UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-37605
POWERCOMPUTE, INC.
(Exact name of Registrant as specified in its charter)
Delaware
47-3844457
(State or other jurisdiction of
incorporation or organization)
(I.R.S. employer
identification no.)
1200 West Platt Street
Suite 100
Tampa, FL
33606
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: 813-222-8996
LM Funding America, Inc.
(Former name)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading symbol
Name of each exchange on which registered
Common Stock par value $0.001 per share
PWCM
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The registrant had 1,794,135 shares of Common Stock, par value $0.001 per share, outstanding as of August 11, 2026.
TABLE OF CONTENTS
Page
PART I.
FINANCIAL INFORMATION
3
Item 1.
Financial Statements
4
PowerCompute, Inc. and Subsidiaries Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025
PowerCompute, Inc. and Subsidiaries Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025 (unaudited)
5
PowerCompute, Inc. and Subsidiaries Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 (unaudited)
6
PowerCompute, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2026 and 2025 (unaudited)
7
Notes to Unaudited Consolidated Financial Statements
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
33
Item 4.
Controls and Procedures
34
PART II.
OTHER INFORMATION
Legal Proceedings
35
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
37
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
38
SIGNATURES
39
PowerCompute, Inc. and Subsidiaries Consolidated Balance Sheets
June 30,
December 31,
2026(unaudited)
2025
Assets
Cash
$
853,788
1,424,426
Marketable securities
43,110
37,380
Prepaid expenses and other assets
759,533
1,198,486
Finance receivables
3,272
17,533
Digital assets - current (Note 2)
751,547
2,563,474
Digital assets - collateral (Note 2)
5,500,000
Digital assets receivable, net (Note 2)
10,183,164
12,678,014
Galaxy loan derivative asset (Note 4)
979,600
47,673
Income tax receivable
-
31,187
Current assets
19,074,014
23,498,173
Fixed assets, net (Note 3)
8,620,463
9,917,350
Intangible assets, net (Note 3)
6,196,193
6,327,769
Deposits on mining equipment
14,974
1,597
Investment in Seastar Medical Holding Corporation
37,986
25,073
Digital assets - long-term (Note 2)
8,233,035
2,200,000
Right of use assets (Note 5)
617,099
728,995
Other assets
325,988
384,234
Long-term assets
18,012,703
27,818,053
Total assets
37,086,717
51,316,226
Liabilities and stockholders’ equity
Accounts payable and accrued expenses
1,515,657
1,745,875
Note payable - short-term (Note 4)
6,588,035
7,006,912
Master digital currency loan (Note 4)
10,809,494
10,920,838
Due to related parties (Note 7)
76,826
48,319
Current portion of lease liability (Note 5)
207,472
194,618
Total current liabilities
19,197,484
19,916,562
Note payable - long-term (Note 4)
1,952,752
1,932,502
Lease liability - net of current portion (Note 5)
411,972
590,368
Long-term liabilities
2,364,724
2,522,870
Total liabilities
21,562,208
22,439,432
Stockholders’ equity (Note 6)
Preferred stock, par value $.001; 150,000,000 shares authorized; no shares issued and outstanding as of June 30, 2026 and December 31, 2025
Common stock, par value $.001; 350,000,000 shares authorized; 934,662 and 564,940 shares issued and outstanding as of June 30, 2026 and December 31, 2025
935
565
Additional paid-in capital
124,528,398
123,199,948
Accumulated deficit
(107,266,452
)
(92,582,928
Total PowerCompute stockholders’ equity
17,262,881
30,617,585
Non-controlling interest
(1,738,372
(1,740,791
Total stockholders’ equity
15,524,509
28,876,794
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these unaudited consolidated financial statements.
Three Months ended June 30,
Six Months ended June 30,
2026
Revenues:
Digital mining revenues
2,008,220
1,806,364
3,986,400
4,080,304
Specialty finance revenue
87,771
94,945
195,428
162,334
Rental revenue
20,593
27,015
43,723
57,023
Total revenues
2,116,584
1,928,324
4,225,551
4,299,661
Operating costs and expenses:
Digital mining cost of revenues (exclusive of depreciation and amortization shown below)
1,571,273
1,288,399
3,439,617
2,836,694
Curtailment and energy sales
(145,071
(223,269
(512,666
(372,955
Staff costs and payroll
1,113,824
1,087,627
2,431,099
2,138,104
Depreciation and amortization
840,142
2,039,343
1,669,970
4,076,921
Loss (gain) on fair value of Bitcoin, net
1,318,607
(3,761,139
5,103,025
(1,951,163
Professional fees
450,389
308,829
796,083
673,314
Selling, general and administrative
345,317
375,420
721,745
685,384
Real estate management and disposal
20,008
22,420
33,383
58,734
Collection costs
12,804
8,589
25,184
25,941
Settlement costs with associations
3,693
Loss (gain) on disposal of assets
(2,739
99,578
286,359
Other operating costs
447,123
259,012
808,218
514,960
Total operating costs and expenses
5,971,677
1,504,809
14,512,919
8,975,986
Operating income (loss)
(3,855,093
423,515
(10,287,368
(4,676,325
Unrealized gain (loss) on marketable securities
8,110
(5,110
5,730
(13,820
Unrealized gain (loss) on investment and equity securities
(1,111
(130,890
12,913
(156,874
Impairment loss on prepaid mining machine deposit
(17,193
Gain on Galaxy loan derivative
1,669,659
1,692,033
Loss on fair value of purchased Bitcoin, net
(52,704
Loss on fair value of digital assets receivable
(1,700,773
(4,879,213
Change in credit loss reserve on digital assets receivable
3,393
9,187
Interest expense
(687,087
(227,546
(1,232,258
(448,452
Interest income
14,532
531
15,064
1,676
Income (loss) before income taxes
(4,565,563
60,500
(14,681,105
(5,346,499
Income tax expense
Net income (loss)
Less: loss (gain) attributable to non-controlling interest
1,253
40,054
(2,419
48,379
Net income (loss) attributable to PowerCompute, Inc.
(4,564,310
100,554
(14,683,524
(5,298,120
Less: deemed dividends (Note 6)
(40,023
Net income (loss) attributable to common shareholders
(4,604,333
(14,723,547
Basic income (loss) per common share (Note 1)
(5.26
0.49
(16.99
(25.80
Diluted income (loss) per common share (Note 1)
Weighted average number of common shares outstanding
Basic
875,050
205,336
866,689
Diluted
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
Noncash lease expense
111,896
96,373
Amortization of debt issue costs and debt discount
711,540
42,528
Stock option expense
530,448
135,426
Accrued interest expense on finance lease
26,244
30,553
(1,898,459
4,879,213
Impairment loss on mining machine deposit
17,193
Unrealized loss (gain) on marketable securities
(5,730
13,820
(1,692,033
(9,187
Unrealized loss (gain) on investment and equity securities
(12,913
156,874
Loss (gain) on disposal of fixed assets
Write-off of income tax receivable
Change in operating assets and liabilities:
480,006
398,424
Due to related party
28,507
5,449
(230,218
540,514
Mining of digital assets
(3,986,400
(4,080,304
Lease liability payments
(191,786
(171,474
Net cash used in operating activities
(7,222,882
(5,713,495
CASH FLOWS FROM INVESTING ACTIVITIES:
Net collections (investment) of finance receivables - original product
8,332
(2,434
Net collections (investment) in finance receivables - special product
5,929
(2,635
Capital expenditures
(252,145
(377,212
Collection of note receivable
200,000
Proceeds from sale of fixed assets
953,153
Investment in digital assets - Tether
(5,296
(30,315
Proceeds from sale of Bitcoin
6,555,285
3,323,773
Proceeds from the sale of Tether
3,173
29,460
Change in deposits for mining equipment
(986,690
Distribution to members
(1,015
Net cash provided by investing activities
6,315,278
3,106,085
CASH FLOWS FROM FINANCING ACTIVITIES:
Insurance financing repayments
(461,406
(410,877
Proceeds from warrant exercise, net of issuance costs
2,909
Proceeds from the issuance of common stock, net of issuance costs
795,463
Issuance costs
(6,285
Net cash provided by (used in) financing activities
336,966
(417,162
NET DECREASE IN CASH
(570,638
(3,024,572
CASH - BEGINNING OF PERIOD
3,378,152
CASH - END OF PERIOD
353,580
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES
Insurance financing
168,324
Recognition of Galaxy loan derivative
760,105
Digital assets transferred to digital assets receivable, net
2,375,176
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION
Cash paid for taxes
Cash paid for interest
568,015
337,850
For the Six Months Ended June 30, 2026 and 2025
(unaudited)
Common Stock
Shares
Amount
Accumulated Deficit
Non-Controlling Interest
Total Equity
Balance - December 31, 2024
205
102,689,867
(65,662,731
(1,684,782
35,342,559
110,805
Member distribution
(5,398,674
(8,325
(5,406,999
Balance - March 31, 2025
102,794,387
(71,061,405
(1,694,122
30,039,065
24,621
(40,054
Balance - June 30, 2025
102,819,008
(70,960,851
(1,734,176
30,124,186
Balance - December 31, 2025
564,940
331,149
Warrant exercise
81,376
81
91
172
(10,119,214
3,672
(10,115,542
Balance - March 31, 2026
646,316
646
123,531,188
(102,702,142
(1,737,119
19,092,573
199,299
109,440
110
2,627
2,737
Common stock issued
178,906
179
795,284
(1,253
Balance - June 30, 2026
934,662
All share and per-share amounts have been adjusted retroactively to reflect a one-for-twenty-five (1:25) reverse stock split, including rounding of fractional shares.
POWERCOMPUTE, INC. AND SUBSIDIARIES
(UNAUDITED)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and principles of consolidation
The accompanying unaudited consolidated financial statements include the accounts of PowerCompute, Inc., previously known as LM Funding America, Inc. (“we,” “our,” “PWCM,” or the “Company”), and its wholly-owned subsidiaries: US Digital Mining and Hosting Co., LLC (“US Digital”) (includes all 100% owned subsidiary limited liability companies), LM Funding, LLC; REO Management Holdings, LLC (including all 100% owned subsidiary limited liability companies); LM Funding of Colorado, LLC; LM Funding of Washington, LLC; LM Funding of Illinois, LLC; and various single purpose limited liability companies owned by REO Management Holdings, LLC which own various properties. It also includes LMFAO Sponsor LLC (a 69.5% owned subsidiary). All significant intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The interim consolidated financial statements as of June 30, 2026 and for the three and six months ended June 30, 2026 and June 30, 2025, respectively, are unaudited. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of the results for the interim periods. The accompanying consolidated balance sheet as of December 31, 2025, is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
There were no changes to the Company’s most significant estimates and assumptions, significant accounting policies, or recent accounting pronouncements that were disclosed in Note 2 - Summary of Significant Accounting Policies included in the Form 10-K other than as discussed below.
Reverse Stock Split
On June 24, 2026, the Board approved a one-for-twenty-five (1:25) reverse split of the Company’s issued and outstanding common stock, par value $0.001 per share, pursuant to which every twenty-five outstanding shares of common stock was converted into one share of common stock (the “Reverse Stock Split”). The Reverse Stock Split became effective at 12:01 a.m. Eastern Time on July 13, 2026. The Company has retroactively adjusted all share amounts and per share data herein to give effect to the Reverse Stock Split. Refer to Note 6 – Stockholders’ Equity.
Corporate Name and Ticker Symbol Change
On July 20, 2026, the Company filed a Certificate of Amendment to its Certificate of Incorporation to change its corporate name from LM Funding America, Inc. to “PowerCompute, Inc.” The Name Change became effective at 12:01 a.m., Eastern Time, on July 22, 2026. In connection with the name change, the Company’s common stock began trading on the Nasdaq Capital Market under the new ticker symbol “PWCM” on July 22, 2026.
Going Concern
The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. On August 27, 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances. The evaluation of going concern under the accounting guidance requires significant judgment which involves the Company to consider that it has historically incurred losses in recent years as it has prepared to grow its business through expansion and acquisition opportunities. The Company must also consider its current liquidity as well as future market and economic conditions that may be deemed outside the control of the Company as it relates to obtaining financing and generating future profits.
As of June 30, 2026, the Company had approximately $854 thousand available cash on-hand and Bitcoin with a fair market value of approximately $8.5 million (of which approximately $7.7 million is pledged as collateral against outstanding borrowings and classified within “Digital assets - collateral” on the consolidated balance sheets). In addition, the Company had Bitcoin with a fair market value of approximately $10.2 million classified as Digital assets receivable which is pledged as collateral against approximately $11 million of borrowings.
The Company has experienced significant operating losses over the past two and a half years (2024 through 2026) with cumulative losses of approximately $49.3 million. These losses resulted in the usage of all cash proceeds from the Company’s public offerings in 2021, 2025 and 2026. The Company’s net cash used in operating activities for the six months ended June 30, 2026 was approximately $7.2 million and net working capital was approximately negative $0.1 million. Additionally, as of June 30, 2026 the Company had $11.0 million of outstanding debt under the Galaxy Loan Facility, $7.0 million of outstanding debt under the Liebel loan and $1.5 million of outstanding debt under the Brown Family Trust loan that was scheduled to mature over the next twelve months. As of June 30, 2026 the Company held approximately 130 Bitcoin valued at approximately $7.7 million as collateral against the Liebel loan. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Subsequent to June 30, 2026, and prior to the issuance of these financial statements, the Company was able to fully repay the $7.0 million Liebel loan and partially paydown the Brown Family Trust loan by $250 thousand through a combination of refinancing (Refer to Note 9) and the use of the Company's ATM. The Company has a history of refinancing debt and management believes it will be able to refinance the remaining balance of the Brown loan. However, there can be no assurance that the Company will be able to successfully refinance the remaining balance or otherwise generate sufficient liquidity to meet its obligations as they become due.
Management’s plans to address these conditions also include the continued use of its ATM program. The ATM program is currently effective and has been utilized to raise capital; however, future proceeds under the ATM program depend, among other things, on the Company's ability to maintain compliance with Nasdaq's continued listing requirements, including applicable market value requirements, market conditions, trading volume, the Company's stock price, and other factors that are not within the Company's control.
As of the date these financial statements are issued, management has not concluded that its plans are probable of mitigating the conditions and events that raise substantial doubt within one year after the date these financial statements are issued. Accordingly, substantial doubt about the Company's ability to continue as a going concern has not been alleviated. The financial statements do not reflect any adjustments that may be required if the Company is unable to continue as a going concern.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates include the evaluation of probable losses on balances due from third parties, the realization of deferred tax assets, the evaluation of contingent losses related to litigation and reserves on notes receivables, estimates of the recoverability and useful lives of long-lived assets and stock-based compensation. Our estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the consolidated financial statements.
Income Taxes
The Company’s calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate of whether it is more likely than not that additional taxes will be required. The Company had no uncertain tax positions as of June 30, 2026 and December 31, 2025.
Deferred income taxes are recognized in the consolidated financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from net operating losses, differences in depreciation methods of archived images, and property and equipment, stock-based and other compensation, and other accrued expenses. A valuation allowance is established when it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized.
The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from management's estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. Interest and penalties are included in tax expense.
Income tax expense/(benefit) from operations for the three and six months ended June 30, 2026 and 2025 was nil in each period, which resulted primarily from maintaining a full valuation allowance against the Company's deferred tax assets.
9
Income (Loss) Per Share
Basic income (loss) per share is calculated as net income (loss) to common stockholders divided by the weighted average number of common shares outstanding during the period. The number of outstanding shares used for the EPS calculation includes outstanding penny warrants. Refer to Note 6 – Stockholder’s Equity.
Diluted income (loss) per share for the periods presented equals basic income (loss) per share as the effect of any stock-based compensation awards and warrant repricing would be anti-dilutive.
The anti-dilutive stock-based compensation awards consisted of:
June 30, 2026
December 31, 2025
Stock Options
71,200
71,208
Stock Warrants
1,274,412
1,465,228
The following table illustrates the computation of basic and diluted EPS for the three and six months ended June 30, 2026 and 2025:
Three months ended June 30, 2026
Three months ended June 30, 2025
Income (loss) (Numerator)
Shares (Denominator)
Per-Share Amount
Less: deemed dividends
Basic and diluted EPS
Six months ended June 30, 2026
Six months ended June 30, 2025
Loss (Numerator)
Net loss attributable to PowerCompute, Inc.
Net loss attributable to common shareholders
10
Note 2. Digital Assets and Digital Assets Receivable, net
Digital assets consisted of the following:
Bitcoin
6,247,252
8,061,303
Tether
4,295
2,171
Digital assets - current
6,251,547
8,063,474
Bitcoin - long-term
10,433,035
Total digital assets
8,451,547
18,496,509
Number of Bitcoin held
144.6
211.4
Carrying basis - per Bitcoin
69,005
100,863
Fair value - per Bitcoin
58,417
87,505
Carrying basis of Bitcoin
9,978,073
21,322,419
Fair value of Bitcoin
8,447,252
18,494,338
The carrying basis represents the valuation of Bitcoin at the time the Company earns the Bitcoin through mining activities or the cost paid for purchased Bitcoin. Fair value of Bitcoin was determined using Level 1 inputs. As of June 30, 2026 and December 31, 2025 approximately 131.8 Bitcoin and 88 Bitcoin, respectively, (with an approximate fair value of $7.7 million) were held in a custody account as collateral for the Company’s loans with SE & AJ Liebel Limited Partnership. Accordingly, the Company is restricted in its ability to use the Bitcoin separately held as collateral in the operation of its business. The Company regularly moves the collateral Bitcoin out of the collateral account when the fair value of such Bitcoin increases and deposits additional Bitcoin into the collateral account when the fair value of such Bitcoin decreases.
The following table presents a roll-forward of Bitcoin for the six months ended June 30, 2026 and 2025:
June 30, 2025
Bitcoin beginning of period
14,019,205
Addition of Bitcoin from mining activities
Bitcoin transferred as collateral for Galaxy loan
(2,375,176
Disposition of Bitcoin from sales
(6,555,285
(3,323,773
Gain (loss) on fair value of Bitcoin, net
(5,103,025
1,951,163
End of period
16,674,195
The Company recognized realized loss (gain) from dispositions of Bitcoin during the three and six months ended June 30, 2026 and 2025 of approximately ($0.2) million and $0.7 million for 2026, respectively, and approximately ($0.2) million and ($0.1) million for 2025, respectively.
Digital Assets Receivable, net
As required under the Galaxy Loan Facility established in October 2025, the Company has pledged 174 and 145 Bitcoin, respectively, as collateral as of June 30, 2026 and December 31, 2025. While a loan is outstanding under the Galaxy Loan Facility, Galaxy has the right and the ability to use the digital assets at its discretion, including the ability to sell or pledge the borrowed digital assets to third parties. At the conclusion of the loan, Galaxy is obligated to return the same type and quantity of digital assets as those pledged by the Company. Because the collateral pledged related to the Galaxy Loan Facility can be rehypothecated, the Bitcoin is derecognized from the Company’s ending Bitcoin balance, and recorded in “Digital assets receivable, net” on the Company’s consolidated balance sheets.
The digital assets receivable is initially measured upon transfer at fair value and subsequently remeasured at fair value as of the balance sheet date. For the three and six months ended June 30, 2026 and 2025, the Company recognized a decrease in fair value of approximately $1.7 million and $4.9 million for 2026, respectively, and nil and nil for 2025, respectively, within “Loss on fair value of digital assets receivable” on the consolidated statements of operations.
The digital assets receivable balance was evaluated for possible credit losses, in accordance with ASC 326 - Financial Instruments - Credit Losses. An allowance for credit losses of nil and approximately $9 thousand was recorded in “Digital assets receivable, net” on the Company’s consolidated balance sheets as of June 30, 2026 and December 31, 2025, respectively.
11
A summary of digital assets receivable, net is as follows:
Digital assets receivable, net
12,687,201
Credit loss reserve on digital assets receivable
Beginning of year
Transfer of Bitcoin to digital assets receivable, net
12
Note 3. Fixed Assets and Intangible Assets, net
The components of fixed assets as of June 30, 2026 and December 31, 2025 are as follows:
Useful Life
Mining machines
9 months - 4 years
22,518,771
22,388,471
Mining site equipment
6-10 years
4,984,547
4,827,888
Building
30 years
467,707
569,480
Real estate assets owned
80,056
Furniture, computer and office equipment
3-5 years
463,999
440,313
Land
525,000
Gross fixed assets
29,040,080
28,831,208
Less: accumulated depreciation
(20,419,617
(18,913,858
Fixed assets, net
As of June 30, 2026 and December 31, 2025, there were approximately 7,500 and 7,200 miners, respectively, located at various hosting sites. The Company’s depreciation expense recognized for the three and six months ended June 30, 2026 and 2025 was approximately $0.8 million and $1.5 million for 2026, respectively and approximately $2.0 million and $4.0 million for 2025, respectively.
The loss (gain) on disposal of fixed assets during the three and six months ended June 30, 2026 and 2025 was approximately ($3) thousand and ($3) thousand for 2026, respectively, and $100 thousand and $286 thousand for 2025, respectively.
Intangible assets as of June 30, 2026 and December 31, 2025 consist of the following:
Useful Life (Years)
Power and interconnection rights
25
6,578,600
Gross intangible assets
Less: accumulated amortization
(382,407
(250,831
Total intangible assets, net
During the three and six months ended June 30, 2026 and 2025 the Company recognized approximately $66 thousand and $131 thousand amortization expense for 2026, respectively, and approximately $55 thousand and $110 thousand amortization expense for 2025, respectively.
Note 4. Debt and Other Financing Arrangements
Galaxy Loan Facility
On October 29, 2025, the Company entered into a Master Digital Currency Loan Agreement (the “Galaxy Loan Facility”) with Galaxy Digital LLC (“Galaxy”), which establishes the terms and conditions pursuant to which the Company may borrow U.S. Dollars and/or specified digital currencies under the Galaxy Loan Facility. On October 30, 2025, the Company made a draw under the Galaxy Loan Facility and borrowed a principal sum of $11 million (the “October 2025 Loan”). In connection with the October 2025 Loan, the Company granted to Galaxy a security interest in 145 Bitcoin owned by the Company as collateral. This security interest was subsequently increased to 174 Bitcoin in the six months ended June 30, 2026.
The settlement amount of the loans borrowed under the Loan Agreement are adjusted based on the Bitcoin price relative to a contractual floor and ceiling market price of Bitcoin (“Collar Feature”), and is cash settled.
During the first half of 2026, the Company amended the Galaxy Loan Facility on January 28, February 27, and April 6 to extend the loan and modify the collar's pricing terms, resulting in realized derivative settlement losses of approximately $48 thousand and gains of approximately $67 thousand and $214 thousand, respectively. On May 26, 2026, the Company extended the Galaxy Loan Facility from June 26, 2026 through August 28, 2026 with no other terms modified.
The Collar Feature is an embedded derivative requiring bifurcation under ASC 815-15. The fair value of the Collar Feature is calculated using a Black-Scholes calculation using Level 3 inputs. Significant inputs for the fair value of the Collar Feature for the January, February and April modifications include the volatility of Bitcoin observed for a similar term as the remaining term of the loan of 32.4% - 59.25% and short-term treasury interest rates of 3.5%. The derivatives are classified as a debt discount and amortized over the life of the contract.
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The derivative asset of approximately $980 thousand and $48 thousand was classified as “Galaxy loan derivative asset” on the consolidated balance sheets as of June 30, 2026 and December 31, 2025, respectively.
Debt of the Company consisted of the following as of June 30, 2026 and December 31, 2025:
Financing agreement with Imperial PFS that is unsecured. Down payment of $9,218 was required upfront. Eleven installment payments of $16,743 are to be made over the loan term. The note matured on June 1, 2026. Annualized interest was 9.45%.
100,461
Financing agreement with Imperial PFS that is unsecured. Down payment of $6,900 was required upfront. Six installment payments of $12,604 are to be made over the loan term. The note matured on June 1, 2026. Annualized interest was 9.45%.
75,627
Financing agreement with Imperial PFS that is unsecured. Down payment of $50,635 was required upfront. Ten installment payments of $47,553 are to be made over the loan term. The note matured on August 1, 2026 and was repaid in full. Annualized interest is 8.6%.
95,106
380,423
Secured loan with Brown Family Enterprises LLC. The note matures on December 31, 2026. Interest was 11% per annum.
1,500,000
Loan with SE & AJ Liebel Limited Partnership. $2.2 million of Bitcoin has been pledged as collateral. The note had a maturity date of September 15, 2027. The note was repaid in full on July 27, 2026. Interest was 12% per annum.
2,000,000
Loan with SE & AJ Liebel Limited Partnership. $5.5 million of Bitcoin has been pledged as collateral. The note had a maturity date of August 6, 2026. The note was repaid in full on July 27, 2026. Interest was 12% per annum.
5,000,000
Loan with Galaxy Digital LLC. Approximately $10.2 million and $12.7 million worth of Bitcoin have been pledged as collateral as of June 30, 2026 and December 31, 2025, respectively. The note was repaid in full on July 27, 2026. Interest was 0% per annum.
11,000,000
Debt discount
(244,825
(196,259
19,350,281
19,860,252
Minimum required principal payments on the Company's debt as of June 30, 2026 are as follows:
Maturity
17,595,106
2027
19,595,106
The Company subsequently refinanced the Galaxy Loan Facility and the SE & AJ Liebel Limited Partnership loans. See Note 9. Subsequent Events.
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Note 5. Commitments and Contingencies
Leases
Lease expense recognized for the three and six months ended June 30, 2026 and 2025 was approximately $63 thousand and $130 thousand for 2026, respectively and was approximately $76 thousand and $147 thousand for 2025, respectively.
The following table presents supplemental balance sheet information related to leases as of June 30, 2026 and December 31, 2025:
Balance Sheet Line Item
ROU assets - operating lease
Right of use asset, net
222,163
268,236
ROU assets - finance lease
394,936
460,759
Total lease assets
Liabilities
Current lease liabilities - operating lease
Current portion of lease liability
101,419
97,852
Current lease liabilities - finance lease
106,053
96,766
Long-term lease liabilities - operating lease
Lease liability - net of current portion
126,137
178,269
Long-term lease liabilities - finance lease
285,835
412,099
Total lease liabilities
619,444
784,986
Weighted-average remaining lease term (in years) - operating lease
2.1
2.6
Weighted-average discount rate - operating lease
10.10
%
10.07
Weighted-average remaining lease term (in years) - finance lease
3.0
3.5
The following table presents supplemental cash flow information and non-cash activity related to leases for the six months ended June 30, 2026 and 2025:
Lease Supplemental Cash Flow Table
Operating cash flow information
Cash paid for amounts included in the measurement of lease liabilities
Non-cashflow information
The following table presents maturities of lease liabilities on an undiscounted basis as of June 30, 2026:
Lease Maturity Table
Operating Leases
Finance Leases
Total Leases
59,757
121,598
147,518
269,116
2028
72,158
151,944
224,102
2029
181,502
2030 and thereafter
(less: imputed interest)
(25,957
(89,076
(115,033
227,556
391,888
Except as described below, we are not currently a party to material pending or known threatened litigation proceedings. However, we frequently become party to litigation in the ordinary course of business, including either the prosecution or defense of claims arising from contracts by and between us and client Associations. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense, and settlement costs, diversion of management resources and other factors.
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The Company accrues for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate.
Uptime Purchase Agreement Matter
In October 2021, we entered into a sale and purchase agreement (the “Uptime Purchase Agreement”) with Uptime Armory LLC (“Uptime”) to purchase 18 modified 40-foot cargo containers (“POD5ive containers”) for approximately $3.15 million, of which we paid approximately $2.4 million (75%) in 2021 as a non-refundable down payment and the remaining 25% in 2022 upon Uptime’s notice of completion; however, no containers have been delivered as of June 30, 2026. In November 2022, we filed suit in Florida circuit court against Uptime and Bit5ive, LLC (“Bit5ive”) alleging breach of contract and violation of the Florida Deceptive and Unfair Trade Practices Act. The court stayed the action and ordered the parties to confidential arbitration governed by the American Arbitration Association. We recorded an impairment charge of approximately $3.15 million on our mining machine deposit in the fourth quarter of 2022. The arbitrator ruled in favor of US Digital’s dispositive motions against Uptime and Bit5ive, and we have filed a Proof of Claim in the amount of the arbitrator’s award of approximately $3.2 million (owed joint and several with Bit5ive) following the Defendants’ filing for Assignment for the Benefit of Creditors. The likelihood and amount of recovery of the Company’s outstanding claims cannot be estimated at this time.
Uptime Hosting Agreement Matter
In October 2021, US Digital also entered into a hosting agreement with Uptime Hosting LLC (the “Hosting Agreement”) to host the Company’s 18 POD5ive containers for 6 cents per kilowatt with a one-year term, under which we paid a refundable deposit of approximately $0.8 million. On June 29, 2022, the Hosting Agreement was terminated pursuant to a Release and Termination Agreement in which Uptime Hosting LLC agreed to repay the $0.8 million deposit. We recorded an impairment charge of approximately $0.8 million on our prepaid hosting deposit in the fourth quarter of 2022. In September 2022, we filed suit in Florida circuit court against Uptime Hosting LLC for return of the deposit and other damages, alleging breach of contract and violation of the Florida Deceptive and Unfair Trade Practices Act. We have since amended the complaint to add claims against additional defendants, including breach of contract, violations of Florida’s Uniform Fraudulent Transfer Act and Florida Fraudulent Asset Conversion, violation of the Florida Deceptive and Unfair Trade Practices Act, and claims for equitable liens.
CFTC Enforcement Action
On September 30, 2024, the Commodity Futures Trading Commission (“CFTC”) filed an enforcement action in the U.S. District Court for the Southern District of Florida, styled Commodity Futures Trading Commission v. Traders Domain FX LTD d/b/a The Traders Domain, et al., Case No. 1:24-cv-23745-RKA (the “CFTC Action”). Among the named defendants were Algo Capital LLC (“Algo Capital”) and certain insiders and affiliates of Algo Capital previously involved in state court Assignment for the Benefit of Creditors (“ABC”) proceedings. The Company’s claims against Robert D Collazo, Uptime, Uptime Hosting LLC, Bit5ive, Block Consulting Services, LLC, 6301 Southwest Ranches LLC were under the jurisdiction of the ABC proceedings therefore such claims are now a part of the CFTC Action.
On October 3, 2024, the District Court entered an order granting the CFTC’s motion for the appointment of a receiver (the “Receivership Order”). All assets that are collected from the individuals and entities named in the CFTC action will be remitted to the Receiver for administration and potential distribution under the supervision of the federal court. The receiver is currently in the process of identifying and recovering assets. There has been no significant development in this case in 2026. The likelihood and amount of recovery of the Company's outstanding claims against Uptime, Uptime Hosting LLC and Bit5ive cannot be estimated at this time.
Note 6. Stockholders’ Equity
On June 24, 2026, the Board approved the Reverse Stock Split. The Reverse Stock Split was effected by the filing of an amendment to our Certificate of Incorporation on July 9, 2026 which provided that the Reverse Stock Split became effective at 12:01 a.m. Eastern Time on July 13, 2026. No fractional shares were issued as a Result of the Reverse Stock Split and, in lieu thereof, any person who would otherwise be entitled to a fractional share of common stock as a result of the Reverse Stock Split received one share of common stock. The Company’s common stock began trading on The Nasdaq Capital Market on a split-adjusted basis on July 13, 2026. The Company has retroactively adjusted all share amounts and per share data herein to give effect to the Reverse Stock Split.
At the Market Program
On March 27, 2026, the Company entered into an at the market offering agreement (the “Sales Agreement”) with Maxim Group LLC (the “Agent”), pursuant to which the Company may, from time to time, at the Company’s discretion, offer and sell shares of the Company’s common stock, having an aggregate offering price of up to $75,000,000 (the “Shares”), through the Agent, acting as sales agent. The Shares to be sold under the Sales Agreement, if any, will be issued and sold pursuant to the Company’s shelf registration statement which was filed with the Securities and Exchange Commission (“SEC”) on August 13, 2024 (the “Registration Statement”)
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and was declared effective on November 21, 2024. A prospectus supplement related to the Company’s at the market offering (“ATM”) program with the Agent under the Sales Agreement was filed with the SEC on March 27, 2026. The ATM program will remain in effect until the Sales Agreement is terminated by either the Company or Agent, with the Company having the right to terminate the agreement at any time upon 10 days’ notice and the Agent having the right to terminate at any time.
The Company sold approximately 179,000 shares and generated approximately $795 thousand in net proceeds for the three and six months ended June 30, 2026.
As of June 30, 2026, an aggregate gross sales limit of approximately $74,174,000 remains available for issuance under the ATM program. Approximately $101 thousand of legal and professional fees incurred related to the establishment of the ATM program as of June 30, 2026 were deferred and recorded within “Prepaid expenses and other assets” on the Consolidated Balance Sheets and will be amortized ratably as stock is issued under the program.
The following is a summary of the stock option plan activity during the six months ended June 30, 2026 and 2025:
Number of
Weighted Average
Options
Exercise Price
Options outstanding at beginning of the year
95.75
23,735
226.50
Granted
Expired
(8
82,031.25
Exercised
Options outstanding at end of the period
86.94
Options exercisable at end of the period
38,294
135.73
Stock compensation expense recognized for the three and six months ended June 30, 2026 and 2025 related to stock options was approximately $199 thousand and $530 thousand, respectively for 2026 and approximately $25 thousand and $135 thousand, respectively for 2025. There was approximately $0.3 million of unrecognized compensation cost associated with unvested stock options remaining as of June 30, 2026.
The aggregate intrinsic value of the outstanding common stock options as of June 30, 2026 and December 31, 2025 was nil. The remaining weighted average life of the options as of June 30, 2026 was approximately 8.28 years.
Warrants
The following is a summary of the warrant activity during the six months ended June 30, 2026 and 2025:
Number of Warrants
Weighted Average Exercise Price
Warrants outstanding at beginning of the year
12.00
189,902
73.25
Issued
(190,816
0.025
(1,453
72.00
Warrants outstanding and exercisable at end of the period
13.46
188,449
During the three and six months ended June 30, 2026, 109,440 and 190,816 pre-funded warrants were exercised for $0.025 per share.
The outstanding 2021 public warrants to purchase an aggregate of 46,151 shares of Company common stock at an exercise price of $12.00 per share were reduced to $3.58 per share as a result of sales under the ATM program. The price reset was accounted for as a
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deemed dividend. Loss attributable to common shareholders was increased by the calculated value transferred to the holder of approximately $40 thousand in the basic and diluted EPS calculations for the six months ended June 30, 2026.
The aggregate intrinsic value of the outstanding common stock warrants as of June 30, 2026 and December 31, 2025 was approximately $0.4 million and $3.2 million, respectively. The remaining weighted average life of the warrants as of June 30, 2026 and December 31, 2025 was 3.08 years and 3.75 years, respectively.
As of June 30, 2026, there were no warrants that were unvested. All outstanding warrants contain provisions allowing a cashless exercise at their respective exercise prices.
Note 7. Related Party Transactions
Legal services for the Company associated with the collection of delinquent assessments from property owners was performed by a law firm (“Business Law Group”, or “BLG”) which was owned solely by Bruce M. Rodgers, the chairman and CEO of the Company, until and through the date of its initial public offering in 2015. Following the initial public offering, Mr. Rodgers transferred his interest in BLG to other attorneys at the firm through a redemption of his interest in the firm. The law firm has historically performed collection work primarily on a deferred billing basis wherein the law firm receives payment for services rendered upon collection from the property owners or at amounts ultimately subject to negotiations with the Company.
On February 1, 2022, the Company consented to the assignment by BLG to the law firm BLG Association Law, PLLC (“BLGAL”) of the Services Agreement, dated April 15, 2015, previously entered into by the Company and BLG (the “Services Agreement”). The Services Agreement had set forth the terms under which BLG would act as the primary law firm used by the Company and its association clients for the servicing and collection of association accounts. Bruce M. Rodgers is a 50% owner of BLGAL.
Under the agreement, the Company paid BLG a fixed monthly fee of $43 thousand per month for services rendered during the three and six months ended June 30, 2026 and 2025, respectively. The Company pays BLG a minimum per unit fee of $700 in any case where there is a collection event and BLG received no payment from the property owner, including any unit where the Company has taken title to the unit or where the Association has terminated its contract with either BLG or the Company.
The Company had originally engaged BLG on behalf of many of its Association clients to service and collect the Accounts and to distribute the proceeds as required by Florida law and the provisions of the purchase agreements between the Company and the Associations. This engagement was subsequently assigned to BLGAL as described above. Ms. Gould, who is a Director of the Company, worked as the General Manager of BLG and works as the General Manager of BLGAL.
Amounts paid to BLGAL for the three and six months ended June 30, 2026 and 2025 were approximately $129 thousand and $258 thousand, respectively for 2026 and approximately $129 thousand and $258 thousand, respectively for 2025.
Pursuant to the Services Agreement, as amended, in effect during the three and six months ended June 30, 2026 and 2025, the Company paid all costs (lien filing fees, process and serve costs) incurred in connection with the collection of amounts due from property owners. Any recovery of these collection costs is accounted for as a reduction in expense incurred. The Company incurred expenses related to collection costs for the three and six months ended June 30, 2026 and 2025 in the amounts of approximately $19 thousand and $38 thousand, respectively for 2026 and approximately $20 thousand and $42 thousand, for 2025. Recoveries during the three and six months ended June 30, 2026 and 2025 were approximately $6 thousand and $13 thousand, respectively, for 2026 and approximately $11 thousand and $16 thousand, respectively, for 2025.
The Company also shares office space, personnel and related common expenses with BLGAL. All shared expenses, including rent, are charged to BLGAL based on an estimate of actual usage. Any expenses of BLGAL paid by the Company that have not been reimbursed or settled against other amounts are included within due to related parties in the accompanying consolidated balance sheet. BLGAL was charged for office sub-lease for three and six months ended June 30, 2026 and 2025 for a total of approximately $7 thousand and $15 thousand, respectively for 2026 and approximately $7 thousand and $15 thousand, respectively for 2025.
Amounts payable to BLGAL as of June 30, 2026 and December 31, 2025 were approximately $77 thousand and $48 thousand, respectively.
Note 8. Segment Information
The Company applies ASC 280 Segment Reporting in determining its reportable segments. The Company has two reportable segments: Specialty Finance and Mining, HPC and Treasury Operations. The guidance requires that segment disclosures present the measure(s) used by the Chief Operating Decision Maker (“CODM”) to decide how to allocate resources and for purposes of assessing such segments’ performance. The Company’s CODM uses revenue, income from operations and income before taxes of our reporting segments to assess the performance of the business of our reportable operating segments. Segment asset information is not disclosed as such information is not regularly reviewed by the CODM. The CODM regularly reviews total assets as reported on the consolidated balance sheet. Performance results are monitored, reviewed, and measured monthly and quarterly to assess returns on investment, compensation decisions and changing strategies, if required.
No operating segments have been aggregated to form the reportable segments. The corporate oversight function, and other
18
components that may earn revenues that are only incidental to the activities of the Company are aggregated and included in the “All Other” category.
The Specialty Finance segment generates revenue from providing funding to nonprofit community associations. The Mining, HPC and Treasury Operations segment generates revenue from the Bitcoin the Company earns through its mining activities.
The following tables present revenue and segment income (loss) for the Company's reportable segments and reconciliations to consolidated amounts:
Three Months Ended June 30, 2026
Specialty Finance
Mining, HPC and Treasury Operations
All Other
Total
Revenue, net
108,364
Digital mining cost of revenue
21,473
296,420
795,931
Loss on fair value of mined bitcoin, net
274
662,766
177,102
Gain on disposal of fixed assets
Other segment expenses (1)
164,504
462,249
648,888
1,275,641
Operating loss
(77,887
(2,155,285
(1,621,921
Unrealized loss on investment and equity securities
Unrealized gain on marketable securities
Impairment loss on prepaid mining machine deposits
(645,950
(41,137
Loss before income taxes
(2,846,149
(1,641,527
Fixed asset additions
32,041
Six Months Ended June 30, 2026
239,151
61,113
607,064
1,762,922
482
1,303,102
366,386
341,060
978,491
1,065,062
2,384,613
(163,504
(6,929,494
(3,194,370
Unrealized gain on investment and equity securities
Unrealized gain on Galaxy loan derivative
(1,150,430
(81,828
(11,275,110
(3,242,491
236,481
4,578
241,059
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Three Months Ended June 30, 2025
121,960
211,239
310,336
566,052
Gain on fair value of Bitcoin, net
476
1,981,510
57,357
Loss on disposal of fixed assets
198,363
383,703
491,782
1,073,848
(288,118
1,826,824
(1,115,191
Unrealized loss on marketable securities
(186,696
(40,850
1,640,128
(1,291,510
15,182
191,957
207,139
Six Months Ended June 30, 2025
219,357
341,860
539,309
1,256,935
953
3,961,602
114,366
413,247
569,089
979,690
1,962,026
(536,703
(1,788,631
(2,350,991
(370,615
(77,837
(2,211,950
(2,597,846
1,170
374,034
2,008
377,212
1) Other segment items for each reportable segment include rent, collection costs, office and general business expenses, travel and insurance costs.
Note 9. Subsequent Events
ATM Program
The Company sold approximately 756,951 shares under the ATM program between July 1, 2026 and August 11, 2026 at a price range between $1.51 per share to $3.52 per share for a total of approximately $1.6 million in net sales proceeds. Certain outstanding and exercisable warrants include price protection provisions requiring a reduction in the instrument’s exercise price in the event that the Company subsequently issues shares at a purchase price, or warrants at an exercise price, lower than the instrument’s original exercise price. As a result of the ATM program sales, this provision was triggered and the exercise price for 46,151 warrants that were issued in 2021 was reduced to $1.51.
20
December RDO Pre-funded Warrants
During July 2026, the remaining 102,480 pre-funded warrants were exercised for $0.025 per share for a total of $2,562.
Debt Refinancing
On July 27, 2026, the Company, through its wholly owned subsidiary US Digital, entered into a bridge loan transaction (the “Bridge Loan”) under which it borrowed an aggregate of approximately $18.1 million from ChainFi Inc. d/b/a Arch Lending (“Arch”) under two separate Promissory Notes (the “Bridge Notes”). The purpose of the Bridge Loan was to fund the repayment in its entirety of the Company’s $18 million in aggregate indebtedness to Galaxy Digital LLC and SE & AJ Liebel Limited Partnership in advance of the completion of a secured term loan facility with Arch to be secured by the Bitcoin in the Company’s treasury. The Bridge Notes were paid off in full in connection with the Company’s loan facility with Arch.
On August 3, 2026, the Company, through US Digital, entered into new loan facility (the “Loan Facility”) with Arch pursuant to which Arch made available to US Digital a non-recourse, collared, 30-day rolling loan secured by US Digital’s Bitcoin (a “Collar Loan”). On August 3, 2026, US Digital borrowed an aggregate of approximately $18.1 million in an initial 30-day Collar Loan under the Loan Facility secured by 307 Bitcoin (with mutually agreed upon floor and ceiling prices) and bearing interest at 2.0% per annum, which loan was used to pay off the Bridge Notes. Under the Loan Facility, the Collar Loan automatically rolls over for successive 30-day periods unless either party provides notice of non-renewal, and at each rollover date, the interest rate, floor price, and ceiling price are re-set based on then-prevailing market conditions. At each maturity, if the Bitcoin reference price is below the agreed-upon floor price, the Borrower may elect to walk away, repay the loan and recover the collateral, or it may roll the loan by curing the shortfall. The terms and conditions of the Loan Facility are set forth in a Loan and Security Agreement that was entered into by US Digital and Arch on August 3, 2026.
Extension of Loan with Brown Family Enterprises
On July 27, 2026, the Company paid $250,000 in reduction of the outstanding principal balance of the Secured Promissory Note with Brown Family Enterprises, LLC , and the Company has paid all interest accrued under the Note through and including June 30, 2026. As of the Effective Date the outstanding principal balance of the Note is $1,250,000 and $12,205 interest remains accrued and unpaid thereon, representing interest accrued for the period from July 1, 2026 through and including July 27, 2026. On July 28, 2026, we entered into a Third Amendment to Secured Promissory Note under which the Company and Brown Family Enterprises agreed to extend the maturity date of the loan from Brown Family Enterprises to December 31, 2026.
Artificial Intelligence Infrastructure Business
In July 2026, we announced the expansion of our business into high-performance computing (“HPC”) and artificial intelligence (“AI”) infrastructure to take advantage of the 26 MW of power under our control. This expansion follows a broader industry trend in which other companies that, like us, have historically focused on Bitcoin mining have sought to redeploy their power and infrastructure assets to support AI and HPC workloads for hyperscalers and other AI and HPC customers.
In July 2026, we acquired one graphics processing unit (“GPU”) with approximately 101.7 teraflops of capacity, representing our initial investment in HPC-capable computing hardware. We began selling our computing capacity to Vast.AI in July 2026 under a demand pricing model, pursuant to which the pricing we receive for our computing capacity will vary based on prevailing market demand for such capacity.
Bitcoin mining and Bitcoin treasury operations currently remain our primary business. Consistent with the approach taken by other Bitcoin mining companies that have begun to diversify into HPC and AI infrastructure, we intend to continue operating our Bitcoin mining business to generate cash flow and help fund our operations while we build out our new HPC and AI business line. Over time, we expect our capital allocation to increasingly reflect investment in additional GPUs, power capacity, and data center infrastructure necessary to support HPC and AI workloads, and we may pursue additional strategic arrangements, such as hosting agreements, leasing arrangements, or joint ventures, to accelerate this expansion.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis should be read in conjunction with the Unaudited Consolidated Financial Statements and Notes for the three and six months ended June 30, 2026, and with the Annual Report on Form 10-K for the year ended December 31, 2025.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs, and plans and objectives of management for future operations, are forward-looking statements. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” “anticipate,” “project,” “predict,” “plan,” “intend,” or “estimate,” “guidance,” and other similar expressions, or the negative of these expressions. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking.
We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties, and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Important factors which could materially affect our results and our future performance include, without limitation:
Overview
PowerCompute, Inc. (“we”, “our”, “PWCM”, or the “Company”) currently maintains three distinct business operations: our Bitcoin treasury operations, Bitcoin mining business, and our specialty finance business. In July 2026, we announced our business expansion into artificial intelligence (“AI”) infrastructure and high-performance computing (“HPC”).
Bitcoin Treasury Operations and Strategy
In August 2025, we launched our Bitcoin treasury operations. During August 2025 we raised approximately $21.3 million in net proceeds from capital raises and we purchased approximately 164 Bitcoins in August 2025 with substantially all of the proceeds from such offering, with the remainder used for working capital purposes. During December 2025, we raised an additional approximately $5.9 million in net proceeds from capital raises and we purchased an additional 47 Bitcoins with substantially all of the proceeds from such offering.
Our Bitcoin treasury strategy for the next twelve months includes acquiring and holding Bitcoin using cash flows from operations that exceed 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. We have not set any specific target for the amount of Bitcoin we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional Bitcoin purchases. This overall strategy also contemplates that we may periodically 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.
We currently maintain a formal, documented strategy that governs circumstances under which we acquire or monetize our Bitcoin holdings. Decisions to purchase or sell Bitcoin are made on a case-by-case basis at management’s discretion, taking into account factors such as our liquidity, general market conditions, and anticipated cash requirements. As of June 30, 2026, Bitcoin represented 100% of our treasury holdings. We do have small holdings of Tether outside of our treasury holdings that value in the aggregate less than $10,000 and are used for purchases with merchants that accept such crypto assets as payment. We do not currently engage in hedging activities. We have not implemented derivative transactions, futures, options, swaps, or other financial instruments to reduce our exposure to Bitcoin price volatility. Any future hedging activity, if undertaken, would be determined by management on a discretionary basis.
Bitcoin Mining Business
Our Bitcoin mining business operation deploys our computing power to mine Bitcoin and validate transactions on the Bitcoin network. We believe that developments in Bitcoin mining have created an opportunity for us to deploy capital and conduct large-scale mining operations in the United States. We conduct this business through a wholly owned subsidiary, US Digital, which we formed in 2021 to develop and operate our Bitcoin mining business.
Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. In Bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the Bitcoin network. A company’s computing power measured in hashrate is generally considered to be one of the most important metrics for evaluating Bitcoin mining companies.
We obtain Bitcoin as a result of our mining operations, and we sell Bitcoin from time to time to support our operations and strategic growth. We do not currently plan to engage in regular trading of Bitcoin (other than as necessary to convert our Bitcoin into U.S.
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dollars) or to engage in hedging activities related to our holding of Bitcoin; however, our decision to hold or sell Bitcoin at any given time may be impacted by the Bitcoin market, which has been historically characterized by significant volatility. Currently, we do not use a formula or specific methodology to determine whether or when we will sell Bitcoin that we hold, or the number of Bitcoins we will sell. Rather, decisions to hold or sell Bitcoins are currently determined by management by monitoring the market in real time.
The value of Bitcoin has historically been subject to wide swings. The carrying value of each Bitcoin we hold reflects the price of one Bitcoin quoted on the active exchange at the end of the reporting period. Therefore, negative swings in the market price of Bitcoin could have a material impact on our earnings and on the carrying value of our Bitcoin. The following table provides a range of intraday low and intraday high Bitcoin prices between December 31, 2022 through June 30, 2026.
Range of intraday Bitcoin prices
Quarterly Reporting Periods Ended
Minimum Price
Maximum Price
December 31, 2022
15,486
21,474
March 31, 2023
16,489
29,178
June 30, 2023
24,750
31,422
September 30, 2023
24,915
31,838
December 31, 2023
26,544
44,800
March 31, 2024
38,501
73,836
June 30, 2024
56,500
72,777
September 30, 2024
49,050
70,000
December 31, 2024
58,864
108,389
March 31, 2025
76,555
109,358
74,421
112,000
September 30, 2025
105,120
124,533
80,525
126,296
March 31, 2026
60,000
97,964
58,115
82,814
The following reflects the financial summary of our Bitcoin holdings:
As of June 30, 2026 and December 31, 2025, we held approximately 145 and 211 Bitcoin, respectively. The fair value of our Bitcoin as of June 30, 2026 and December 31, 2025 was approximately $8.5 million and $18.5 million, respectively, on our consolidated balance sheet. This does not include 174 Bitcoins valued at approximately $10.2 million as of June 30, 2026 and 145 Bitcoin valued at approximately $12.7 million as of December 31, 2025 classified as Digital assets receivable, net. As of June 30, 2026 and December 31, 2025 approximately 131.8 Bitcoin and 88 Bitcoin, respectively (with an approximate fair value of $7.7 million) were held in a custody account as collateral for the Company’s $7.0 million loans with SE & AJ Liebel Limited Partnership and were classified within “Digital assets - collateral” on the consolidated balance sheets.
The following is a summary of the average cost of revenues for mining each Bitcoin during the three and six months ended June 30, 2026 and 2025:
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Three Months Ended June 30,
Six Months Ended June 30,
Cost of Revenues - Analysis of costs to mine one Bitcoin (per Bitcoin amounts are actual)
Bitcoin Mined
27.9
18.4
54.2
42.7
Average revenue of each Bitcoin mined (1)
71,979
98,172
73,550
95,557
Digital mining cost of revenues and curtailment and energy sales
1,426,202
1,065,130
2,926,951
2,463,739
Miner related depreciation (2)
Direct costs to mine including non-cash depreciation
2,088,968
3,046,640
4,230,053
6,425,341
Direct costs to mine one Bitcoin - Energy/hosting fees only (3)
51,118
57,888
54,003
57,699
Direct costs to mine one Bitcoin - including miner related depreciation expense
74,873
165,578
78,045
150,476
Cost of mining one Bitcoin as % of average Bitcoin mining revenue - energy/hosting fees only
71
59
74
60
Cost of mining one Bitcoin as % of average Bitcoin mining revenue - including miner related depreciation expense
104
169
106
157
(1) Average revenue of each Bitcoin mined is calculated by dividing the sum of Bitcoin mining revenue by the total number of Bitcoin mined during the respective periods. See the table "Range of intraday Bitcoin prices" for information on the range of intraday Bitcoin prices for quarterly periods.
(2) Miner-related depreciation includes depreciation and amortization related to intangible assets, buildings, equipment and mining machines used in the mining process.
(3) Weighted average cost of mining one Bitcoin is calculated by dividing the sum of total hosting fee expense by the total Bitcoin mined during the respective periods.
The Company’s Bitcoin unit activity during the six months ended June 30, 2026 and 2025 was as follows:
Beginning of Year
150.2
Production of Bitcoin
Sale of Bitcoin
(91.8
(37.1
Bitcoin transferred for loan collateral
(29.0
Fees
(0.2
(0.3
End of Period
155.5
Power prices are the most significant cost driver for our wholly owned locations. Energy prices can be highly volatile and global events (including the war in Ukraine and the resulting natural gas shortage) can cause power prices to increase. Our wholly owned and operated sites in Oklahoma and Mississippi are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs. Such prices are governed by power purchase agreements and said prices can change hour to hour. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms, polar vortices and hurricanes, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates.
Our management team makes real-time determinations on the need and timing during which we should curtail our operations. We curtail when power prices exceed the value we would receive for the corresponding fixed Bitcoin reward. This means if Bitcoin’s value decreases or energy prices increase, our curtailment will increase; likewise, when Bitcoin’s value increases and energy prices decrease, our curtailment will decrease. Our management team manages this decision on an hour-by-hour basis for our owned site.
The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners' expected useful life. Such non-cash depreciation amounts are recorded within the consolidated statements of operations and comprehensive loss as “Depreciation and Amortization”. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a “per Bitcoin” basis, calculated by dividing miner depreciation expense in our hosted facilities by the number of Bitcoin mined in the hosted facilities. On a “per Bitcoin” ratio, direct costs to mine including miner depreciation expense was approximately $75 thousand and $78 thousand for the three and six months ended June 30, 2026, respectively, and approximately $166 thousand and $150 thousand for the three and six months ended June 30, 2025, respectively.
The Company utilizes a third-party broker to facilitate our participation in demand response programs at our Oklahoma site. The sale of power under these programs was approximately $0.1 million and $0.5 million for the three and six months ended June 30, 2026, respectively and approximately $0.2 million and $0.4 million for the three and six months ended June 30, 2025, respectively.
Mining Sites
As of June 30, 2026, we own approximately 7,500 machines with total hashing capacity of approximately 0.85 EH/s as compared to approximately 7,200 machines as of December 31, 2025 with total hashing capacity of approximately 0.75 EH/s.
The mining machines are installed at the following locations:
• 15 MW hosting site located in Calumet, Oklahoma (the “Oklahoma site”) with approximately 4,528 installed Antminer machines which have a total projected hashrate of 538 PH.
• 11 MW hosting site located in Columbus, Mississippi (the “Columbus site”) with approximately 2,350 installed Antminer machines which have a total projected hashrate of 233 PH.
On June 24, 2026, the Board approved a one-for-twenty-five (1:25) reverse split of the Company’s issued and outstanding common stock, par value $0.001 per share, pursuant to which every twenty-five outstanding shares of common stock was converted into one share of common stock (the “Reverse Stock Split”). The Reverse Stock Split was effected by the filing of an amendment to our Certificate of Incorporation on July 9, 2026 which provided that the Reverse Stock Split became effective at 12:01 a.m. Eastern Time on July 13, 2026. No fractional shares shall be issued in the Reverse Stock Split and, in lieu thereof, any person who would otherwise be entitled to a fractional share of common stock as a result of the Reverse Stock Split received one share of common stock. The Company’s common stock began trading on The Nasdaq Capital Market on a split-adjusted basis on July 13, 2026. The Company has retroactively adjusted all share amounts and per share data herein to give effect to the Reverse Stock Split.
Results of Operations
Summarized Consolidated Statements of Operations
Revenue
Operating costs and expenses
Other loss
(710,470
(363,015
(4,393,737
(670,174
The Three Months Ended June 30, 2026 compared with the Three Months Ended June 30, 2025
Revenues
During the three months ended June 30, 2026, total revenues increased by approximately $0.2 million, to approximately $2.1 million from approximately $1.9 million for the three months ended June 30, 2025.
Digital mining revenue increased in the three months ended June 30, 2026 by approximately $0.2 million to approximately $2.0 million from approximately $1.8 million for the three months ended June 30, 2025.
Bitcoin mining revenues are determined by two main drivers: quantity of Bitcoin mined and the price of Bitcoin on the date the Bitcoin is mined. During the three months ended June 30, 2026, we mined 27.9 Bitcoins with an average Bitcoin price of approximately $72 thousand as compared to 18.4 Bitcoins with an average Bitcoin price of approximately $98 thousand during the three months ended June 30, 2025. The increase in Bitcoin mining revenue for the three months ended June 30, 2026 was attributable
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to an increase in the number of miners actively mining offset in part by a decrease in Bitcoin price and decreased difficulty rate, which increased our share of the global hashrate.
Operating Expenses
During the three months ended June 30, 2026, operating expenses increased by approximately $4.5 million to approximately $6.0 million from approximately $1.5 million for the three months ended June 30, 2025. The increase in operating expenses is primarily due to the following factors:
Fair Market Adjustment on mined digital assets
The fair market adjustment on mined digital assets resulted in a loss of approximately $1.3 million for the three months ended June 30, 2026 compared to a gain of $3.8 million for the three months ended June 30, 2025.
Digital mining cost of revenues
Bitcoin mining costs increased by approximately $0.3 million to approximately $1.6 million for the three months ended June 30, 2026 from approximately $1.3 million for the three months ended June 30, 2025 primarily due to an increase in the number of miners active at the Oklahoma and Mississippi sites, and the idling of some mining machines during the prior year quarter. Mining costs as a percentage of digital mining revenue increased to approximately 78.2% from approximately 71.3% due to the lower Bitcoin price.
Compensation from curtailment and energy sales was approximately $0.1 million for the three months ended June 30, 2026 compared to approximately $0.2 million for the three months ended June 30, 2025.
Compensation costs for three months ended June 30, 2026 was relatively flat at approximately $1.1 million from approximately $1.1 million for the three months ended June 30, 2025 primarily due to decrease in incentive compensation offset by increased staff costs associated with the Oklahoma and Mississippi sites.
Depreciation and amortization for three months ended June 30, 2026 decreased to approximately $0.8 million compared to approximately $2.0 million for the three months ended June 30, 2025 primarily due to the impairment of mining machines in the fourth quarter of 2025.
Other Income (Expense)
The Company incurred an approximately $1.7 million and nil loss on the fair value of the digital assets receivable Bitcoin assets in custody for the Company’s loan facility with Galaxy Digital LLC for the three months ended June 30, 2026 and 2025, respectively.
The Company recognized a $1.7 million gain and nil gain on the fair value of the derivative instrument attached to the Galaxy loan for the three months ended June 30, 2026 and 2025, respectively.
The Company recognized approximately $0.7 million of interest expense for the three months ended June 30, 2026 as compared to approximately $0.2 million for the three months ended June 30, 2025 due to an increase in secured borrowings and interest resulting from the Galaxy loan derivative instrument.
Income Tax Expense
During the three months ended June 30, 2026, the Company generated an approximately $4.6 million net loss before income taxes and the Company increased its income tax valuation allowance by approximately $1.1 million, which offset the Company’s incurred net income tax benefit of approximately $1.1 million which resulted in no income tax expense being recognized for the three months ended June 30, 2026. During the three months ended June 30, 2025, the Company generated an approximately $0.1 million net income before income taxes and the Company increased its income tax valuation allowance by approximately $0.1 million, which offset the Company’s incurred net income tax benefit of approximately $0.1 million which resulted in no income tax expense being recognized for the three months ended June 30, 2025.
Net Income (Loss)
During the three months ended June 30, 2026, net loss was approximately ($4.6) million as compared to net income of approximately $0.1 million for the three months ended June 30, 2025.
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Net Loss Attributable to Non-Controlling Interest
The Company owns 69.5% of the equity interests of LMFAO Sponsor LLC. As such, there was an approximately $1 thousand net loss for the three months ended June 30, 2026 attributable to the Non-Controlling Interest as compared to an approximately $40 thousand net loss for the three months ended June 30, 2025.
Net Income (Loss) Attributable to PowerCompute, Inc.
During the three months ended June 30, 2026, net loss attributable to PowerCompute, Inc. was approximately ($4.6) million as compared to net income of approximately $0.1 million for the three months ended June 30, 2025.
Net Income (Loss) Attributable to Common Shareholders
During the three months ended June 30, 2026 and 2025, net income (loss) attributable to common shareholders was approximately $40 thousand and nil higher, respectively, than net income (loss) attributable to PowerCompute, Inc. due to deemed dividends related to warrant repricing. During the three months ended June 30, 2026, net loss attributable to common shareholders was approximately ($4.6) million as compared with net income of approximately $0.1 million for the three months ended June 30, 2025.
The Six Months Ended June 30, 2026 compared with the Six Months Ended June 30, 2025
During the six months ended June 30, 2026, total revenues decreased by approximately $0.1 million, to approximately $4.2 million from approximately $4.3 million for the six months ended June 30, 2025.
Digital mining revenue decreased in the six months ended June 30, 2026 by approximately $0.1 million to approximately $4.0 million from approximately $4.1 million for the six months ended June 30, 2025.
Bitcoin mining revenues are determined by two main drivers: quantity of Bitcoin mined and the price of Bitcoin on the date the Bitcoin is mined. During the six months ended June 30, 2026, we mined approximately 54.2 Bitcoin with an average Bitcoin price of approximately $74 thousand as compared to approximately 42.7 Bitcoins with an average Bitcoin price of approximately $96 thousand during the six months ended June 30, 2025. The decrease in Bitcoin mining revenue for the six months ended June 30, 2026 was attributable to a decrease in Bitcoin price, offset in part by the decreased difficulty rate, which increased our share of the global hashrate and an increase in the number of miners actively mining.
During the six months ended June 30, 2026, operating expenses increased by approximately $5.5 million to approximately $14.5 million from approximately $9.0 million for the six months ended June 30, 2025. The increase in operating expenses is primarily due to the following factors:
The fair market adjustment on mined digital assets resulted in a loss of approximately $5.1 million for the six months ended June 30, 2026 compared to a gain of approximately $2.0 million for the six months ended June 30, 2025.
Bitcoin mining costs increased by approximately $0.6 million to approximately $3.4 million for the six months ended June 30, 2026 from approximately $2.8 million for the six months ended June 30, 2025 primarily due to an increase in the number of miners active at the Oklahoma and Mississippi sites as compared to third party hosting sites, and the idling of some mining machines during the prior year quarter. Mining costs as a percentage of digital mining revenue increased to approximately 86% from approximately 70% due to the overall lower average Bitcoin price.
Compensation from curtailment and energy sales was approximately $0.5 million for the six months ended June 30, 2026 compared to approximately $0.4 million for the six months ended June 30, 2025.
Compensation costs for six months ended June 30, 2026 increased by approximately $0.3 million to approximately $2.4 million from approximately $2.1 million for the six months ended June 30, 2025 primarily due to increased staff costs associated with the Oklahoma and Mississippi sites.
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Depreciation and amortization for six months ended June 30, 2026 decreased to approximately $1.7 million compared to approximately $4.1 million for the six months ended June 30, 2025 primarily due to the impairment of mining machines in the fourth quarter of 2025.
Loss (gain) on disposal of mining equipment
Loss (gain) on disposal of mining equipment was approximately ($3) thousand and approximately $0.3 million for the six months ended June 30, 2026 and 2025, respectively.
The Company incurred an approximately $4.9 million and nil loss on the fair value of the digital assets receivable Bitcoin assets in custody for the Company’s loan facility with Galaxy Digital LLC for the six months ended June 30, 2026 and 2025, respectively.
The Company recognized an approximately $1.7 million gain and nil gain on the fair value of the derivative instrument attached to the Galaxy loan for the six months ended June 30, 2026 and 2025, respectively.
The Company recognized approximately $1.2 million of interest expense for the six months ended June 30, 2026 as compared to approximately $0.4 million for the six months ended June 30, 2025 due to an increase in secured borrowings and interest resulting from the Galaxy loan derivative.
During the six months ended June 30, 2026, the Company generated an approximately $14.7 million net loss before income taxes and the Company increased its income tax valuation allowance by approximately $3.6 million, which offset the Company’s incurred net income tax benefit of approximately $3.6 million which resulted in no income tax expense being recognized for the six months ended June 30, 2026. During the six months ended June 30, 2025, the Company generated an approximately $5.3 million net loss before income taxes and the Company increased its income tax valuation allowance by approximately $1.5 million, which offset the Company’s incurred net income tax benefit of approximately $1.5 million, resulting in no income tax expense being recognized during the period.
Net Loss
During the six months ended June 30, 2026, net loss was approximately $14.7 million as compared to net loss of approximately $5.3 million for the six months ended June 30, 2025.
Net Loss (Income) Attributable to Non-Controlling Interest
The Company owns 69.5% of the equity interests of LMFAO Sponsor LLC. As such, there is an approximately ($2) thousand net income for the six months ended June 30, 2026 attributable to the Non-Controlling Interest as compared to an approximately $48 thousand net loss for the six months ended June 30, 2025.
Net Loss Attributable to PowerCompute, Inc.
During the six months ended June 30, 2026, net loss attributable to PowerCompute, Inc. was approximately $14.7 million as compared to net loss of approximately $5.3 million for the six months ended June 30, 2025.
Net Loss Attributable to Common Shareholders
During the six months ended June 30, 2026 and 2025, net loss attributable to common shareholders was approximately $40 thousand and nil higher, respectively, than net loss attributable to PowerCompute, Inc. due to deemed dividends related to warrant repricing. During the six months ended June 30, 2026, net loss attributable to common shareholders was approximately $14.7 million as compared with approximately $5.3 million for the six months ended June 30, 2025.
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Liquidity and Capital Resources
General
Our primary sources of liquidity are our cash and cash equivalents, Bitcoin generated from our digital mining operations and proceeds from borrowings. As of June 30, 2026, we had approximately $0.9 million of cash and cash equivalents and approximately $8.5 million of digital assets (approximately 144.6 Bitcoins with average fair value of approximately $58 thousand), of which $7.7 million is pledged as collateral against outstanding borrowings, compared with approximately $1.4 million of cash and cash equivalents and approximately $18.5 million of digital assets (approximately 211.4 Bitcoin with average fair value of approximately $88 thousand), of which $7.7 million is pledged as collateral against outstanding borrowings, at December 31, 2025.
This does not include 174 Bitcoins and 145 Bitcoins valued at approximately $10.2 million and $12.7 million, as of June 30, 2026 and December 31, 2025, respectively, classified as Digital assets receivable, net. We currently have access to equity financing through equity and debt financing. Cash management continues to be a top priority. We expect to incur negative operating cash flows as we work to increase our digital mining revenue and maintain operational efficiencies.
Our working capital needs may increase in the future as we continue to expand and enhance our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our then current business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control.
No assurance can be given that we will be successful in raising the required capital at a reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our business operations in the Bitcoin mining industry which could adversely impact our business, financial condition and results of operations.
Equity Financing Transactions
On March 27, 2026, the Company entered into an at the market offering agreement (the “Sales Agreement”) with Maxim Group LLC (the “Agent”), pursuant to which the Company may, from time to time, at the Company's discretion, offer and sell shares of the Company’s common stock, having an aggregate offering price of up to $75,000,000 (the “Shares”), through the Agent, acting as sales agent. The ATM program will remain in effect until the Sales Agreement is terminated by either the Company or Agent, with the Company having the right to terminate the agreement at any time upon 10 days’ notice and the Agent having the right to terminate at any time. The Company sold approximately 179,000 shares and generated approximately $795,000 in net proceeds for the three and six months ended June 30, 2026.
As of June 30, 2026, an aggregate gross sales limit of approximately $74.2 million remains available for issuance under the ATM program.
As of June 30, 2026 and December 31, 2025, our liquidity was comprised of:
Cash and cash equivalents
Bitcoin - current portion
Bitcoin collateral - current portion
Bitcoin collateral - long-term
Bitcoin receivable
19,531,609
32,636,329
The Company's cash flow summary for the six months ended June 30, 2026 and 2025 are as follows:
Cash flows used in operating activities
Cash flows provided by investing activities
Cash flows provided by (used in) financing activities
Net decrease in cash
Cash - beginning of year
Cash - end of period
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Cash from Operations
Net cash used in operations was approximately $7.2 million during the six months ended June 30, 2026 compared with net cash used in operations of approximately $5.7 million during the six months ended June 30, 2025. The mining of Bitcoin is considered a noncash item for operating purposes which totaled approximately $4.0 million and $4.1 million for the six months ended June 30, 2026 and 2025, respectively.
Cash from Investing Activities
For the six months ended June 30, 2026 net cash provided by investing activities was approximately $6.3 million as compared to net cash provided by investing activities of approximately $3.1 million for the six months ended June 30, 2025. The proceeds from the sale of Bitcoin is considered an investing activity which totaled approximately $6.6 million and $3.3 million for the six months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2025, the Company received net payments of approximately $0.2 million from the collection of Symbiont sale receivable while investing approximately $1.0 million on deposits for Bitcoin mining equipment.
Cash from Financing Activities
Net cash provided by financing activities was approximately $0.3 million compared to net cash used in financing activities of approximately $0.4 million for the six months ended June 30, 2026 and 2025, respectively.
Debt
On October 29, 2025, the Company entered into a Master Digital Currency Loan Agreement (the “Galaxy Loan Facility”) with Galaxy Digital LLC (“Galaxy”). On October 30, 2025, the Company made a draw under the Galaxy Loan Facility and borrowed a principal sum of $11 million (the “October 2025 Loan”). In connection with the October 2025 Loan, the Company granted to Galaxy a security interest in 145 Bitcoin owned by the Company as collateral. This security interest was subsequently increased to 174 Bitcoin in the six months ended June 30, 2026.
During the first half of 2026, the Company amended the Galaxy Loan Facility on January 28, February 27, and April 6 to extend the loan and modify the collar's pricing terms, resulting in realized derivative settlement losses of approximately $48 thousand and gains of $67 thousand and $214 thousand, respectively. On May 26, 2026, the Company extended the Galaxy Loan Facility from June 26, 2026 through August 28, 2026 with no other terms modified.
The Collar Feature is an embedded derivative requiring bifurcation under ASC 815-15. The fair value of the Collar Feature is calculated using a Black-Scholes calculation using Level 3 inputs. Significant inputs for the fair value of the Collar Feature for the January, February and April modifications include the volatility of Bitcoin observed for a similar term as the remaining term of the loan of 32.4%-59.25% and short-term treasury interest rates of 3.5%. The derivatives are classified as a debt discount and amortized over the life of the contract.
On July 27, 2026, the Company, through its wholly owned subsidiary US Digital, entered into a bridge loan transaction (the “Bridge Loan”) under which it borrowed an aggregate of $18.1 million from ChainFi Inc. d/b/a Arch Lending (“Arch”) under two separate Promissory Notes (the “Bridge Notes”). The purpose of the Bridge Loan was to fund the repayment in its entirety of the Company’s $18 million in aggregate indebtedness to Galaxy Digital LLC and SE & AJ Liebel Limited Partnership in advance of the completion of a secured term loan facility with Arch to be secured by the Bitcoin in the Company’s treasury. The Bridge Notes were paid off in full in connection with the Company’s loan facility with Arch.
On August 3, 2026, the Company, through US Digital, entered into new loan facility (the “Loan Facility”) with Arch pursuant to which Arch made available to US Digital a non-recourse, collared, 30-day rolling loan secured by US Digital’s Bitcoin (a “Collar Loan”). On August 3, 2026, US Digital borrowed an aggregate of $18.1 million in an initial 30-day Collar Loan under the Loan Facility secured by 307 Bitcoin (with mutually agreed upon floor and ceiling prices) and bearing interest at 2.0% per annum, which loan was used to pay off the Bridge Notes. Under the Loan Facility, the Collar Loan automatically rolls over for successive 30-day periods unless either party provides notice of non-renewal, and at each rollover date, the interest rate, floor price, and ceiling price are re-set based on then-prevailing market conditions. At each maturity, if the Bitcoin reference price is below the agreed-upon floor price, the Borrower may elect to walk away, repay the loan and recover the collateral, or it may roll the loan by curing the shortfall. The terms and conditions of the Loan Facility are set forth in a Loan and Security Agreement that was entered into by US Digital and Arch on August 3, 2026.
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On July 28, 2026, we entered into a Third Amendment to Secured Promissory Note with Brown Family Enterprises, LLC under which the Company and Brown Family Enterprises agreed to extend the maturity date of the $1.5 million loan from Brown Family Enterprises to December 31, 2026.
The following table presents maturities of debt on an undiscounted basis as of June 30, 2026:
Non-GAAP Financial Measures
Our reported results are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). We also disclose Earnings before Interest, Tax, Depreciation and Amortization (“EBITDA”) and Core Earnings before Interest, Tax, Depreciation and Amortization (“Core EBITDA”) which adjusts for unrealized loss (gain) on investment and equity securities, loss (gain) on disposal of mining equipment, loss on impairment of prepaid mining machine deposits, and stock compensation expense and option expense, all
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of which are non-GAAP financial measures. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of Bitcoin miners.
The following tables reconcile net loss, which we believe is the most comparable GAAP measure, to EBITDA and Core EBITDA:
687,087
227,546
1,232,258
448,452
Income (loss) before interest, taxes & depreciation
(3,038,334
2,327,389
(11,778,877
(821,126
1,111
130,890
Stock compensation and option expense
Core income (loss) before interest, taxes & depreciation
(2,823,470
2,582,478
(11,246,888
(242,467
Critical Accounting Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure or inclusion of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. There are no critical accounting estimates for the six months ended June 30, 2026.
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Annual Report on Form 10-K. For a description of our critical accounting policies and estimates, see Part I, Item 1, Note 1, “Summary of Significant Accounting Policies” in our notes to the unaudited consolidated financial statements in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
Please refer to Note 1 in our unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of June 30, 2026.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to make disclosures under this item.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2026.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We are not currently a party to material litigation proceedings, and we are not subject to any known material threatened legal proceedings other than described under Note 5 of our Consolidated Financial Statements included herein under the caption “Legal Proceedings.” In addition to the foregoing, we periodically become a party to litigation in the ordinary course of business, including either the prosecution or defense of claims arising from contracts by and between us and client Associations. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense, and settlement costs, diversion of management resources and other factors.
Other than the updated risk factors set forth below, there have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Risks Related to our High-Performance Computing and Artificial Intelligence Services Business
Our transition to HPC and AI infrastructure services may not be successful and involves significant execution risk.
Our strategy to expand into HPC and AI infrastructure services is subject to significant execution risk. The successful conversion of our existing mining infrastructure to HPC and AI applications requires substantial capital investment, technical expertise in data center design and operations for GPU-intensive workloads, and the ability to attract and retain qualified engineering and sales personnel. There can be no assurance that we will be able to successfully convert our existing facilities, that converted facilities will meet the technical requirements of potential customers, or that the economic returns from HPC and AI operations will exceed those available from our existing Bitcoin mining operations. The transition may require the displacement of Bitcoin mining hardware and significant retrofit or replacement of data center infrastructure, which could result in impairment expenses, accelerated depreciation, and additional capital expenditures during the transition period.
We have limited operating history in HPC and AI infrastructure services.
We have a limited operating history providing GPU-as-a-service to customers for HPC and AI applications. Our limited experience in this market, including with respect to sales, marketing, customer onboarding, service level management, and infrastructure optimization for GPU-intensive workloads, may limit our ability to compete effectively against established data center operators and cloud service providers with significantly greater experience, resources, and customer relationships. Our limited track record may also make it difficult to attract new customers or negotiate favorable contract terms.
Tariffs and trade restrictions may increase our equipment costs and delay deployment timelines.
Our HPC/AI infrastructure operations require specialized hardware, including GPU servers, networking equipment, cooling systems, and power distribution components, a significant portion of which is manufactured outside the United States. Tariffs, trade restrictions, or export controls could materially increase our capital expenditure requirements, delay equipment procurement timelines, reduce the economic viability of planned conversions, or limit our ability to procure next-generation hardware. There can be no assurance that we will be able to pass increased costs on to customers or that alternative domestic supply sources will be available at competitive prices.
Our diversification into HPC and AI services may divert management attention and resources from our existing operations.
Our efforts to diversify revenue streams through HPC and AI infrastructure services require significant management time and attention, including with respect to customer negotiations, facility design and construction oversight, personnel recruitment, technology evaluation, and strategic planning. These activities may divert management focus from optimizing our existing bitcoin mining operations, potentially resulting in decreased mining efficiency, missed opportunities in digital asset markets, or failure to adequately manage operational risks in our core business. The allocation of capital to HPC and AI development may also reduce resources available for Bitcoin mining fleet upgrades or capacity expansion, which could affect our competitive position in digital asset mining.
The demand for HPC and AI infrastructure services is uncertain and depends on factors outside our control.
Our increased focus on high-density data center infrastructure for AI and HPC applications may not be successful and depend on the continuing development of, and demand for, large-scale computing infrastructure for AI model training, inference, and related applications. Demand for our services could be adversely affected by a slowdown in AI investment by enterprise customers, consolidation among hyperscale cloud providers, technological advances that reduce computing requirements for AI workloads, regulatory restrictions on AI development or deployment, economic recession, or other factors outside our control. There can be no assurance that the current growth in demand for AI computing infrastructure will continue at historical rates or at all.
Risks Related to our Securities
If we are unable to continue to comply with the continued listing requirements of the The Nasdaq Capital Market, including the proposed rule that would require a $5 million Market Value of Listed Securities, we could be delisted from Nasdaq, which would seriously harm the liquidity of our stock and our ability to raise capital.
Our common stock is currently listed on The Nasdaq Capital Market. In order to maintain that listing, we must maintain compliance with the continued listing requirements and standards of The Nasdaq Capital Market. There can be no assurances that we will be able to comply with the applicable listing requirements and standards of The Nasdaq Capital Market.
On January 13, 2026, Nasdaq filed a proposed rule change with the Securities and Exchange Commission, or SEC, to adopt a new continued listing requirement requiring the maintenance of a minimum Market Value of Listed Securities, or MVLS, of at least $5 million. Under the proposal, a company that fails to maintain an MVLS of at least $5 million for 30 consecutive business days would be subject to suspension and delisting proceedings with no cure right and limited appeal rights. The rule change applies to companies listed on the Nasdaq Capital Market, including the Company. The proposed rule was approved by the SEC on July 22, 2026, and was subsequently stayed on July 29, 2026, pending review by the SEC. It’s not certain whether or when the MVLS rule will retake effect. As we do not currently maintain a MVLS of at least $5.0 million and, to the extent our MVLS does not exceed $5.0 million within 30 consecutive business days of the MVLS rule retaking effect, we expect to be in violation of the new rule, which could trigger an immediate suspension and delisting from Nasdaq. We can provide no assurance that we will be able to regain compliance with this new MVLS requirement if and when it retakes effect.
There is no guarantee that we will be able to remain in compliance with Nasdaq’s listing requirements in the future. Any failure to maintain compliance with continued listing requirements of the Nasdaq Capital Market could result in delisting of our common stock from the Nasdaq Capital Market and negatively impact our company and holders of our common stock, including by reducing the willingness of investors to hold our common stock because of the resulting decreased price, liquidity and trading of our common stock, limited availability of price quotations and reduced news and analyst coverage. Delisting may adversely impact the perception of our financial condition, cause reputational harm with investors, our employees and parties conducting business with us and limit our access to debt and equity financing.
Risks Related to our Financial Condition
Our indebtedness under our Bitcoin-secured loan facility is substantial, and we may be unable to roll over or refinance this indebtedness on commercially reasonable terms, or at all.
We recently incurred a significant amount of indebtedness under a new loan facility with ChainFi Inc. d/b/a Arch Lending, pursuant to which our wholly owned subsidiary, US Digital Mining and Hosting Co, LLC, borrowed approximately $18.1 million under an initial 30-day, non-recourse, collared rolling loan secured by 307 Bitcoin and bearing interest at 2.0% per annum. Although the loan facility automatically rolls over for successive 30-day periods unless either party provides notice of non-renewal, the interest rate, floor price, and ceiling price are reset at each rollover date based on then-prevailing market conditions. As a result, we may be required to accept less favorable terms in connection with future rollovers, including higher interest rates or less favorable collateral-related economics, or we may be unable to continue rolling over the loan on terms acceptable to us.
If we are unable to roll over, refinance, or otherwise repay this indebtedness at maturity on commercially reasonable terms, we may be required to use available cash, seek alternative financing, sell assets, pledge additional collateral, or take other actions that could adversely affect our liquidity, financial condition, and business operations. In addition, if the Bitcoin reference price is below the agreed-upon floor price at maturity, we may be required to cure the shortfall in order to roll the loan, repay the loan to recover the collateral, or elect to walk away from the collateral, any of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our operating losses and indebtedness may currently and in the future raise substantial doubt as to our ability to continue as a going concern.
In connection with the filing of this Quarterly Report on Form 10-Q, we evaluated our ability to continue as a going concern for the twelve months following the issuance of the financial statements contained herein. The Company has experienced significant operating losses over the past two and a half years (2024 through 2026) with cumulative losses of approximately $49.3 million. As of June 30, 2026, the Company had $854 thousand available cash on-hand and Bitcoin with a fair market value of $8.5 million (of which $7.7 million is pledged as collateral against outstanding borrowings). In addition, the Company had Bitcoin with a fair market value of $10.2 million classified as Digital assets receivable which was pledged as collateral against $11 million of borrowings. This indebtedness was refinance through our above-described credit facility with Arch. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Management's plans to address these conditions include a plan to refinance certain indebtedness and the continued use of its ATM program. The ATM program is currently effective and has been utilized to raise capital; however, future proceeds under the ATM program depend, among other things, on the Company's ability to maintain compliance with Nasdaq's continued listing requirements,
36
including applicable market value requirements, market conditions, trading volume, the Company's stock price, and other factors that are not within the Company's control.
As of the date these financial statements are issued, management has not concluded that its plans are probable of mitigating the conditions and events that raise substantial doubt within one year after the date these financial statements are issued. Accordingly, substantial doubt about the Company's ability to continue as a going concern has not been alleviated. The financial statements included in this report do not reflect any adjustments that may be required if the Company is unable to continue as a going concern.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities.
None.
(b) Use of Proceeds.
(c) Repurchase of Securities.
a) None.
b) None.
c) During the six months ended June 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified, or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement (as defined in the Securities and Exchange Commission’s rules).
The following documents are filed as a part of this report or are incorporated herein by reference.
EXHIBIT
NUMBER
DESCRIPTION
3.1*
Certificate of Incorporation of PowerCompute Inc., as amended
3.2
Amended and Restated By-Laws of PowerCompute Inc. (incorporated by reference to Exhibit 3.2 to the Form 10-8 filed on July 20, 2026)
10.1
Promissory Note, dated July 27, 2026, in principal amount of $11,005,502.75 by US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 31, 2026)
10.2
Promissory Note, dated July 27, 2026, in principal amount of $7,063,342.53 by US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on July 31, 2026)
10.3
Loan and Security Agreement, dated August 3, 2026, between US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.1 to the Form 8-K filed August 5, 2026)
10.4
Collar Loan Annex, dated August 3, 2026, between US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.2 to the Form 8-K filed August 5, 2026)
10.5
Third Amendment to Secured Promissory Note, dated July 28, 2026, by PowerCompute, Inc. payable to Brown Family Enterprises, LLC (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on July 31, 2026)
31.1*
Rule 13a – 14(a) Certification of the Principal Executive Officer
31.2*
Rule 13a – 14(a) Certification of the Principal Financial Officer
32.1*
Written Statement of the Principal Executive Officer, Pursuant to 18 U.S.C. § 1350
32.2*
Written Statement of the Principal Financial Officer, Pursuant to 18 U.S.C. § 1350
101.INS
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
LM FUNDING AMERICA, INC.
Date: August 14, 2026
By:
/s/ Bruce M. Rodgers
Bruce M. Rodgers
Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
/s/ Richard Russell
Richard Russell
Chief Financial Officer
(Principal Accounting Officer)