What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-15 · 156 added, 73 removed, 203 unchanged (53% of the section changed)

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The following discussion and analysis of the results of operations and financial condition of KULR Technology Group, Inc.

(“KULR”) and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of March 31, 2025 and for the three months ended March 31, 2025 and 2024 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report.

(“KULR”) and its wholly-owned subsidiary, KULR Technology Corporation (“KTC”) (collectively referred to as “KULR” or the “Company”) as of June 30, 2025 and for the three and six months ended June 30, 2025 and 2024 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Quarterly Report.

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”, “our” and similar terms refer to the Company.

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By leveraging our proprietary cooling solutions that have been developed through longstanding partnerships with advanced technology users like NASA, the Jet Propulsion Lab and others, our products and services make commercial battery powered products safer and electronics systems cooler and lighter.

KULR’s business model continues to evolve from being a component supplier, to providing more design and testing services to our customers.

In addition to KULR’s commitment to its Bitcoin Treasury Strategy (see “Our Bitcoin Acquisition Strategy” section below), KULR’s business model continues to evolve from being a component supplier, to providing more design and testing services to our customers.

The next step of evolution is to provide total system solutions to address market needs.

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This architecture, combined with KULR’s utilization of MOLICEL lithium-ion cells, provides one of the safest and highest performing off-the-shelf space flight battery designs available today.

The 400 series of the K1S platform serves as the first ever commercial offering of a 20793 rated battery with final certification expected from NASA in Q2 2025.

The 400 series of the K1S platform serves as the first ever true commercial off-the-shelf offering of a 20793 rated battery.

Final certification is pending NASA’s approval processes associated with the Artemis II mission slated for 2026.

KULR Battery Management System (BMS) + AI = KULR Core TM

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Recent Developments

Bitcoin Strategy

During the first three months of March 31, 2025, the Company purchased 449.45 Bitcoin via trade orders on Coinbase (the prime broker), at an average cost of $99,008 per Bitcoin, inclusive of fees and expenses, for an aggregate cost of $44,499,352.

Additionally, on March 7, 2025, the Company entered into a sixty-day lease agreement (the “Machine Lease Agreement”) with a bitcoin mining services company to operate 2,500 S-19 bitcoin mining machines on KULR’s behalf, at a total lease cost of $850,000.

Through March, 31, 2025, 2.97 bitcoin have been earned pursuant to the Machine Lease Agreement, at an average value of $84,186 per bitcoin.

During the period from April 1, 2025 through May 13, 2025, the Company purchased 42.37 Bitcoin, at an average cost of $94,403 per Bitcoin, and earned 4.48 Bitcoin from mining services.

Bitcoin Treasury Strategy

During the three months ended June 30, 2025, the Company purchased 244.36 Bitcoin via trade orders on Coinbase (the prime broker), at an average cost of $103,949 per Bitcoin, inclusive of fees and expenses, for an aggregate cost of $25,400,657.

During the six months ended June 30, 2025, the Company purchased 693.81 Bitcoin via trade orders on Coinbase at an average cost of $100,748 per Bitcoin, inclusive of fees and expenses, for an aggregate cost of $69,900,009.

On March 7, 2025, the Company entered into a sixty-day lease agreement (the “First Machine Lease Agreement”) with a bitcoin mining services company to operate 2,500 S-19 bitcoin mining machines on KULR’s behalf, at a total lease cost of $850,000.

Additionally, on May 16, 2025, the Company entered into a two hundred and twenty eight-day lease agreement (the “Second Machine Lease Agreement”) with the same digital asset mining services company to operate the 2,500 digital assets mining machines on KULR’s behalf, at a total lease cost of $3,200,000.

Furthermore, on June 20, 2025, the Company entered into a one hundred and three-day lease agreement (the “Third Machine Lease Agreement”) with a new digital asset mining services company to operate 3,570 Bitmain Antminer S19 digital assets mining machines on KULR’s behalf, at a total lease cost of $2,756,795.

Additionally, on July 30, 2025, the Company entered into a three hundred and sixty five day lease agreement (the “Fourth Machine Lease Agreement”) to operate 1,157 MicroBT Whatsminer M30S++ bitcoin mining machines on KULR’s behalf, at a total lease cost of $2,646,250.

Through June 30, 2025, 17.29 bitcoin have been earned pursuant to the Machine Lease Agreements, at an average value of $97,685 per bitcoin.

During the period from July 1, 2025 through August 12, 2025, the Company purchased 90.0 Bitcoin, at an average cost of $108,889 per Bitcoin, and earned 17.69 Bitcoin from mining services.

See the section “Our Bitcoin Acquisition Strategy” below for further information regarding our Bitcoin purchases, including the source of capital used to purchase Bitcoin.

At the Market Offering

On January 24, 2025, the Company increased the maximum aggregate offering amount of the shares of the Company’s common stock issuable under the ATM by an additional $50 million, bringing the total aggregate offering amount to $146 million.

During the three months ended March 31, 2025, the Company issued a total of 19,407,622 shares of common stock pursuant to the ATM for aggregate gross proceeds of $51,152,353.

During the period from April 23, 2025 through May 15, 2025, the Company issued 13,945,241 shares of common stock for gross proceeds of $19,827,210 pursuant to the ATM.

On January 24, 2025, the Company increased the maximum aggregate at the market (“ATM”) offering amount of the shares of the Company’s common stock issuable under the ATM by an additional $50 million, bringing the total aggregate offering amount to $146

On May 30, 2025, the Company completed its initial ATM agreement with a total of 14,783,393 shares issued for gross proceeds of $146 million.

On June 9, 2025, the Company entered into a second At the Market Offering agreement (the “second ATM Agreement”) with an agent (the “Agent”), pursuant to which the Company may, from time to time, sell shares of common stock for aggregate gross proceeds of up to $300 million in ATM offerings through or to the Agent.

Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of the sale, or as otherwise agreed with the Agent.

The Agent will receive a commission from the Company of up to 3.0% of the gross proceeds of any shares of common stock sold pursuant to the ATM Agreement.

During the six months ended June 30, 2025, the Company issued a total of 6,258,415 shares of common stock pursuant to the ATMs for aggregate gross proceeds of $89,484,074.

During the period from July 1, 2025 through August 12, 2025, the Company issued 1.6 million shares of common stock for gross proceeds of $10.7 million pursuant to the ATM.

Issuance of Non-Convertible Series A Voting Preferred Stock

On January 16, 2025, the Board of Directors approved the issuance of an additional 270,000 shares of Non-convertible Series A Voting Preferred Stock (“Series A Voting Preferred”) to the Chief Executive Officer (“CEO”), bringing his total holdings up to 1,000,000 shares of Series A Preferred Stock.

On January 16, 2025, the Board of Directors of the Company (the “Board”) approved the issuance of an additional 270,000 shares of Non-Convertible Series A Voting Preferred Stock (“Series A Voting Preferred”) to the Chief Executive Officer (“CEO”), bringing his total holdings up to 1,000,000 shares of Series A Preferred Stock.

The issuance is subject to the Board reserving the full and unequivocal right to revoke, rescind, transfer or otherwise cancel the issued Non-Convertible Series A Voting Preferred Stock in the event the CEO is removed from any position with the Company or resigns from all positions with the Company.

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The Independent Members of the Board have determined that the issuance represents a pivotal strategic move to reinforce and enhance the Company’s flexibility to optimize the Company’s negotiating position in any potential current and/or future engagements with commercial, financial, and/or strategic parties, and to provide defenses against potential hostile third-party actions.

Change in Auditors

On November 1, 2024, CBIZ CPAs P.C.

(“CBIZ”) acquired the attest business of Marcum LLP (“Marcum”), and substantially all of the partners and staff that provided attestation services for Marcum joined CBIZ.

On April 29, 2025, we were notified that Marcum resigned as the independent registered accounting firm of the Company.

On April 30, 2025, upon Marcum’s resignation as auditors of the Company and with the approval of the Audit Committee of the Board of Directors of the Company, CBIZ was engaged as the Company’s independent registered public accounting firm.

Appointment of New Directors

Effective June 6, 2025, the Board increased the number of directors to five and appointed Messrs.

Shawn Canter and Aron Schwartz to serve as members of the Board.

Canter and Schwartz will serve as members of the Board until the next annual meeting of the Company’s stockholders, and until their successors are elected and qualified or until their earlier death, resignation or removal.

In addition, Mr.

Schwartz was appointed as the Chair of the Board’s Compensation Committee and a member of each of the Audit Committee and Nominating and Corporate Governance Committee.

In connection with Mr.

Schwartz’ appointment, the Company agreed to pay Mr.

Schwartz cash compensation equal to $95,000 per year and to issue 13,130 restricted stock units (“RSUs”) of the Company’s common stock, which shares shall vest in two equal increments every six months following June 6, 2025, subject to Mr.

Schwartz’s continued service with the Company through each applicable vesting date and such RSUs becoming issuable upon the Company’s shareholder approval of a new equity incentive plan.

Canter will not receive additional compensation for his duties on the Board.

Non-Executive Director Compensation

Effective June 6, 2025, the Board of Directors of the Company approved a cash compensation adjustment and the grant of restricted stock units to the non-executive members of the Board as follows:

Joanna Massey, the Company’s Lead Director, cash compensation equal to $120,000 per year and to issue 13,130 RSUs of the Company’s common stock, which shares shall vest in two equal increments every six months following June 6, 2025, subject to Ms.

Massey’s continued service with the Company through each applicable vesting date and such RSUs becoming issuable upon the Company’s shareholder approval of a new equity incentive plan;

Donna Grier, the Company’s Audit Committee chair, cash compensation equal to $97,500 per year and to issue 13,130 RSUs of the Company’s common stock, which shares shall vest in two equal increments every six months following June 6, 2025, subject to Ms.

Grier’s continued service with the Company through each applicable vesting date and such RSUs becoming issuable upon the Company’s shareholder approval of a new equity incentive plan.

Reverse Stock Split

On June 20, 2025, the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effect a 1-for-8 reverse stock split of the shares of the Company’s common Stock, effective on June 23, 2025 (the “Reverse Stock Split”).

As a result of the Reverse Stock Split, every eight shares of issued and outstanding common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share.

No fractional shares were issued as a result of the Reverse Stock Split, and any fractional shares that would otherwise have resulted from the Reverse Stock Split were rounded up to the next whole number.

The number of authorized shares of common stock under the Company’s Certificate of Incorporation, as amended, remained unchanged.

All references to share and per share amounts for all periods presented in the unaudited condensed consolidated financial statements have been retrospectively restated to reflect the Reverse Stock Split.

All rights to receive shares of common stock under outstanding securities, including but not limited to, warrants, options, and restricted stock units (“RSUs”) were adjusted to give effect to the Reverse Stock Split.

Furthermore, proportionate adjustments were made to the per share exercise price and the number of shares of common stock that may be purchased upon exercise of outstanding stock options granted by the Company, and the number of shares of common stock reserved for future issuance under the Company’s 2018 Equity Incentive Plan.

Credit Agreement

On July 1, 2025, the Company, entered into a Master Loan Agreement (the “Master Loan Agreement”) with Coinbase Credit, Inc., a Delaware corporation, and Coinbase, Inc., a Delaware corporation, acting in its principal capacity and as agent for each of its affiliates (each, a “Coinbase Entity” and together the “Lender”).

The Master Loan Agreement governs separate loan transactions (each, a “Loan”) whereby the Lender may, from time to time, lend to the Company (i) specified quantities of digital assets or (ii) cash in U.S.

dollars (collectively, “Loaned Assets”).

Each Loan will be documented by a written confirmation setting forth the asset type, principal amount, loan fee rate, maturity profile and any other negotiated terms.

The Master Loan Agreement provides for a multiple-draw term facility, with no fixed aggregate cap on the amount that can be borrowed.

A Loan shall only be deemed to commence once the Lender transfers the Loaned Assets to the Company;

and the Company simultaneously pledges the required collateral.

Each Loan shall be documented by a written confirmation that sets forth, among other matters, the principal amount, asset type, commencement date, loan-fee rate and any other mutually agreed terms.

The Company shall grant the Lender a continuing first-priority security interest in the collateral.

On July 8, 2025, the Company borrowed $8.0 million in cash (the “Initial Drawdown”) under the Master Loan Agreement.

The Initial Drawdown is the first advance against the revolving credit facility established by the Master Loan Agreement.

The Initial Drawdown bears an 8% loan fee.

The Company’s obligations are secured by a first-priority security interest at collateral-coverage ratio of about 156.25% of the outstanding principal amount, or 166 BTC.

The Initial Drawdown is subject to the terms and conditions of the Master Loan Agreement.

Mining Operations

On July 9, 2025, Company announced that it had successfully deployed 3,570 Bitmain S19 XP 140T Bitcoin mining machines at facilities located in Asuncion, Paraguay, thereby boosting the Company’s operational capacity to 750 petahash per second (PH/s) across multiple mining locations.

This deployment underscores KULR’s dual acquisition strategy of both mining Bitcoin and purchasing it on the open market.

On July 30, 2025, Company announced that it had successfully deployed 1,157 MicroBT Whatsminer M30S++ Bitcoin mining machines at facilities located in Asuncion, Paraguay, thereby boosting the Company’s operational capacity to 125 petahash per second (PH/s) across multiple mining locations.

This deployment underscores KULR’s dual acquisition strategy of both mining Bitcoin and purchasing it on the open market.

Retirement of Executive Officer

Effective as of August 15, 2025, the Vice President of Engineering, Mr.

Carpenter, resigned from all positions of the Company in connection with his planned retirement.

Carpenter’s decision to retire was not due to any disagreement with the Company on any matter relating the Company’s operations, policies, or practices.

Carpenter served as KULR’s Vice President of Engineering since June 2017.

Risks Associated with Ongoing Conflicts

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Risks Associated with the Tariff War

Geopolitical developments, such as the recent changes in tariff policies by the United States and the retaliatory tariff and non-tariff responses by other countries, especially with China, Canada and Mexico, the prospect of further changes in tariff and trade policies add an additional negative affect on the supply chain.

The increased tariffs the U.S.

has imposed with these countries could have an adverse effect on our supply chain, potentially causing financial difficulty for our direct or indirect customers and reduced demand of our products.

Geopolitical developments, such as the recent changes in tariff policies by the United States and the retaliatory tariff and non-tariff responses by other countries, especially with European Union, China, Canada and Mexico, the prospect of further changes in tariff and trade policies add an additional negative affect on the supply chain.

The increased tariffs imposed by the U.S.

and other countries could have an adverse effect on our supply chain if the imposition of tariffs impact the availability of goods, potentially causing financial difficulty for our direct or indirect customers and reduced demand of our products.

A continuation of these tariffs could have adverse changes in international trade policies and relations.

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Changing our operations in accordance with new or changed trade restrictions can be expensive, time-consuming and disruptive to our operations.

In addition, potential mitigation strategies could increase costs that a company may not be able to recover.

We cannot predict how the events described above will evolve.

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terrorist activities;

our exposure to

foreign currency fluctuations;

our exposure to foreign currency fluctuations;

reputational risk;

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Results of Operations

Three Months Ended March 31, 2025, Compared With Three Months Ended March 31, 2024

Three and Six Months Ended June 30, 2025, Compared With Three and Six Months Ended June 30, 2024

For the Three Months Ended

For the Six Months Ended

Product sales

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Total Revenue

For the three months ended March 31, 2025 and 2024, we generated $2,448,606 and $1,749,104 of revenues from 26 and 34 customers, respectively.

Revenue from product sales during the three months ended March 31, 2025, increased by $545,466 or 87% compared to the three months ended March 31, 2024.

We had 16 product sales customers in the first quarter of 2025, compared with 25 in the first quarter of 2024.

Product sales during these periods include sales of our component product, carbon fiber velvet (“CFV”) thermal management solution, internal short circuit battery cells and devices, patented TRS technology, and thermal fiber thermal interface materials.

Although the number of customers decreased, the increase in revenue was driven primarily by contracts with two new customers we did not have contracts with during the three months ended March 31, 2024.

Revenue from contract services during the three months ended March 31, 2025, decreased by $95,718 or 8% compared to the three months ended March 31, 2024.

The decrease in revenue is primarily due to a decline in customers to 12 in the first quarter of 2025, from 14 in the first quarter of 2024.

For the three months ended June 30, 2025 and 2024, we generated $3,972,997 and $2,432,005 of revenues from 30 and 27 customers, respectively, representing an increase of $1,540,992, or 63%.

For the six months ended June 30, 2025 and 2024, we generated $6,421,603 and $4,181,109 of revenues from 43 and 48 customers, respectively, representing an increase of $2,240,494, or 54%.

Revenue from product sales during the three months ended June 30, 2025, increased by $843,297 or 74% compared to the three months ended June 30, 2024.

We had 25 product sales customers in the second quarter of 2025, compared with 15 in the second quarter of 2024.

and exoskeleton devices.

The increase in revenue was driven primarily by contracts with two new customers we did not have contracts with during the three months ended June 30, 2024.

Revenue from product sales during the six months ended June 30, 2025, increased by $1,388,763 or 79% compared to the six months ended June 30, 2024.

We had 32 product sales customers in the first six months of 2025, compared with 36 in the first six months of 2024.

Although the number of customers decreased, the increase in revenue was driven primarily by contracts with three new customers we did not have contracts with during the six months ended June 30, 2024.

Revenue from contract services during the three months ended June 30, 2025, decreased by $741,400 or 57% compared to the three months ended June 30, 2024.

The decrease in revenue is primarily due to two large contracts earned in the second quarter of 2024 for which generated $681,736 of service revenues.

We had 12 contract services customers in the second quarter of 2025, compared with 14 in the second quarter of 2024.

Service revenue includes unique engineering design and testing projects customized for specific customers.

Revenue from mining digital assets during the three months ended March 31, 2025, was $249,754.

The contract was entered into on March 7, 2025.

There was no mining of digital asset revenue recognized prior to this period.

Revenue from contract services during the six months ended June 30, 2025, decreased by $837,118 or 34% compared to the six months ended June 30, 2024.

We had 23 contract services customers in the first six months of 2025, compared with 21 in the first six months of 2024.

The decrease in revenue is primarily due to 7 large contracts earned during 2024 which generated $1,643,751 of service revenues.

Service revenue includes unique engineering design and testing projects customized for specific customers.

Our customers and prospective customers are large organizations with multiple levels of management, controls/procedures, and contract evaluation/authorization.

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Accordingly, the business activity cycle between expression of initial customer interest to shipping, acceptance and billing can be lengthy, unpredictable, and lumpy, which can influence the timing, consistency and reporting of sales growth.

Revenue from mining digital assets during the three and six months ended June 30, 2025, was $1,439,095 and $1,688,849, respectively.

The initial mining contract was entered into on March 7, 2025 and expanded throughout the second quarter of 2025, as previously described.

For the six months ended June 30, 2025, we earned 17.28 bitcoin from mining operations.

There was no mining of digital assets revenue recognized prior to March 7, 2025.

Cost of Revenue, Gross Profit and Gross Profit Margin

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Product mix plays an important part in our reported average margins for any period.

Because we are introducing new products at an early stage in our development cycle and the margins earned can vary significantly between periods, customers, products and services due to the learning process, customer negotiating strengths, and product mix.

For the three months ended March 31, 2025 and 2024, cost of revenues was $2,242,261 and $1,238,315, respectively, representing an increase of $1,003,946 or 81%.

For the three months ended March 31, 2025 and 2024, gross profit was $206,345 and $510,789, respectively, a decline of $304,444 or 60%.

Our gross profit margins were 8% and 29%, during the three months ended March 31, 2025 and 2024, respectively.

The decrease in the current period profit margin resulted primarily from increased hours spent on service contracts and a net loss on mining of digital assets.

Because we are introducing new products and contract services at an early stage in our development cycle the margins earned can vary significantly between periods, customers, products and services due to the learning process, customer negotiating strengths, and product mix.

For the three months ended June 30, 2025 and 2024, cost of revenues was $3,259,287 and $1,859,377, respectively, representing an increase of $1,399,910 or 75%.

For the three months ended June 30, 2025 and 2024, gross profit was $713,710 and $572,628, respectively, an increase of $141,082 or 25%.

Our gross profit margins were 18% and 24% during the three months ended June 30, 2025 and 2024, respectively.

The decrease in the current period profit margin resulted primarily from increased hours spent on service contracts and an increase in costs related to digital assets mining leases.

For the three months ended June 30, 2025, our gross profit margins for product sales, contract services and digital assets mining were 49%, (48%), and 1%, respectively.

For the three months ended June 30, 2024, our gross profit margins for product sales and contract services were 18% and 28%, respectively.

There was no revenue from digital assets mining during 2024.

For the six months ended June 30, 2025 and 2024, cost of revenues was $5,501,548 and $3,097,692, respectively, representing an increase of $2,403,856 or 78%.

For the six months ended June 30, 2025 and 2024, gross profit was $920,055 and $1,083,417, respectively, a decline of $163,362 or 15%.

Our gross profit margins were 14% and 26%, during the six months ended June 30, 2025 and June 30, 2024, respectively.

The decrease in the current period gross profit margin resulted primarily from increased hours spent on service contracts and an increase in costs related to digital assets mining leases.

For the six months ended June 30, 2025 and 2024, our gross profit margins for product sales, contract services and digital assets mining were 59%, (54%), and (4%), respectively.

For the six months ended June 30, 2024, our gross profit margins for product sales and contract services were 11% and 37%, respectively.

Research and Development

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Research and development expenses are charged to operations as incurred.

For the three months ended March 31, 2025 and 2024, R&D expenses were $2,449,900 and $954,625, respectively, representing an increase of $1,495,275 or 157%.

The increase was comprised primarily of $908,215 for R&D consulting services, a $366,309 increase in stock-based compensation, an $111,669 increase in building related expenses for the facility in Texas, partially offset by $48,304 of engineering labor and other costs charged that were reduced or redeployed to revenue-generating activities and charged to costs of revenue.

For the three months ended June 30, 2025 and 2024, R&D expenses were $2,436,754 and $1,305,186, respectively, representing an increase of $1,131,568 or 87%.

The increase was comprised primarily due to planned increases in R&D services and new hires in 2025, and an increase in stock-based compensation from additional awards granted in 2025.

For the six months ended June 30, 2025 and 2024, R&D expenses were $4,886,654 and $2,259,811, respectively, representing an increase of $2,626,843 or 116%.

The increase was primarily attributable to planned increases in R&D services and new hires in 2025, and an increase in stock-based compensation from new awards granted in 2025.

We expect that our R&D expenses will increase as we expand our future operations.

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Selling, general and administrative expenses consisted primarily of stock-based compensation, marketing and advertising, salaries, payroll taxes and other benefits, Board compensation, accounting and tax, consulting fees, travel and entertainment, rent expense, office expenses, and legal and professional fees.

For the three months ended March 31, 2025 and 2024, selling, general and administrative expenses were $7,200,250 and $4,212,898, respectively, representing an increase of $2,987,352 or 71%.

The increase is primarily due to a planned increase in advertising and marketing services of $1,238,607, a write down of equipment deposits of $568,777, an increase in stock-based compensation of $425,129 primarily due to new equity award grants, a planned increase in insurance of $307,042, a planned increase in consulting fees for exploring new business opportunities of $246,288, an increase in accounting and tax services of $173,462, and a planned increase in outsourced professional services of $144,780, partially offset by a decrease in labor costs of $160,631.

For the three months ended June 30, 2025 and 2024, selling, general and administrative expenses were $6,941,599 and $4,594,500, respectively, representing an increase of $2,347,099 or 51%.

The increase is primarily due to planned investments to support our growth related activities, including additional advertising and marketing services, professional and consulting fees, and increased salaries and stock-based compensation from new hires and new grants awarded in 2025.

For the six months ended June 30, 2025 and 2024, selling, general and administrative expenses were $13,573,072 and $8,807,401, respectively, representing an increase of $4,765,671 or 54%.

The increase is primarily due to planned investments in growth related activities that we anticipate will accelerate our growth going forward, including additional advertising and marketing services, professional and consulting fees, travel related expenses, and increased salaries and stock-based compensation from new hires and new grants awarded in 2025.

Impairment Expense

For the three and six months ended June 30, 2025, impairment expenses were $786,397 and $1,355,174, respectively, due to the write-off of equipment deposits.

There were no impairment expenses for the three and six months ended June 30, 2024.

Other Income (Expense)

For the three months ended March 31, 2025 and 2024, other expense (net) was $9,362,853 and $352,142, respectively, representing an increase of $9,010,711, or 2,559%.

The change is primarily attributable to the $9,748,600 unrealized loss on Bitcoin holdings due to the change in market price of Bitcoin to $82,549 as of March 31, 2025, partially offset by an increase of $273,600 for the change in fair value of accrued issuable equity, an increase of $168,424 from interest earned from the licensing agreements, a decrease of $122,305 in interest expense due to the full repayment of the prepaid advance liability on March 27, 2024, and a decrease of $92,202 for amortization of debt discount in connection with merchant cash advances.

For the three months ended June 30, 2025 and 2024, other income (expense), net was $17,593,189 and $(563,470), respectively, representing an increase of $18,156,659.

The change is primarily attributable to the $17,367,660 unrealized gain on Bitcoin holdings due to the three-month change in market price of Bitcoin from $82,560 on March 31, 2025, to $107,176 on June 30, 2025, a decrease of $527,199 for amortization of debt discount in connection with merchant cash advances, an increase of $168,975 from interest earned from the licensing agreements, an increase of $61,415 for the change in fair value of accrued issuable equity, and a decrease of $31,410 in interest expense due to the full repayment of the prepaid advance liability on March 27, 2024.

For the six months ended June 30, 2025 and 2024, other income (expense), net, was $8,230,336 and $(915,609), respectively, representing an increase of $9,145,945.

The change is primarily attributable to the $7,619,060 unrealized gain on Bitcoin holdings due to the six-month change in market price of Bitcoin, from $93,384 on December 31, 2024, to $107,176 on June 30, 2025, a decrease of $619,398 for amortization of debt discount in connection with merchant cash advances, an increase of $337,399 from interest earned from the licensing agreements, an increase of $335,015 for the change in fair value of accrued issuable equity, a decrease of $153,715 in interest expense due to the full repayment of the prepaid advance liability on March 27, 2024, and an increase of $81,358 from the gain on debt extinguishment.

Our Bitcoin Acquisition Strategy

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Our strategy includes acquiring and holding bitcoin using cash that exceeds our working capital requirements, and from time to time, subject to market conditions, issuing equity or debt securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase bitcoin.

For example, we began issuing shares under our “at-the-market” offering program in the second half of 2024, and used proceeds from these capital markets transactions to acquire bitcoin.

For example, we began issuing shares under our “at-the-market” offering program in the second half of 2024, and entered into a second ATM Agreement on June 9, 2025, to issue shares of common stock for aggregate gross proceeds of up to $300 million, and used proceeds from these capital markets transactions to acquire bitcoin.

We view our bitcoin holdings as long term holdings and expect to continue to accumulate bitcoin.

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This overall strategy also contemplates that we could periodically leverage or sell bitcoin for general corporate purposes or in connection with strategies that generate tax benefits in accordance with applicable law, enter into additional capital raising transactions, including those that could be collateralized by our bitcoin holdings, and consider pursuing strategies to create income streams or otherwise generate funds using our bitcoin holdings.

Additionally, on March 7, 2025, the Company entered into a sixty-day Machine Lease Agreement with a bitcoin mining services company to operate 2,500 S-19 bitcoin mining machines on our behalf, at a total lease cost of $850,000.

Through March 31, 2025, 2.97 bitcoin have been earned pursuant to the Machine Lease Agreement, at an average value of $84,186 per bitcoin.

The following table presents bitcoin activity during the three months ended March 31, 2025.

Average Fair Value

On March 7, 2025, the Company entered into a sixty-day Machine Lease Agreement with a bitcoin mining services company to operate 2,500 S-19 bitcoin mining machines on our behalf, at a total lease cost of $850,000.

Through June 30, 2025, 17.29 bitcoin have been earned pursuant to the Machine Lease Agreements, at an average value of $97,685 per bitcoin.

The following table presents bitcoin activity during the six months ended June 30, 2025.

Digital Assets (1)

Per Bitcoin (in $)

Beginning balance at January 1, 2025

Fair value of digital assets purchased

Cost to acquire digital assets

Cost basis of digital assets held

Fair value of digital assets mined

Fair value as of December 31, 2024

Digital assets purchased

Digital assets mined

Change in fair value of digital assets

Balance as of March 31, 2025

Fair value as of June 30, 2025

(1) The source of capital used to purchase Bitcoin was primarily proceeds from ATM offerings.

Liquidity and Capital Resources

As of March 31, 2025 and December 31, 2024, we had cash balances of $24,449,297 and $29,831,858, respectively, and working capital of $27,418,991 and $29,498,421, respectively.

As of March 31, 2025 and December 31, 2024, we also had Bitcoin holdings of $55,281,690 and $20,281,184, respectively.

For the three months ended March 31, 2025 and 2024, net cash used in operating activities was $9,771,951 and $3,907,406, respectively.

Our net cash used in operations for the three months ended March 31, 2025, was primarily attributable to our net loss of $18,806,658, adjusted for non-cash expenses in the aggregate amount of $11,891,113, plus $2,856,406 of net cash used to fund changes in the levels of operating assets and liabilities.

Our net cash used in operations for the three months ended March 31, 2024, was primarily attributable to our net loss of $5,008,876, adjusted for non-cash expenses in the aggregate amount of $1,853,354, plus $751,884 of net cash used to fund changes in the levels of operating assets and liabilities.

For the three months ended March 31, 2025 and 2024, net cash used in investing activities was $44,716,519 and $13,400, respectively.

Net cash used in investing activities during the three months ended March 31, 2025, was related to investments in digital assets of $44,499,352, purchases of property and equipment of $120,229 and deposits paid for purchases of property and equipment of $96,938.

Net cash used in investing activities during the three months ended March 31, 2024, was related to purchases of property and equipment.

For the three months ended March 31, 2025 and 2024, net cash provided by financing activities was $49,105,909 and $3,524,885, respectively.

Net cash provided by financing activities during the three months ended March 31, 2025, was primarily due to net proceeds from ATM equity financing totaling $49,871,627 and proceeds from the exercise of stock options totaling $7,565, partially offset by notes payable repayments of $577,675, and payments for deferred financing costs of $195,000.

Net cash provided by financing activities during the three months ended March 31, 2024, was due to proceeds from SEPA Advance Notices totaling $2,910,651, and net proceeds from notes payable totaling $963,900, partially offset by notes payable repayments of $349,666.

As of June 30, 2025 and December 31, 2024, we had cash balances of $20,570,108 and $29,831,858, respectively, and working capital of $27,303,994 and $29,498,421, respectively.

As of June 30, 2025 and December 31, 2024, we also had Bitcoin holdings of $99,489,102 and $20,281,184, respectively.

For the six months ended June 30, 2025 and 2024, net cash used in operating activities was $21,720,717 and $9,198,453, respectively.

Our net cash used in operations for the six months ended June 30, 2025, was primarily attributable to our net loss of $10,664,509, adjusted for non-cash gains in the aggregate amount of $4,156,178, plus $6,900,030 of net cash used to fund changes in the levels of operating assets and liabilities.

Our net cash used in operations for the six months ended June 30, 2024, was primarily attributable to our net loss of $10,899,404, adjusted for non-cash expenses in the aggregate amount of $3,970,681, plus $2,269,730 of net cash used to fund changes in the levels of operating assets and liabilities.

For the six months ended June 30, 2025 and 2024, net cash used in investing activities was $73,637,042 and $163,023, respectively.

Net cash used in investing activities during the six months ended June 30, 2025, was related to investments in digital assets of $69,900,009, investment in preferred stock of $3,325,045, purchases of property and equipment of $334,648, and deposits paid for purchases of property and equipment of $77,340.

Net cash used in investing activities during the six months ended June 30, 2024, was related to purchases of property and equipment.

For the six months ended June 30, 2025 and 2024, net cash provided by financing activities was $86,096,009 and $9,183,655, respectively.

Net cash provided by financing activities during the six months ended June 30, 2025, was primarily due to net proceeds from ATM equity financing totaling $89,484,074, partially offset by issuance costs on ATM equity financing of $2,239,735, notes payable repayments of $577,674, and payments for deferred financing costs of $577,000.

Net cash provided by financing activities during the six months ended June 30, 2024, was due to proceeds from SEPA Advance Notices totaling $9,104,950, and net proceeds from notes payable totaling $1,730,000, partially offset by notes payable repayments of $1,525,195 and issuance costs on notes payable of $126,100.

Future cash requirements for our current liabilities include approximately $3,044,167 for accounts payable and accrued expenses and $493,061 for future payments under operating and finance leases.

Future cash requirements for long-term liabilities include $777,439 for future payments under operating and finance leases plus other non-current liabilities.

Future cash requirements for long-term liabilities include $1,269,657 for future payments under operating and finance leases.

Our primary source of liquidity has historically been cash generated from equity and debt offerings.

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We have a history of recurring net losses and recurring use of cash in operations.

During the three months ended March 31, 2025, the Company received gross proceeds of $51,152,353 pursuant to the ATM.

Given our cash balance as of March 31, 2025, there is no substantial doubt about the Company’s ability to meet its obligations as they become due within the twelve months from the date these condensed consolidated financial statements are available to be issued.

While no assurance can be provided that we will be successful in raising additional capital from the ATM, during the period from April 1, 2025 through May 15, 2025, the Company issued 13,945,241 shares of common stock for gross proceeds of $19,827,210 pursuant to the ATM.

During the six months ended June 30, 2025, the Company received gross proceeds of $89,484,074 pursuant to the ATM.

Given our cash balance and our liquid digital asset holdings as of June 30, 2025, there is no substantial doubt about the Company’s ability to meet its obligations as they become due within the twelve months from the date these condensed consolidated financial statements are available to be issued.

While no assurance can be provided that we will be successful in raising additional capital from the ATM, during the period from July 1, 2025 through August 12, 2025, the Company issued 1.6 million shares of common stock for gross proceeds of $10.7 million pursuant to the ATM.

Off-Balance Sheet Arrangements

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Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S.

We prepare our condensed consolidated financial statements in accordance with U.S.

generally accepted accounting principles, which require our management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.

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(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

There are items within our consolidated financial statements that require estimation but are not deemed critical, as defined above.

There are items within our condensed consolidated financial statements that require estimation but are not deemed critical, as defined above.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis