulatory approval; therefore, we cannot guarantee that the power generation at our Ward County property will be expanded as currently contemplated. While there is no penalty under the Nscale Agreement if we are unable to provide Nscale with the additional 89 MW of capacity, the ability to access additional power capacity is critical to our strategic growth plans. In addition, increases in Bitcoin network hashrate drive greater demand for additional and more efficient miners, which require additional power capacity. Additional energy capacity can be difficult to source at cost-effective prices or within locations that are favorable to HPC and AI infrastructure or to bitcoin mining. We aim to continue to leverage our existing relationships and develop new relationships within the energy industry to secure low-cost power capacity. Demand for Digital Infrastructure Solutions The planned growth of our digital infrastructure solutions business, through increased investment in HPC/AI infrastructure over the next several years, should gradually reduce our overall exposure to volatility in the spot price of bitcoin as digital infrastructure solutions begins to account for a larger percentage of our financial results. The digital infrastructure solutions business is characterized by implementation of long-term contracts with customers spanning several years and terms and conditions resulting in stable, predictable revenue and cash flows over the contract period. Energy Costs Energy costs are the most significant driver of the profitability of our cryptocurrency mining business and, because they can be highly volatile, may impact digital infrastructure solutions as well. For our cryptocurrency mining business, we manage our cost of electricity through participation in various demand response programs, power purchase agreements, and curtailment of miners when electricity prices make it unprofitable to mine bitcoin. Geopolitical and macroeconomic factors, such as overseas military or economic conflict between states, can adversely affect electricity costs by raising the cost of power generation inputs such as natural gas. Other events out of our control can also impact electricity costs and availability. In certain power markets, financial hedging can be employed to protect buyers from the financial impact of significant increases in power prices. 39 Table of Contents Energy costs may be adversely affected by macroeconomic or geopolitical events. For example, Russia’s invasion of Ukraine in February 2022 exerted pressure on the global energy market, particularly Europe’s natural gas supply. Higher liquid natural gas import needs in Europe previously resulted in increased volatility and worldwide supply tensions. The conflict added further pressure to supply chain disruptions and likely supported rising inflation through higher commodity prices. The U.S. experienced elevated electricity pricing possibly due to this conflict, although we have no, and do not intend to have any, direct operations in Russia or Ukraine. The current conflict in Iran has also affected global energy and transportation markets, in particular, the volatility of oil prices due to attacks on infrastructure and blockages of the Strait of Hormuz. Our Competition and Customers The success of our digital infrastructure solutions business greatly depends on our ability to retain and develop opportunities with our existing customer, to secure additional infrastructure, and to attract new customers. In our digital infrastructure solutions business, we compete with data center REITs, developers, hyperscalers, and other bitcoin miners with facilities suitable for HPC workloads, primarily for high-power sites and the capital to develop them. We believe our operational track record and development expertise position us to effectively capture the strong and growing demand for high-power data center capacity. In addition, cryptocurrency mining is increasingly dominated by large-scale industrial operators and, in some cases, sovereign nation-states with substantial resources. Competition spans hardware procurement, capital access, low-cost power, and high-power site development. While sector-wide transparency remains limited, available data indicates that network hashrate has continued to rise as both new entrants and existing competitors deploy additional capacity. While we believe our mining fleet and low-cost power portfolio position us competitively as the industry matures, we continue to shift our business to leasing digital infrastructure assets and anticipate that our bitcoin mining operations will decline over time. 40 Table of Contents Results of Operations Comparison of the three months ended June 30, 2026 and 2025 The following tables summarize the results of operations for the three months ended June 30, 2026 and 2025: Three Months Ended ($ in thousands) June 30, 2026 June 30, 2025 $ Variance % Variance Revenue: Cryptocurrency mining $ 4,798 $ 37,192 $ (32,394) (87.1) % Digital infrastructure leasing 43,849 — 43,849 — % Total revenue $ 48,647 $ 37,192 $ 11,455 30.8 % Costs and operating expenses: Cost of mining revenue, exclusive of depreciation 3,060 22,256 (19,196) (86.3) % Cost of digital infrastructure solutions revenue, exclusive of depreciation 209 — 209 — % Depreciation 4,903 16,917 (12,014) (71.0) % General and administrative expenses 19,465 10,796 8,669 80.3 % Loss (gain) on fair value of cryptocurrency assets 28,204 (46,780) 74,984 * Realized gain on sale of cryptocurrency assets — (14,796) 14,796 (100.0) % Loss (gain) on disposal of property and equipment 847 (2) 849 * Other operating expenses, net 195 250 (55) (22.0) % Total operating expenses 56,883 (11,359) 68,242 * Operating income (loss) $ (8,236) $ 48,551 $ (56,787) (117.0) % Other income (expense): Interest income 179 359 (180) (50.1) % Realized loss on cryptocurrency derivatives — (130) 130 (100.0) % Loss on litigation settlement — (8,079) 8,079 (100.0) % Other income (expense) 179 (7,850) 8,029 * Loss before provision for income taxes $ (8,057) $ 40,701 $ (48,758) * Provision for income taxes 27,248 8,787 18,461 * Net income (loss) $ (35,305) $ 31,914 $ (67,219) * * - not meaningful Revenue Cryptocurrency mining revenues Cryptocurrency mining revenue represents revenue earned from the mining of bitcoin. We participate in a third-party operated mining pool to which we provide the service of performing hash calculations, an output of our ordinary activities, in exchange for bitcoin. Our revenue is determined by the price of bitcoin, the hashrate generated by our miners, the block reward and transaction fee reward established by the Bitcoin network, and the network difficulty. 41 Table of Contents Cryptocurrency mining revenue for the three months ended June 30, 2026 was $4.8 million compared to $37.2 million for the three months ended June 30, 2025. The $32.4 million, or 87.1%, decrease in cryptocurrency mining revenue was primarily due to a decline in the average price of bitcoin and a reduction in active miners resulting in a reduced average hash rate as compared to the prior period. Digital infrastructure leasing revenues Digital infrastructure leasing revenue consists of revenue earned from leasing arrangements at our owned digital infrastructure site. For the three months ended June 30, 2026, we recognized $43.8 million digital infrastructure leasing revenue, representing the recognition of revenue associated with the Nscale Agreement. Costs of revenues and operating expenses Cost of mining revenues, exclusive of depreciation Cost of mining revenues, exclusive of depreciation, consists primarily of energy and labor costs to operate our owned and leased facilities and hosting fees to operate our hosted facilities. Electricity costs, which are a component of both owned, leased, and hosting costs of mining revenues, were and remain the most significant direct bitcoin mining expenditure. The price of electricity has historically been and may continue to be volatile. For the three months ended June 30, 2026 the cost of mining revenues, exclusive of depreciation totaled $3.1 million compared with $22.3 million for the three months ended June 30, 2025. The cost of mining revenues, exclusive of deprecation decreased primarily due to the reduction in mining activities as compared to the prior period. Cost of digital infrastructure leasing revenues Cost of digital infrastructure leasing revenue represents the costs incurred to decommission cryptocurrency mining operations at Ward County in preparation for occupation by the tenant in accordance with the Nscale Agreement, as well as amortization of the initial direct costs of the lease contract and costs to maintain the facilities that are largely passed through to the customer. For the three months ended June 30, 2026, Cost of digital infrastructure leasing revenue was $0.2 million. There were no Cost of digital infrastructure leasing revenue during the three months ended June 30, 2025. Depreciation Depreciation expense for the three months ended June 30, 2026 totaled $4.9 million, compared with $16.9 million for the three months ended June 30, 2025. The decrease in depreciation expense of 71.0% for the three months ended June 30, 2026 was primarily attributable to the reduction of fixed assets as a result of decommissioning the cryptocurrency mining operations at Ward County during the fourth quarter of 2025 and the subsequent disposal of related assets, including a reduction in our mining fleet. In addition, as of December 31, 2025, the Company recorded an impairment of its fixed assets related to its remaining cryptocurrency mining operations. General and administrative (“G&A”) expenses G&A expenses consist of service fees, professional fees, insurance, compensation costs, storage expenses, and sales taxes. G&A expenses of $19.5 million for the three months ended June 30, 2026 represent an increase of 80.3% compared to $10.8 million for the three months ended June 30, 2025. The increase in G&A expenses is primarily due to higher stock-based compensation expense and higher headcount-related costs as we expanded our team to support the Company’s strategic transition to digital infrastructure solutions. (Gain) loss on fair value of cryptocurrency We recorded a loss on the fair value of cryptocurrency for the three months ended June 30, 2026 totaling $28.2 million compared with a gain of $46.8 million for the three months ended June 30, 2025. This activity represents the change in fair value of bitcoin held by us between the time the bitcoin was mined and the fair value of bitcoin as of the respective period-end, and reflects the volatility in the price of a bitcoin. Realized gain on sale of cryptocurrency assets There was no realized gain on sale of cryptocurrency assets for the three months ended June 30, 2026 compared to a gain of $14.8 million for the three months ended June 30, 2025. This is a result of the Company not selling any cryptocurrency assets during the current period. 42 Table of Contents Other income (expense), net Other income (expense) consists primarily of interest income, gains and losses related to litigation settlements, gains on investments, and realized and unrealized losses related to derivative contracts. Other income was $0.2 million for the three months ended June 30, 2026 compared to expense of $7.9 million for the three months ended June 30, 2025, with the difference of $8.0 million primarily driven by non-recurring gains in the prior period on a litigation settlement. Provision (benefit) for income taxes During the second quarter of 2026, the Company changed its methodology for determining interim income tax expense from the estimated annual effective tax rate method to the year-to-date actual effective tax rate method, adjusted for discrete items recognized in the applicable interim period. The change was made because the Company determined it could no longer reliably estimate its annual effective tax rate due primarily to the volatility of bitcoin fair values and the resulting variability in its deferred tax position, together with significant uncertainty in forecasting annual pre-tax income. Additional information regarding this change is included in Note 14 to the condensed consolidated financial statements. For the three months ended June 30, 2026, the Company recorded income tax expense (including discrete items) of $27.2 million, compared to $8.8 million for the three months ended June 30, 2025. The increase in income tax expense was primarily attributable to deferred tax expense resulting from increases in the Company's valuation allowance, principally related to deferred tax assets associated with unrealized losses on cryptocurrency holdings. The Company’s effective tax rate (including discrete items) was (338.2)% and 21.6% for the three months ended June 30, 2026 and 2025, respectively. The effective tax rate for the 2026 period differed significantly from the U.S. federal statutory rate of 21% primarily due to the valuation allowance recorded against the deferred tax asset associated with unrealized losses on cryptocurrency holdings, as well as permanent differences related to non-deductible officer compensation and non-deductible stock issuance costs. Under ASU 2023-08, changes in the fair value of the Company's cryptocurrency holdings are recognized in earnings but are not taxable until disposition. Any resulting losses would be capital in character and available only to offset capital gains, which the Company does not currently expect to generate in sufficient amounts within the applicable carryforward period to realize the related deferred tax asset. These items resulted in the recognition of income tax expense despite the Company’s pre-tax losses for the quarter. 43 Table of Contents Results of Operations Comparison of the six months ended June 30, 2026 and 2025 The following tables summarize the results of operations for the six months ended June 30, 2026 and 2025: Six Months Ended ($ in thousands) June 30, 2026 June 30, 2025 $ Variance % Variance Revenue: Cryptocurrency mining $ 12,199 $ 78,273 $ (66,074) (84.4) % Digital infrastructure leasing 87,888 — 87,888 — % Total revenue $ 100,087 $ 78,273 $ 21,814 27.9 % Costs and operating expenses: Cost of mining revenue, exclusive of depreciation 8,663 47,469 (38,806) (81.8) % Cost of digital infrastructure solutions revenue, exclusive of depreciation 674 — 674 — % Depreciation 10,479 33,374 (22,895) (68.6) % General and administrative expenses 35,706 17,907 17,799 99.4 % Loss on fair value of cryptocurrency assets 81,527 (1,332) 82,859 * Realized gain on sale of cryptocurrency assets — (32,410) 32,410 (100.0) % Loss (gain) on disposal of property and equipment 544 (21) 565 * Other operating expenses, net 382 500 (118) (23.6) % Total operating expenses 137,975 65,487 72,488 110.7 % Operating income (loss) $ (37,888) $ 12,786 $ (50,674) * Other income (expense): Interest income 506 700 (194) (27.7) % Realized loss on cryptocurrency derivatives — (130) 130 (100.0) % Loss on litigation settlement — (8,079) 8,079 (100.0) % Other income (expense) 506 (7,509) 8,015 * Income (loss) before provision for income taxes $ (37,382) $ 5,277 $ (42,659) * Provision for income taxes 10,907 1,394 9,513 * Net income (loss) $ (48,289) $ 3,883 $ (52,172) * * - not meaningful 44 Table of Contents Revenue Cryptocurrency mining revenues Cryptocurrency mining revenue for the six months ended June 30, 2026 was $12.2 million compared to $78.3 million for the six months ended June 30, 2025. The $66.1 million, or 84.4%, decrease in cryptocurrency mining revenue was primarily due to a decline in the average price of bitcoin and a reduction in active miners resulting in a reduced average hash rate as compared to the prior period. Digital infrastructure leasing revenues Digital infrastructure leasing revenue consists of revenue earned from leasing arrangements at our owned digital infrastructure site. For the six months ended June 30, 2026 we recognized $87.9 million infrastructure leasing revenue, representing the recognition of revenue associated with the Nscale Agreement. There was no digital infrastructure leasing revenue during the six months ended June 30, 2025. Costs of revenues and operating expenses Cost of mining revenues, exclusive of depreciation For the six months ended June 30, 2026 the cost of mining revenues, exclusive of depreciation totaled $8.7 million compared with $47.5 million for the six months ended June 30, 2025. The cost of mining revenues, exclusive of depreciation decreased primarily due to the reduction in mining activities as compared to the prior period. Cost of digital infrastructure leasing revenues Cost of digital infrastructure leasing revenue represents the costs incurred to decommission cryptocurrency mining operations at Ward County in preparation for occupation by the tenant in accordance with the Nscale Agreement, as well as amortization of the initial direct costs of the lease contract and costs to maintain the facilities that are largely passed through to the customer. For the six months ended June 30, 2026, Cost of digital infrastructure leasing revenue was $0.7 million. There were no Cost of digital infrastructure leasing revenue during the six months ended June 30, 2025. Depreciation Depreciation expense for the six months ended June 30, 2026 totaled $10.5 million, compared with $33.4 million for the six months ended June 30, 2025. The decrease in depreciation expense of 68.6% for the six months ended June 30, 2026 was primarily attributable to the reduction of fixed assets as a result of decommissioning of cryptocurrency mining operations at Ward County during the fourth quarter of 2025 and the subsequent disposal of related assets, including a reduction in our mining fleet. In addition, as of December 31, 2025, the Company recorded an impairment of its fixed assets related to its remaining cryptocurrency mining operations. General and administrative (“G&A”) expenses G&A expenses consist of service fees, professional fees, insurance, compensation costs, storage expenses, and sales taxes. G&A expenses of $35.7 million for the six months ended June 30, 2026 represent an increase of 99.4% compared to $17.9 million for the six months ended June 30, 2025. The increase in G&A expenses is primarily due to higher compensation costs and professional fees as compared to the prior period. (Gain) loss on fair value of cryptocurrency We recorded a loss on the fair value of cryptocurrency for the six months ended June 30, 2026 totaling $81.5 million compared with a gain of $1.3 million for the six months ended June 30, 2025. This activity represents the change in fair value of bitcoin held by us between the time the bitcoin was mined and the fair value of bitcoin as of the respective period-end, and reflects the volatility in the price of a bitcoin. Realized gain on sale of cryptocurrency assets There was no realized gain on sale of cryptocurrency assets for the six months ended June 30, 2026 compared to a gain of $32.4 million for the six months ended June 30, 2025. This is a result of the company not selling any cryptocurrency assets during the current period. Other income (expense), net Other income (expense) consists primarily of interest income, gains and losses related to litigation settlements, gains on investments, and realized and unrealized losses related to derivative contracts. Other income was $0.5 million for the six months ended June 30, 2026 compared to expense of $7.5 million for the six months ended June 30, 2025, with the difference of $8.0 million primarily driven by non-recurring gains in the prior period on a litigation settlement. 45 Table of Contents Provision (benefit) for income taxes During the second quarter of 2026, the Company changed its methodology for determining interim income tax expense from the estimated annual effective tax rate method to the year-to-date actual effective tax rate method, adjusted for discrete items recognized in the applicable interim period. The change was made because the Company determined it could no longer reliably estimate its annual effective tax rate due primarily to the volatility of bitcoin fair values and the resulting variability in its deferred tax position, together with significant uncertainty in forecasting annual pre-tax income. Additional information regarding this change is included in Note 14 to the condensed consolidated financial statements. For the six months ended June 30, 2026 and 2025, the Company recorded income tax expense (including discrete items) of $10.9 million and $1.4 million, respectively. The increase in income tax expense was primarily attributable to deferred tax expense resulting from increases in the Company's valuation allowance, principally related to deferred tax assets associated with unrealized losses on cryptocurrency holdings. The Company’s effective tax rate (including discrete items) was (29.2)% and 26.4% for the six months ended June 30, 2026 and 2025, respectively. The effective tax rate for the 2026 period differed from the U.S. federal statutory rate of 21% primarily due to the valuation allowance recorded against the deferred tax asset associated with unrealized losses on cryptocurrency holdings, as well as permanent differences related to non-deductible officer compensation and non-deductible stock issuance costs. Under ASU 2023-08, changes in the fair value of the Company's cryptocurrency holdings are recognized in earnings but are not taxable until disposition. Any resulting losses would be capital in character and available only to offset capital gains, which the Company does not currently expect to generate in sufficient amounts within the applicable carryforward period to realize the related deferred tax asset. These items resulted in the recognition of income tax expense despite the Company’s pre-tax losses for the period. 46 Table of Contents Non-GAAP Financial Measures We use certain financial measures that are not calculated in accordance with generally accepted accounting principles in the U.S. (“GAAP”) to supplement our condensed consolidated financial statements. These non-GAAP financial measures provide additional information to investors to facilitate comparisons of past and present operating results, identify trends in our underlying operating performance, and offer greater transparency on how we evaluate our business activities. These measures are integral to our processes for budgeting, managing operations, making strategic decisions, and evaluating our performance. Our primary non-GAAP financial measures are Adjusted gross profit and Adjusted EBITDA. Adjusted gross profit We define Adjusted gross profit as gross profit exclusive of depreciation. We rely on Adjusted gross profit to evaluate our business, measure our performance, and make strategic decisions. It is used by our Chief Operating Decision Maker (“CODM”) when making decisions regarding the allocation of resources to operating segments. We believe that the presentation of this non-GAAP financial measure will provide useful information to investors and analysts in assessing the Company’s financial performance by excluding non-cash depreciation expense which is representative of historical investments and which we do not believe is indicative of our current operating performance. Gross profit is the GAAP measure most directly comparable to Adjusted gross profit. Our non-GAAP financial measures should not be considered as an alternative to the most directly comparable GAAP financial measures. You are encouraged to evaluate each of these adjustments and the reasons our management considers them appropriate for supplemental analysis. The following tables provide a reconciliation of Gross Profit to Adjusted Gross Profit: Three Months Ended Six Months Ended ($ in thousands) June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Revenue $ 48,647 $ 37,192 $ 100,087 $ 78,273 Cost of revenue, excluding depreciation (3,269) (22,256) (9,337) (47,469) Depreciation (4,903) (16,917) (10,479) (33,374) Gross profit (loss) $ 40,475 $ (1,981) $ 80,271 $ (2,570) Depreciation 4,903 16,917 10,479 33,374 Adjusted gross profit $ 45,378 $ 14,936 $ 90,750 $ 30,804 47 Table of Contents Adjusted EBITDA We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation, and amortization, further adjusted for certain items that management believes are not indicative of core operating performance, including unrealized gains or losses on energy derivatives and other investments, one-time gains or losses on litigation settlements, stock-based compensation expense, impairment charges on intangible and long-lived assets, costs related to the decommissioning of cryptocurrency mining sites, and other such costs, as detailed in the table below. Additionally, as explained below, beginning with this Quarterly Report, we also adjust Adjusted EBITDA to exclude realized and unrealized gains and losses on digital assets. We use Adjusted EBITDA to evaluate operating performance, allocate resources, and make strategic decisions, including assessing progress on our transition from bitcoin mining to digital infrastructure leasing. Adjusted EBITDA is used in internal forecasting and budgeting, in evaluating treasury management decisions, and in board-level discussions regarding capital structure, liquidity, and our ability to fund growth initiatives. Our exclusion of realized and unrealized gains and losses on digital assets from Adjusted EBITDA does not reverse or modify GAAP recognition and measurement principles. We exclude these amounts because they primarily reflect Bitcoin market price fluctuations and treasury management decisions. We view our Bitcoin holdings primarily as investments used to support liquidity and growth initiatives, rather than as components of our operations. Core operating performance is driven by factors such as hashrate performance, energy costs, miner efficiency, uptime, and revenues from digital infrastructure leasing activities. We include digital assets received as revenue at the market price on the date of receipt, as this reflects value realized from core business activities. Decisions to hold or liquidate these assets are investment decisions, distinct from operating performance. We present Adjusted EBITDA because we believe it provides useful information to investors and analysts in assessing our historical financial performance. In particular, the exclusion of realized and unrealized gains and losses on digital assets beginning with this Quarterly Report allows investors to evaluate operating performance on a basis more consistent with management’s view of our core business, as we execute our strategic transition. Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA. This non-GAAP measure should not be considered as an alternative to GAAP measures. We encourage you to evaluate each adjustment and the reasons management considers them appropriate. We may incur similar or unusual items in the future that could affect Adjusted EBITDA, and our presentation should not be construed as an inference that future results will be unaffected by such items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in the future, and any modification may be material. Adjusted EBITDA has important limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP results. It may be defined differently by other companies, limiting comparability. 48 Table of Contents The following tables provide a reconciliation of Net income (loss) to Adjusted EBITDA ( in thousands ): Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Net income (loss) $ (35,305) $ 31,914 $ (48,289) $ 3,883 Interest income (179) (359) (506) (700) Provision for income taxes 27,248 8,787 10,907 1,394 Depreciation 4,903 16,917 10,479 33,374 Amortization 5 5 10 10 Stock-based compensation expense (1) 8,990 — 15,438 — Loss (gain) on fair value of cryptocurrency 28,204 (46,780) 81,527 (1,332) Realized gain on sale of cryptocurrency assets — (14,796) — (32,410) Realized loss (gain) on sale of property and equipment 847 (2) 544 (21) Direct listing expenses and fees 1,449 — 1,449 — Private placement issuance costs 1,431 — 1,431 — (Gain) loss on litigation settlement (2) — 8,079 — 8,079 Adjusted EBITDA $ 37,593 $ 3,765 $ 72,990 $ 12,277 (1) Stock-based compensation during the three and six months ended June 30, 2026 relates to restricted stock units and performance restricted stock units issued to employees and board members. There was no equivalent activity for the three and six months ended June 30, 2025. (2) Loss on litigation settlement during the three and six months ended June 30, 2025 reflects a settlement to resolve shareholder actions. There was no equivalent activity for the three and six months ended June 30, 2026. 49 Table of Contents Liquidity and Capital Resources As of June 30, 2026, the Company had on hand $415.7 million in cash and cash equivalents and 2,882 bitcoin valued at $168.7 million at that date. Our current obligations as of June 30, 2026 totaled $26.3 million and consisted primarily of accrued expenses including transaction costs related to the Private Placement. The Company had no outstanding borrowings as of June 30, 2026. We anticipate having sufficient liquidity on hand for the next twelve months from the Private Placement and revenue generated and the sale of accumulated bitcoin to fund operations, the estimated $64 million in capital expenditures ($45 million in 2026 and the remainder in 2027) to upgrade the substation in Ward County, as well as to pursue strategic opportunities. Our ability to liquidate bitcoin earned at future values will be regularly evaluated to generate cash for operations. We incurred no debt during the six months ended June 30, 2026 or for the year ended December 31, 2025, and we seek to optimize our balance sheet, operations, and liquidity position to meet our immediate cash flow requirements, and will evaluate leveraging opportunities to meet expansion opportunities over the next twelve months. Cash Flows For the six months ended June 30, 2026 and 2025 we had a net increase in cash and cash equivalents of $372.2 million and net decrease of $11.1 million, respectively. The following table summarizes our cash flow activity for the periods presented: Six Months Ended ($ in thousands) June 30, 2026 June 30, 2025 Net cash used in operating activities $ (25,935) $ (71,255) Net cash provided by (used in) investing activities (1,837) 60,107 Net cash provided by financing activities 400,000 — Net increase (decrease) in cash and cash equivalents for the period $ 372,228 $ (11,148) Operating Activities Net cash used in operating activities results from payments made to operate the mining business, particularly to hosting and energy providers, as well as tax payments, general and administrative expenses, and repairs and maintenance to mining equipment. Historically, these expenses are not offset by our revenues, as consideration from the mining pool operator is received in bitcoin rather than cash. The $25.9 million net cash used in operating activities during the six months ended June 30, 2026, represents a net loss of $48.3 million adjusted for non-cash items including cryptocurrency mining revenue received in bitcoin, depreciation of our miners and other long-lived assets placed in service, change in the fair value of bitcoin held in treasury, an increase in the deferred tax expense, and stock compensation expense. Other material changes to our use of cash in operating activities during the six months ended June 30, 2026 include a decrease in deferred revenue resulting from the recognition of digital infrastructure solutions revenue at our Ward County facility. See “Results of Operations” for further information about the modifications to our business strategy that are driving these non-cash impacts. Investing Activities During the six months ended June 30, 2026, the Company used $1.8 million for investing activities, primarily for purchases of property and equipment, partially offset by proceeds from the disposal of assets held for sale. Financing Activities For the six months ended June 30, 2026, the Company’s net cash from financing activities was a result of $400 million proceeds from the Private Placement. Contractual Obligations, Commitments and Contingencies Refer to Note 15 to our condensed consolidated financial statements for further information regarding the Company’s commitments and contingencies. 50 Table of Contents Critical Accounting Policies and Estimates Our critical accounting policies and estimates are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Prospectus. We believe there have been no new critical accounting policies or material changes to our existing critical accounting policies and estimates compared to those discussed in our registration statement.