AVAX One Technology (NASDAQ: AVX) Q1 2026 hit by crypto fair-value losses
Rhea-AI Filing Summary
AVAX One Technology Ltd. reports Q1 2026 results with revenue of $2.5 million, up sharply from blockchain activities, and a net loss of $46.4 million as digital asset values fell. Large unrealized and realized losses on AVAX and Bitcoin, plus an impairment on liquid staking tokens, drove the deficit.
The company held digital assets with fair value of $108.5 million and cash, cash equivalents and restricted cash of $21.9 million as of March 31, 2026. It continued repurchasing shares and funding operations mainly through convertible debentures while focusing on Avalanche staking, Bitcoin mining and early-stage AI/HPC data center development.
Positive
- None.
Negative
- Large fair-value driven loss: Q1 2026 net loss of $46.4 million on $2.5 million revenue, mainly from a $36.3 million unrealized loss and $5.3 million realized loss on digital assets plus impairment of liquid staking tokens.
- Concentrated crypto and protocol risk: Digital assets of $108.5 million, largely AVAX, and a business model centered on the Avalanche network create vulnerability to token price declines, protocol changes, and ecosystem disruption.
- Leverage and listing pressure: Current debentures of $12.5 million (net of discounts) and a Nasdaq minimum bid price deficiency, with reliance on a planned reverse stock split to regain compliance, increase financial and market-structure risk.
Insights
Heavy Q1 loss from digital asset volatility and fair-value accounting.
AVAX One Technology generated Q1 2026 revenue of $2.5 million, mainly from Avalanche staking ($1.9 million) and Bitcoin mining ($0.6 million). However, it reported a net loss of $46.4 million, overwhelmingly driven by fair value changes and losses tied to digital assets.
Digital assets at fair value dropped from $153.7 million to $108.5 million, reflecting a $36.3 million unrealized loss and $5.3 million realized loss, plus a $1.1 million impairment on liquid staking tokens. Operating cash outflow was $1.3 million, while financing activities provided $3.7 million, primarily from debentures.
The business is now concentrated in Avalanche-related strategies and Bitcoin mining, creating exposure to token prices, staking protocol risks and the Avalanche ecosystem. The company also faces a Nasdaq minimum bid price deficiency and plans a reverse stock split subject to shareholder approval on May 29, 2026, adding listing-compliance execution risk.
Key Figures
Key Terms
liquid staking tokens financial
tAVAX financial
Debentures financial
Asset Management Agreement financial
Reverse Stock Split financial
Nasdaq minimum bid price financial
Earnings Snapshot
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| (Mark One) | ||
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
||
| For
the quarterly period ended |
||
| 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:
(Exact name of registrant as specified in its charter)
| British Columbia | ||
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
||
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
(Former name or former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted 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 and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | 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 Act). Yes ☐ No
As of May 14, 2026, the registrant had common shares, par value per share, issued and 89,616,222 outstanding.
TABLE OF CONTENTS
| PART I — FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 4 |
| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 | 4 | |
| Unaudited Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2026 and March 31, 2025 | 5 | |
| Unaudited Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Three Months ended March 31, 2026 and March 31, 2025 | 6 | |
| Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2026 and March 31, 2025 | 7 | |
| Notes to Condensed Consolidated Financial Statements | 8 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 |
| Item 4. | Controls and Procedures | 31 |
| PART II — OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 32 |
| Item 1A. | Risk Factors | 32 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 34 |
| Item 3. | Defaults Upon Senior Securities | 34 |
| Item 4. | Mine Safety Disclosures | 34 |
| Item 5. | Other Information | 34 |
| Item 6. | Exhibits | 34 |
| Signatures | 35 | |
| 2 |
| Table of Contents |
Cautionary Note Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding our assumptions about financial performance; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; the expected impact of changes in accounting policies on our results of operations, financial condition or cash flows; anticipated problems and our plans for future operations; volatility and other risks of cryptocurrencies; and the economy in general or the future of the data center industry, all of which were subject to various risks and uncertainties.
When used in this Quarterly Report on Form 10- Q and other reports, statements, and information we have filed with the Securities and Exchange Commission (“Commission” or “SEC”), in our press releases, in our periodic reports on Forms 10-K and 10-Q, in oral statements made by or with the approval of an executive officer, the words or phrases “believes,” “may,” “will,” “expects,” “should,” “continue,” “anticipates,” “intends,” “will likely result,” “estimates,” “projects” or similar expressions and variations thereof are intended to identify such forward-looking statements. However, any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors.
We do not assume the obligation to update any forward-looking statement. You should carefully evaluate such statements in light of factors described in this quarterly report. In this Quarterly Report on Form 10-Q, we have identified important factors that could cause actual results to differ from expected or historic results. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.
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| Table of Contents |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
AVAX ONE TECHNOLOGY LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share data)
| March 31, 2026 | December 31, 2025 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Escrow receivable | ||||||||
| Liquid staking tokens | ||||||||
| Staking rewards receivable | ||||||||
| Other receivables | ||||||||
| Deposit receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Non-current | ||||||||
| Property and equipment, net | ||||||||
| Digital assets, non-current | ||||||||
| Intangible assets, net | ||||||||
| Intangible asset held for sale | ||||||||
| Goodwill | ||||||||
| Lease deposit, non-current | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Debentures, net of discount | ||||||||
| Loan payable | ||||||||
| Other current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies - See Note 15 | ||||||||
| Shareholders’ equity | ||||||||
| Common shares, | ||||||||
| Treasury shares | ( | ) | ( | ) | ||||
| Additional paid-in-capital | ||||||||
| Subscriptions receivable - digital assets | ( | ) | ( | ) | ||||
| Obligation to issue shares | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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| Table of Contents |
AVAX ONE TECHNOLOGY LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| REVENUE | $ | $ | ||||||
| OPERATING EXPENSES | ||||||||
| Cost of revenue, excluding depreciation | $ | $ | ||||||
| Bitcoin operating costs | ||||||||
| Selling, general and administrative | ||||||||
| Repairs and maintenance | ||||||||
| Share-based compensation | ||||||||
| Depreciation and amortization | ||||||||
| Loss on disposal of operating assets | ||||||||
| Impairment of liquid staking tokens | ||||||||
| Realized loss on digital asset transactions | ||||||||
| Unrealized loss on market valuation of digital assets | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| OTHER (EXPENSE) INCOME | ||||||||
| Accretion of interest on debentures | ( | ) | ( | ) | ||||
| Change in fair value of derivative liabilities | ||||||||
| Foreign exchange loss | ( | ) | ||||||
| Gain on conversion of convertible debt | ||||||||
| Loss on debt extinguishment | ( | ) | ||||||
| Other expense | ( | ) | ( | ) | ||||
| Total other (expenses) income, net | ( | ) | ||||||
| Net (loss) income from continuing operations | ( | ) | ||||||
| Loss from operations of discontinued operations | ( | ) | ||||||
| Net loss from discontinued operations | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive loss | ||||||||
| Foreign currency translation | ||||||||
| Comprehensive loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Earnings per share: | ||||||||
| Basic net loss per common share for continuing operations | $ | ( | ) | $ | ||||
| Basic net loss per common share for discontinued operations | $ | $ | ( | ) | ||||
| Basic net loss per common share, total | $ | ( | ) | $ | ( | ) | ||
| Diluted net loss per common share for continuing operations | $ | ( | ) | $ | ( | ) | ||
| Diluted net loss per common share for discontinued operations | $ | $ | ( | ) | ||||
| Diluted net loss per common share, total | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding – basic and diluted* | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| * |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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AVAX ONE TECHNOLOGY LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(in thousands, except share data)
| For the three months ended March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||
| Common shares | Common share Treasury Shares | Additional | Obligation | Accumulated other | Total | |||||||||||||||||||||||||||||||||||
# of Shares | Amount | # of Shares | Amount | Paid-in Capital | Subscriptions Receivable | to issue shares | Accumulated Deficit | comprehensive income (loss) | shareholders’ equity | |||||||||||||||||||||||||||||||
| Balance, January 1, 2026 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Shares issued for conversion of convertible debt | - | |||||||||||||||||||||||||||||||||||||||
| Warrants issued with convertible debt | - | - | ||||||||||||||||||||||||||||||||||||||
| Share based compensation | - | - | ||||||||||||||||||||||||||||||||||||||
| Repurchases of shares | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Repurchase of shares, retired | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Fees associated with registration statement | - | ( | ) | - | ( | ) | ||||||||||||||||||||||||||||||||||
| Release of locked tokens - receipt of digital assets | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| For the three months ended March 31, 2025 | ||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Common shares | Additional | Obligation | other | Total | ||||||||||||||||||||||||
# of Shares | Amount | paid-in capital | to issue shares | Accumulated Deficit | comprehensive income (loss) | shareholders’ equity | ||||||||||||||||||||||
| Balance, January, 1 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | | |||||||||||||||||
| Shares issued for conversion of convertible debt | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| * | reflects
the |
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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| Table of Contents |
AVAX ONE TECHNOLOGY LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Staking fees paid in AVAX tokens | ||||||||
| Impairment of liquid staking tokens | ||||||||
| Realized loss on digital assets | ||||||||
| Unrealized losses on digital assets | ||||||||
| Share-based compensation | ||||||||
| Amortization of debt issuance costs | ||||||||
| Amortization of power purchase agreement | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Gain on debt conversion | ( | ) | ||||||
| Loss on debt extinguishment | ||||||||
| Loss on disposal of fixed assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Revenue from digital asset production | ( | ) | ( | ) | ||||
| Other receivables | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Deposit receivable | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Other current liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Acquisitions | ( | ) | ||||||
| Purchase of digital assets | ( | ) | ||||||
| Purchase of equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Shares repurchased in the open market, including costs | ( | ) | ||||||
| Proceeds from debenture and warrant issuance, net of discount | ||||||||
| Repayment of convertible debentures | ( | ) | ||||||
| Repayment of loan payable | ( | ) | ||||||
| Financing costs of debentures | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ) | ||||||
| Change in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash, beginning of period | ||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing transactions: | ||||||||
| Shares issued for conversion of convertible debt | $ | $ | ||||||
| Exchange listing fees for registration statement | ||||||||
| Purchase of liquid staking tokens with digital assets | ||||||||
| Release of AVAX tokens from subscriptions receivable | ||||||||
| Escrow receivable obtained in connection with issuance of convertible debt and warrants | ||||||||
| Warrants issued with convertible debt and classified as equity | ||||||||
| Initial fair value of debenture warrants initially classified as derivatives | ||||||||
| Initial fair value of conversion feature of debentures initially classified as derivatives | ||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
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AVAX ONE TECHNOLOGY LTD. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2026 and 2025 (unaudited)
(Expressed in US Dollars, except where noted)
1. NATURE OF OPERATIONS
Business Overview
The Company was incorporated under the name AgriForce Growing Systems, Ltd. as a private company by Articles of Incorporation issued pursuant to the provisions of the Business Corporations Act (British Columbia) on December 22, 2017. The Company’s registered and records office address is at 800 – 525 West 8th Avenue, Vancouver, BC, Canada, V5Z 1C6. Effective as of November 13, 2025, the Company changed its name to AVAX One Technology Ltd. (“AVAX One,” “AVX,” “AgriFORCE,” the “Company,” “we” and “our”).
AgriFORCE ceased its legacy “ag-tech” operations in early 2025 except that it maintained its Manna business involving the deployment of certain patented technologies, which business the Company is currently in the process of liquidating.
The Company operates several Bitcoin mining facilities in Alberta, Canada and Ohio. In the third quarter of 2025, the Company announced that its main business focus would be to establish and maintain a digital asset strategy and ancillary operations focused around the Avalanche coin. It closed a private placement on November 5, 2025 and formally launched its Avalanche-centric activities.
Additionally, on April 6, 2026, the Company announced the execution of a Front End Engineering & Design (“FEED”) proposal for the development of a 10 megawatt (MW) artificial intelligence / high performance compute (“AI/HPC”) Micro-Grid Data Center at the 4-31 Battery site in Alberta, Canada. On April 20, 2026, the Company executed a letter of intent with BlueFlare Energy Solutions Inc. (“BlueFlare”), an Alberta-based infrastructure developer, for the development of powered land capable of supporting a 10 MW AI/HPC micro-grid data center in Alberta, Canada. The Company also engaged BlueFlare as the infrastructure development partner for the project, and on May 6, 2026, ASCENT Consulting Ltd. was selected to lead engineering and design services for the Alberta site. See Note 17, “Subsequent Events,” for additional information.
Principal of Consolidation
Our consolidated financial statements include the accounts of our wholly owned subsidiaries. Although we have none at the present time, we consolidate variable interest entities when we have variable interests and are the primary beneficiary.
Use of Estimates
The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Significant estimates reflected in these financial statements include, but are not limited to, accounting for share-based compensation, valuation of derivative liabilities, valuation of warrants and convertible debt at issuance, business combination, impairment as well as depreciation method. Actual results could differ from these estimates, and those differences could be material.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect on the reported financial position, results of operations, or cash flows. The impact of such reclassifications on any prior period disclosures were immaterial.
Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available and is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and assess performance. The Company’s CODM group is composed of the Chief Executive Officer and Chief Financial Officer.
The Company has chosen to organize its operating segments based on products or services offered. Each operating segment is also a reportable segment (i.e., operating segments have not been aggregated). The Company’s operating and reportable segments at March 31, 2026, include Avalanche Protocol and Bitcoin Mining. All other activities, including financing, are carried out through the corporate entity. At March 31, 2026, Bitcoin Mining operations are conducted at several locations in Alberta, Canada, and the Bald Eagle Property in Ohio, USA, which reflects the manner in which the Company’s CODM reviews and assesses the performance of the business and allocates resources. Additionally, the Company’s CODM regularly reviews the Company’s expenses on a consolidated basis. The financial metrics used by the CODM help make key operating decisions, such as determination of digital asset purchases and significant acquisitions and allocation of budget between operating costs, general and administrative expenses and research and development expenses. See Note 16, “Segment Information” for further details.
Reverse Stock Split
On
July 28, 2025, the Company effected a one-for-nine reverse stock split of the Company’s issued and outstanding common shares (the
“Reverse Split”). As a result of the Reverse Split,
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NASDAQ Compliance
On March 13, 2026, the Company received a letter from Nasdaq that it no longer complies with Rule 5550(a)(2) of Nasdaq’s Listing Rules which require listed securities to maintain a minimum bid price of $ per share. Based upon the closing bid price for the last 30 consecutive business days (January 29, 2026 to March 12, 2026), the Company no longer met this requirement.
The Company presented its appeal to the Hearing Panel (the “Panel”), and the hearing was held on April 21, 2026. On May 8, 2026, the Company received from the Panel an exception to cure its listing deficiencies and provides for the continued listing on The Nasdaq Stock Market subject to certain conditions. The conditions include, among other things, that the Company must demonstrate compliance with the minimum bid price of $1 per share for a minimum of 10 consecutive trading days on or before July 6, 2026. The Company plans to complete a reverse stock split (the “RSS”) to cure the deficiency and will seek approval for the RSS at the annual shareholder meeting on May 29, 2026.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Preparation
The accompanying unaudited condensed consolidated financial statements and related financial information of AVAX One Technology Ltd. should be read in conjunction with the audited financial statements and the related notes thereto for the years ended December 31, 2025 and 2024 included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2026. These unaudited interim financial statements have been prepared in accordance with the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by the accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements.
In the opinion of management, the accompanying unaudited interim financial statements contain all adjustments which are necessary to state fairly the Company’s financial position as of March 31, 2026 and December 31, 2025, and the results of its operations and cash flows during the three months ended March 31, 2026 and 2025. Such adjustments are of a normal and recurring nature. The results for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2026, or for any future period.
Cash and Cash Equivalents
The Company’s cash and cash equivalents consists of cash that is not restricted as to withdrawal or use, stablecoins, and from time to time may also include interest-bearing highly liquid investments with original maturities of three months or less at the date of purchase. The Company acquires and holds stablecoins primarily to facilitate crypto asset transactions and are typically held in secure digital wallets or on crypto asset exchanges.
As
of March 31, 2026 and December 31, 2025, stablecoins consisted primarily of USDC, which is readily convertible to known amounts of
cash, allowing for near-instant, one-to-one redemption of USDC for U.S. dollars. Additionally, the underlying reserves backing USDC,
comprising cash in segregated accounts titled for benefit of USDC holders and a government money market fund that holds cash,
short-duration U.S. Treasuries, and overnight U.S. Treasury repurchase agreements, exhibit the risk and liquidity characteristics of
cash equivalents as defined in Accounting Standards Codification (“ASC”) 230, Statement of Cash Flows. As of
March 31, 2026 and December 31, 2025, the Company held approximately $
Restricted Cash and Escrow Receivable
Restricted cash as of March 31, 2026, represents funds held in a deposit account control agreement (“DACA”), related to the sale of debentures in October 2025. Escrow receivable as of March 31, 2026 and December 31, 2025, represents funds held in escrow, in anticipation of being held in a DACA, related to the sale of debentures in January 2026 and October 2025, respectively. The release of funds to the Company is in the sole discretion of the investors. See Note 9, “Debentures” for further information.
Liquid Staking Tokens
The
liquid staking tokens, represents the deployment by the Company in March 2026 of approximately
The tAVAX tokens provide an enforceable claim because rather than holding the staked assets itself because tAVAX operates as a liquid staking receipt token backed by the BENQI protocol and deployed across Treehouse Finance’s DeFi. When the AVAX tokens are deposited in the Treehouse vault, the protocol automatically stakes the tokens into BENQI, minting sAVAX in return. sAVAX serves as the fundamental receipt, representing the Company’s claim on the deposited AVAX token and the related native staking rewards. The Company’s holdings in tAVAX is redeemable on demand, for AVAX tokens, which exit process takes approximately 14 days. The DeFi protocol interactions carry substantial risk, such as smart contract vulnerabilities, market and liquidation risks from extreme asset volatility, governance attacks and bridge failures. If an adverse event occurs, typically the Company will absorb the losses.
Based
on the fair value of AVAX tokens on March 31, 2026, the Company recorded an impairment charge of approximately $
Digital Assets
The Company’s digital assets consist primarily of the native cryptocurrency of the Avalanche Network, referred to as AVAX tokens and Bitcoin. These assets are held in either custodial or non-custodial wallets under the Company’s control through secure private keys. The primary custodians are BitGo and Coinbase which are operated pursuant to multiyear agreements. The Company seeks to generate returns on its digital assets and actively pursues risk-adjusted return opportunities to generate cash flows that supports its operating expenses. The majority of the Company’s AVAX tokens are deployed in staking arrangements with lock-up period of less than 30 days.
Digital assets are reflected as non-current assets on the unaudited condensed consolidated balance sheets due to the Company’s intent to retain and hold its digital assets for long-term investment purposes. Digital assets, if any, held with the intent to fund operating expenses are included in current assets on the unaudited condensed consolidated balance sheet.
The Company accounts for its digital assets under ASC 350-60, Intangibles - Goodwill and Other - Crypto Assets, and measures such assets at fair value in accordance with ASC 820, Fair Value Measurement. Fair value represents the price that would be received for an asset in a current sale, assuming an orderly transaction between market participants on the measurement date. Market participants are considered to be independent, knowledgeable, and willing and able to transact. Fair value is measured using quoted crypto asset prices within the Company’s principal market at the time of measurement. It requires the Company to assume that its digital assets are sold in their principal market or, in the absence of a principal market, the most advantageous market to which it has access.
Proceeds from the sales of digital assets are included within investing activities in the accompanying unaudited condensed consolidated statement of cash flows (unless they are converted to cash nearly immediately after they are received, in which case they are included within operating activities). In accordance with Accounting Standards Update (“ASU”) 2023,08, Accounting for and Disclosures of Crypto Assets (“ASU 2023-08”), the Company measures digital assets at fair value with changes recognized on the consolidated statements of operations, in accordance with ASC 350-60. The Company tracks its cost basis of digital assets in accordance with the first-in-first-out (“FIFO”) method of accounting.
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Asset Management Agreement
In September 2025, the Company entered into an asset management agreement (the “Asset Management Agreement”) with Hivemind Capital Partners, LLC (the “Asset Manager”) pursuant to which the Asset Manager provides discretionary asset management services with respect to, among other assets, the Company’s digital asset strategies, in accordance with the terms of the Asset Management Agreement. The custodians under the Asset Management Agreement will consist of cryptocurrency wallet providers agreed to by the Company and the Asset Manager. The Asset Manager is entitled to receive an annual management fee (the “Management Fee”) equal to 1.25% of the account size (as defined in the Asset Management Agreement). The Management Fee is calculated and payable quarterly in advance, as of the first business day of each calendar quarter. In addition to the Management Fee, the Company will reimburse the Asset Manager for all documented out-of-pocket expenses incurred by the Asset Manager in connection with the performance of the Asset Manager’s duties under the Asset Management Agreement.
The Asset Management Agreement will, unless early terminated, continue in effect until the tenth anniversary of the effective date (as defined in the Asset Management Agreement) and, unless a party to the agreement elects not to continue the effectiveness of the Asset Management Agreement, will continue for successive five-year renewal periods upon the mutual agreement of the Asset Manager and the Company. The Asset Management Agreement may be terminated at any time for cause (i) by the Company upon at least 30 days’ prior written notice to the Asset Manager and (ii) by the Asset Manager upon at least 60 days’ prior written notice to the Company. The Asset Manager may immediately terminate the Asset Management Agreement upon written notice to the Company if the Asset Manager reasonably determines that the continuation of its services or the Asset Management Agreement would result in a violation of any applicable law, regulation, or regulatory guidance.
See Note 14, “Related Party Transactions,” for additional information regarding the Asset Manager and Management Fees.
Subscriptions Receivable - Digital Assets
As of March 31, 2026 and December 31, 2025, the Company holds certain AVAX tokens that remain in investor wallets to which the Company does not have the private keys because the tokens are subject to restrictions, such as lock-up agreements or pledges as collateral pursuant to UCC-1 financing statements. As a result, management believes the Company does not have control of these digital assets and has presented these AVAX tokens as subscriptions receivable - digital assets within the unaudited condensed consolidated statements of stockholders’ equity, as contra-equity. After each individual restriction lapses and the Company thus obtains control, the AVAX tokens will be reclassified to digital assets.
While the restrictions remain, the Company has the right and the ability to use the AVAX tokens in staking arrangements in accordance with its revenue recognition policy.
During
the three months ended March 31, 2026, the restrictions lapsed on
Fair Value Measurement
Coinbase serves as the principal market for the Company’s digital assets. This determination results from a comprehensive evaluation considering various factors, including compliance, trading activity, and price stability. While Coinbase is designated as the primary exchange, the Company retains flexibility to conduct cryptocurrency transactions on other exchanges where it maintains accounts. This flexibility allows the Company to adapt to changing market conditions and explore alternative platforms when necessary to ensure cost-effective execution and fair value measurement using the most advantageous market.
The selection of Coinbase as the principal market reflects the Company’s commitment to informed decision-making and achieving the most accurate representation of fair value for its digital assets. Regular reviews ensure alignment with the Company’s objectives and cryptocurrency market dynamics.
The Company measures its digital assets at fair value in accordance with ASC 820, Fair Value Measurement, using the last closing price of the day in the UTC time zone at each reporting period end with changes recognized in operating expenses in the unaudited condensed consolidated statement of operations.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and impairment as applicable. Property and equipment acquired through business combinations are measured at fair value at the date of acquisition. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company’s property and equipment is primarily comprised of digital asset mining equipment, which are largely homogenous and have approximately the same useful lives. Accordingly, the Company utilized the group method of depreciation for its digital asset mining equipment. The Company will update the estimated useful lives of its digital assets mining equipment periodically if information on the operations of the mining equipment indicates a change is required. The Company will assess and adjust the estimated useful lives of its mining equipment when there are indicators that the productivity of the mining assets is longer or shorter than the assigned estimated useful life.
Definite Lived Intangible Assets
Definite lived intangible assets consist of a granted patent and intangible assets acquired from an acquisition. Amortization is computed using the straight-line method over the estimated useful life of the asset.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In order to determine if assets have been impaired, assets are grouped and tested at the lowest level for which identifiable independent cash flows are available (“asset group”). An impairment loss is recognized when the sum of projected undiscounted cash flows is less than the carrying value of the asset group. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the asset group. Fair value can be determined using a market approach, income approach or cost approach. The reversal of impairment losses is prohibited.
Goodwill
Goodwill is not amortized; however, the Company reviews goodwill for impairment annually or whenever events or changes in circumstances indicate that the fair value of the reporting unit less than its carrying value. To determine if goodwill has been impaired, the Company performs a qualitative assessment to determine if more likely than not the fair value of the reporting unit is below its carrying value. If it is determined that more likely than not there is impairment, a quantitative impairment assessment is performed to identify potential goodwill impairment. An impairment loss is recognized when the fair value as at the measurement date is less than the carrying value. The measurement of the impairment loss to be recognized is based on the difference between the fair value and the carrying value of the reporting unit.
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Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815, Derivatives and Hedging (“ASC 815”), which provides that if three criteria are met, the Company is required to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which:
| ● | the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract; | |
| ● | the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur; and | |
| ● | a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. |
ASC 815 also provides an exception to this rule when the host instrument is indexed to the Company’s common stock. ASC 815 provides that, among other things, generally, if an event is not within the entity’s control or could require net cash settlement, then the contract shall be classified as an asset or a liability.
Revenue Recognition
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of the revenue standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| ● | Step 1: Identify the contract with the customer; | |
| ● | Step 2: Identify the performance obligations in the contract; | |
| ● | Step 3: Determine the transaction price; | |
| ● | Step 4: Allocate the transaction price to the performance obligations in the contract; and | |
| ● | Step 5: Recognize revenue when the Company satisfies a performance obligation. |
In order to identify the performance obligations in a contract with a customer, an entity must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
| ● | the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and | |
| ● | the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). |
If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:
| ● | variable consideration; | |
| ● | constraining estimates of variable consideration; | |
| ● | the existence of a significant financing component in the contract; | |
| ● | non-cash consideration; and | |
| ● | consideration payable to a customer. |
Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized under the accounting contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.
The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis.
The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time, as appropriate.
The Company’s revenues are generated from blockchain-based operations and comprises two primary sources: (i) staking rewards earned from delegating and validator node operations, primarily Avalanche blockchain (“Avalanche Protocol”) and (ii) the production of Bitcoin mining activities (“Bitcoin Mining”).
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Avalanche Protocol
The Company engages in network-based smart contracts by staking (or “delegating”) crypto assets on nodes run by third-party operators or its own validator node. Through these contracts, the Company provides crypto assets to stake to a node for the purpose of validating transactions and adds blocks to a respective blockchain network. The terms of a smart contract vary based on the rules of the respective blockchain and typically lasts from a few days to several weeks after it is cancelled (or “un-staked”) by the delegator and requires that the crypto assets staked remain locked up during the duration of the smart contract.
In exchange for the foregoing services, the Company is entitled to receive non-cash consideration in the form of native crypto assets (primarily AVAX). For purposes of revenue recognition under ASC 606, the Company measures this non-cash consideration based on its fair value at contract inception. Subsequent changes in its fair value are recognized in unrealized or realized gains and losses.
In
exchange for staking the crypto assets and validating transactions on blockchain networks, the Company is entitled to all of the fixed
crypto asset award earned from the network when delegating to the Company’s own node and is entitled to a fractional share of the
network-determined crypto asset awarded a third-party node operator receives (less crypto asset transaction fees payable to the node
operator, which are immaterial and are recorded as a deduction from revenue), for successfully validating or adding a block to the blockchain.
The Company’s fractional share of awards received from delegating to a third-party validator node is proportionate to the crypto
assets staked by the Company compared to the total crypto assets staked by all delegators to the node at that time. If the validators
do not achieve an uptime requirement of
On certain blockchain networks on which the Company operates a validator node, the Company earns a validator node fee (“Validator Fee”), determined as a node operator’s published percentage of the crypto asset rewards earned on crypto assets delegated to its node. Token rewards earned from staking, as well as tokens earned as Validator Fees, are calculated and distributed directly to the Company’s digital wallets by the blockchain networks as part of their consensus mechanism.
The provision of validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs over time, since the customer simultaneously receives and consumes the benefit provided by our performance as we perform. Accordingly, we recognize the transaction price for revenue related to our AVAX tokens ratably over the staking period.
Expenses associated with providing validating blockchain transactions, such as staking fees, asset management fees, and other related fees are recorded as cost of revenues when we are using nodes under the Company’s control. Digital assets received are recorded as digital assets. Cash flows from selling digital assets, if any, are included within the investing activities on the unaudited condensed consolidated statements of cash flows (unless they are converted to cash nearly immediately after they are received, in which case they are included within operating activities).
Bitcoin Mining
The Company earns revenue from the production of certain digital assets through mining activities. The Company provides transaction verification services to a mining pool. Transaction verification services are an output of the Company’s ordinary activities. The Company views the mining pool as a customer and recognizes the share of block rewards and transaction fees it is entitled to receive from the pool as revenue from contracts with customers under ASC 606. The Company assessed the following factors in the determination of the inception and duration of each individual contract as follows:
| ● | For each individual contract, the parties’ rights, the transaction price, and the payment terms are fixed and known as of the inception of each individual contract. | |
| ● | The Company’s agreement with the pool indicates that the term of the contract expires at the end of each day, and is automatically renewed for another day unless terminated by either party. |
In accordance with ASC 606-10-32-21, the Company measures the estimated fair value of the non-cash consideration (the Company’s share of the block reward and transaction fees) at contract inception, which is the beginning of each day. The Company measures the non-cash consideration using the quoted spot rate for bitcoin determined using the Company’s primary trading platform for bitcoin. The customer receives and consumes the benefits provided by the Company’s performance as the Company performs. Accordingly, the Company recognizes revenue over the term of the contract (over the day).
Expenses associated with providing Bitcoin transaction verification services, such as hosting fees, electricity costs, and other related fees are recorded as cost of revenues. Digital assets received are recorded as digital assets. Cash flows from selling digital assets, if any, are included within the investing activities on the unaudited condensed consolidated statements of cash flows (unless they are converted to cash nearly immediately after they are received, in which case they are included within operating activities).
The Company evaluates and accounts for its digital assets in accordance with ASU 2023-08, Accounting for and Disclosure of Crypto Assets, the Company measures digital assets at fair value with changes recognized in operating expenses. The Company applies the first-in-first-out method of accounting to its digital assets and tracks the cost basis of the crypto asset by wallet.
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Concentrations and Current Vulnerability
The Company’s principal activities consist primarily from investing, staking and evaluating digital tokens technologies that run on the Avalanche public blockchain network. Due to the current nature of the Company’s operations and the scale of business transacted on the Avalanche Network, a concentration could potentially result in a vulnerability as of the reporting date. The concentration and potential associated vulnerabilities include, but are not limited to:
| ● | A decline in, or loss of, staking rewards earned from the staking of AVAX tokens delegated to one or more validator nodes on the network, | |
| ● | A decline in, or loss of, our AVAX holdings and its utility to the Avalanche Network and a source of liquidity for our business, and | |
| ● | Disruption to the nature and extent of the business plan should the Avalanche public blockchain network fail or become redundant due to technological obsolescence or regulatory action. |
The AVAX token performs various functions within the Avalanche ecosystem, including incentivizing network security and functionality and acting as the payment currency on the primary network. Therefore, this concentration may result in vulnerability to a near-term severe impact, and at least possible that there could be events outside of our control that may result in a severe impact in the near term.
As a result, of the foregoing, the Company believes a concentration exists as of the date of these financial statements, and a dissolution of the Avalanche Foundation or an inability of the Avalanche public blockchain network and/or AVAX tokens to function as expected, could result in near-term severe impacts to our business.
The Company presents basic and diluted loss per share data for its common shares. Basic loss per common share is calculated by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. The number of common shares used in the loss per shares calculation includes all outstanding common shares plus all common shares issuable for which there are no conditions to issue other than time. Diluted loss per common share is calculated by adjusting the weighted average number of common shares outstanding to assume conversion of all potentially dilutive share equivalents, such as options and warrants and assumes the receipt of proceeds upon exercise of the dilutive securities to determine the number of shares assumed to be purchased at the average market price during the year.
Loss per common share calculations for all periods have been adjusted to retroactively reflect the Reverse Split.
Fair Value Measurement
The Company measures fair value in accordance with FASB ASC 820, “Fair Value Measurement,” which establishes a fair value hierarchy that prioritizes the assumptions (inputs) to valuation techniques used to price assets or liabilities that are measured at fair value. The hierarchy, as defined below, gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The guidance for fair value measurements requires that assets and liabilities measured at fair value be classified and disclosed in one of the following categories:
| ● | Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities. | |
| ● | Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
| ● | Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. |
The Company measures and records its digital assets at fair value using quoted crypto asset prices within the Company’s principal market at the time of measurement which is deemed a level 1 input. See Note 3, “Digital Assets” for further details.
Assets and liabilities measured and recorded at fair value on a non-recurring basis
The Company’s non-financial assets, such as property and equipment, intangible assets and goodwill are measured at fair value when there is an indicator of impairment and are recorded at fair value when an impairment charge is recognized. There were no indications of impairment during the three months ended March 31, 2026 and 2025.
Assets and liabilities not measured and recorded at fair value
Certain of the Company’s financial instruments are not measured and recorded at fair value but their carrying values approximate fair value due to their liquid or short-term nature such as current assets, accounts payable and accrued expenses, debentures and other current liabilities.
Income Taxes
Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted at period-end.
Deferred tax assets, including those arising from tax loss carryforwards, require management to assess the likelihood that the Company will generate sufficient taxable earnings in future periods in order to utilize recognized deferred tax assets. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. In addition, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future periods. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Company to realize the net deferred tax assets recorded at the reporting date could be impacted.
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The Company operates in various tax jurisdictions and is subject to audit by various tax authorities.
The Company generally uses the straight-line method to allocate compensation cost to reporting periods over each optionee’s requisite service period, which is generally the vesting period, and estimates the fair value of share-based awards to employees and directors using the Black-Scholes option-valuation model (the “Black-Scholes model”). This model incorporates certain assumptions for inputs including a risk-free market interest rate, expected dividend yield of the underlying common shares, expected option life, and expected volatility in the market value of the underlying common shares. The Company recognizes any forfeitures as they occur.
Recent Accounting Pronouncements
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, as modified by the Jumpstart Our Business Start-ups Act of 2012, (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended, for complying with new or revised accounting standards applicable to public companies. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The requires additional disclosures of certain expenses in the notes of the financial statements, to provide enhanced transparency into the expense captions presented on the Consolidated Statements of Operations. Additionally, in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), to clarify the effective date of ASU 2024-03. The new standard is effective for the Company for its annual periods beginning January 1, 2027, and for interim periods beginning January 1, 2028, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
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3. DIGITAL ASSETS
Digital Assets
The following table presents the Company’s digital assets held as of March 31, 2026 and December 31, 2025, which are measured at fair value in accordance in ASC 350-60, Intangibles - Crypto Assets. Measurement is based on quoted prices in active markets (Level 1 input under ASC 820, Fair Value Measurement) (in thousands, except quantity):
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Quantity | Cost Basis | Fair Value | Quantity | Cost Basis | Fair Value | |||||||||||||||||||
| AVAX tokens | $ | $ | $ | $ | ||||||||||||||||||||
| Bitcoin | ||||||||||||||||||||||||
| Total digital assets | $ | $ | $ | $ | ||||||||||||||||||||
Activity Rollforward
The following table summarizes the activity in the Company’s digital assets for the three months ended March 31, 2026 (in thousands):
| Amounts | ||||
| December 31, 2025 - Fair Market Value | $ | |||
| Additions and purchases of digital assets | ||||
| Rewards earned from blockchain infrastructure | ||||
| Release of locked tokens - subscriptions receivable | ||||
| Payment of vendor invoices | ( | ) | ||
| Conversion to tAVAX | ( | ) | ||
| Realized losses on digital assets | ( | ) | ||
| Unrealized loss on market valuation | ( | ) | ||
| March 31, 2026 - Fair Market Value | $ | |||
The
Company recognized realized losses of $
Investor Contributions - Subscriptions Receivable
The Company holds certain AVAX tokens that remain in investor wallets to which the Company does not have the private keys because the tokens are subject to restrictions, such as lock-up agreements or pledges as collateral pursuant to UCC-1 financing statements. As a result, management believes the Company does not have control of these digital assets and has presented these AVAX tokens as subscriptions receivable within the unaudited condensed consolidated statements of stockholders’ equity, as contra-equity. After each individual restriction lapses and the Company obtains control, the AVAX tokens are to digital assets.
The following table summarizes the total AVAX tokens subject to restrictions as of March 31, 2026 and December 31, 2025 (in thousands, except for quantity):
| March 31, 2026 | December 31, 2025 | |||||||||||||||
| Quantity | Cost Basis | Quantity | Cost Basis | |||||||||||||
| Restricted tokens pledged as collateral | $ | $ | ||||||||||||||
| Other restricted tokens | ||||||||||||||||
| Total subscriptions receivable - digital assets | $ | $ | ||||||||||||||
The following table summarizes the restrictions that apply to the AVAX tokens classified as digital assets and the AVAX tokens classified as subscriptions receivables as of March 31, 2026:
| Restriction Period | AVAX Tokens | |||
| Tokens unlock over 108 equal monthly increments beginning December 2026 and concluding November 2035 | ||||
| Tokens unlock in equal weekly increments concluding July 2027 | ||||
| Tokens unlock in equal quarterly increments beginning February 2026 and concluding July 2030 | ||||
| Tokens unlock in equal weekly increments concluding September 2027 | ||||
| Tokens unlock in equal weekly increments beginning in March 2026 and concluding February 2027 | ||||
| Tokens unlock in equal weekly increments concluding May 2027 | ||||
| Tokens unlock in equal weekly increments beginning September 2026 and concluding March 2027 | ||||
| Tokens unlock at a rate of approximately 41% in March 2026 and approximately 59% April 2026 | ||||
| Tokens unlock at a rate of approximately 42% per week through March 2026 and approximately 58% per week concluding March 2027 | ||||
| Tokens unlock in equal weekly installments concluding March 2026 | ||||
In accordance with ASU 2022-03 (Topic 820), these restrictions are not considered a part of the unit of account for the AVAX tokens and was not considered when measuring the AVAX tokens at fair value.
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4. ACQUISITIONS AND DISPOSITIONS
| (a) | Bald Eagle Acquisition |
In
January 2025, the Company consummated the acquisition of assets of Bald Eagle Mining, LLC (“Bald Eagle”), located in Columbiana
County, Ohio, for a total purchase price of $
The following pro forma summary presents consolidated information of the Company as if the business combination had occurred on January 1, 2024 (in thousands):
Proforma for the three month ended March 31, | ||||
| 2025 | ||||
| Revenue | $ | |||
| Net loss | $ | |||
The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and net loss position. These pro forma amounts have been calculated after applying the Company’s accounting policies and adjusting the results of Bald Eagle to reflect the additional amortization that would have been charged assuming the fair value adjustments to the intangible assets had been applied from January 1, 2025, with the consequential tax effects.
The following table summarizes the consideration transferred to acquire Bald Eagle and the amounts of identified assets acquired and liabilities assumed at the acquisition date (in thousands):
| Cash consideration | $ | |||
| Option payment | ||||
| Purchase price | $ | |||
| Assets acquired | ||||
| S19J Pro Bitmain ASIC Miners | $ | |||
| Natural gas power generators | ||||
| Transformers | ||||
| Data centers | ||||
| Shipping containers | ||||
| Standby generators | ||||
| Fair value of identified net assets acquired | ||||
| Goodwill | $ |
The Company will continue to operate its bitcoin mining business alongside its AVAX treasury business, which will be the main business operation post-closing.
| (b) | Radical Clean Solutions Acquisition / Disposition |
In
August 2024, the Company completed the acquisition of assets of Radical Clean Solutions, Inc. (“RCS”), effectively increasing
its interest from
On
July 1, 2025, the Company mutually agreed to return the RCS assets and certain liabilities to the seller, and has presented the results
of operations of the RCS business, for the three months ended March 31, 2025, as loss from discontinued operations in the accompany unaudited
condensed consolidated statement of operations. Cash used in operating activities from discontinued operations was $
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5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following for the periods presented (in thousands):
| March 31, 2026 | December 31, 2025 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Prepaid Bitcoin Mining infrastructure | ||||||||
| Prepaid filings fees | ||||||||
| Other | ||||||||
| Prepaid expenses and other current assets | $ | $ | ||||||
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following for the periods presented (in thousands):
| March 31, 2026 | December 31, 2025 | |||||||
| Bitcoin Mining facility and infrastructure | $ | $ | ||||||
| Bitminers | ||||||||
| Transformers and generators | ||||||||
| Total property and equipment | $ | $ | ||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense on property and equipment for the three months ended March 31, 2026 and 2025 was $
7. INTANGIBLE ASSETS
Intangible assets consisted of the following for the periods presented (in thousands):
| March 31, 2026 | December 31, 2025 | |||||||
| Manna IP | $ | $ | ||||||
| Power Purchase Agreement | ||||||||
| Total intangible assets | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Manna Intellectual Property
In
2021, the Company acquired intellectual property (the “Manna IP”) pursuant to an asset purchase agreement with an unrelated
third party. The Manna IP encompasses various patented technologies to naturally process and convert, among other things, fiber rich
baking flour products. The Company accounted for the purchase as an asset acquisition and the Manna IP was estimated to have useful life
of
In
December 2025, the Company entered into a letter of intent, with an unrelated third party, to sell the Manna IP for a purchase price
of $
Power Purchase Agreement
In
November 2024, the Company acquired the power purchase agreement (the “Power Purchase Agreement”) pursuant to an acquisition.
The Power Purchase Agreement allows the Company to obtain natural gas for its Natural Gas Power Plant, which was also acquired pursuant
to the acquisition. The Power Purchase Agreement was determined to be a favorable contract asset, and as such was recorded as an intangible
asset at the present value of the contractual benefit, estimated to be three years. During the three months ended March 31, 2026 and
2025, the Company recorded amortization expense totaling $
The
estimated annual amortization expense for the Power Purchase Agreement is $
8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following for the periods presented (in thousands):
| March 31, 2026 | December 31, 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
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9. DEBENTURES
In
June 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreements”) with arm’s-length accredited
institutional investors (the “Investors”) for the sale of debentures, which are convertible into the Company’s common
shares in an aggregate principal amount of up to $
On
June 30, 2022, the Company consummated the closing for the sale of (i) the initial debenture in the principal amount of $
The
Investors had the right to purchase additional tranches of $
From
January 2023 through May 2024, the Investors purchased additional tranches under the Purchase Agreements under similar terms as the First
Tranche for an aggregate principal amount of $
The details of each of these seven tranches are summarized in the table below:
| Description | Date | Face Amount | OID | Gross Proceeds | Conversion Price | Principal Payment Starting Date * | # of Warrants | Exercise Price | Expiration Date | Transaction Costs | |||||||||||||||||||||||||||||
| 1st Tranche | Jun-22 | $ | % | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| 2nd Tranche | Jan-23 | % | |||||||||||||||||||||||||||||||||||||
| 3rd Tranche | Oct-23 | % | |||||||||||||||||||||||||||||||||||||
| 4th Tranche | Nov-23 | % | |||||||||||||||||||||||||||||||||||||
| 5th Tranche | Feb-24 | % | |||||||||||||||||||||||||||||||||||||
| 6th Tranche | Apr-24 | % | |||||||||||||||||||||||||||||||||||||
| 7th Tranche | May-24 | % | |||||||||||||||||||||||||||||||||||||
| * |
Interest
rates are
These
In
January 2025, the Company entered into a Securities Purchase Agreement (the “2025 Purchase Agreements”) with arm’s-length
accredited institutional investors (the “Investors”) for the sale of debentures, which are convertible into the Company’s
common shares in an aggregate principal amount of up to $
From
March 2025 through January 2026, the Investors purchased additional tranches under the 2025 Purchase Agreements under similar terms as
the January 2025 Tranche for an aggregate principal amount of $
| Description | Date | Face Amount | Original Issue Discount | Gross Proceeds | Conversion Price | Principal Payment Starting Date * | No. of Warrants | Exercise Price | Expiration Date | Transaction Costs | ||||||||||||||||||||||||||
| Jan-25 Tranche | Jan-25 | $ | % | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Mar-25 Tranche | Mar-25 | % | ||||||||||||||||||||||||||||||||||
| May-25 Tranche | May-25 | % | ||||||||||||||||||||||||||||||||||
| Jul-25 Tranche | Jul-25 | % | ||||||||||||||||||||||||||||||||||
| Sep-25 Tranche | Sep-25 | % | ||||||||||||||||||||||||||||||||||
| Oct-25 Tranche (a) | Oct-25 | % | ||||||||||||||||||||||||||||||||||
| Jan-26 Tranche (b) | Jan-26 | % | ||||||||||||||||||||||||||||||||||
| * |
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Interest
rates are
These debentures may be extended by six months at the election of the Company by paying a sum equal to six months’ interest on the principal amount outstanding at the end of the 12th month, at the rate of 8% per annum.
| (a) | The
Company received $ | |
| (b) | The
Company received $ |
The funds held in DACA, related to the October 2025 tranche is reflected as restricted cash and the funds related to the January 2026 tranche are reflected as escrow receivable in the accompanying unaudited condensed consolidated balance sheets.
Debentures consisted of the following for the periods presented (in thousands):
| Description | Maturity | Interest Rate | March 31, 2026 | December 31, 2025 | ||||||||||||
| Principal (First Tranche Debentures) | % - | % | $ | $ | ||||||||||||
| Principal (Second Tranche Debentures) | % - | % | ||||||||||||||
| Principal (Fourth Tranche Debentures) | % - | % | ||||||||||||||
| Principal (May 2025 Tranche Debentures) | % | |||||||||||||||
| Principal (July 2025 Tranche Debentures) | % | |||||||||||||||
| Principal (September 2025 Tranche Debentures) | % | |||||||||||||||
| Principal (October 2025 Tranche Debentures) | % | |||||||||||||||
| Principal (January 2026 Tranche Debentures) | % | |||||||||||||||
| Debt issuance costs and discounts | ( | ) | ( | ) | ||||||||||||
| Total Debentures (current) | $ | $ | ||||||||||||||
During
the three months ended March 31, 2026, the Investors converted $ thousand of principal and interest into the Company’s common
shares and the conversion was determined to be a modification of the existing debt. During the three months ended March 31, 2026, the
Company incurred $
During
the three months ended March 31, 2025, the Investors converted $
million of principal and interest into the Company’s common shares resulting in a $
10. LOAN
In
August 2025, the Company entered into a Master Loan Agreement (the “MLA”) with BitGo Prime, LLC providing the Company the
ability to secure USD cash loans secured by Bitcoin (“BTC”) for a total loan under the MLA of $
As
of March 31, 2026, the aggregate outstanding balance on the BitGo loan, included accrued but unpaid interest was approximately $
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11. DERIVATIVE LIABILITIES
As a result of the change in the Company’s functional currency effective April 1, 2025, the derivative liabilities, consisting of warrant liabilities and the debenture conversion features were reclassified to equity.
Warrant Liabilities
As of April 1, 2025, the Company utilized the Monte Carlo option-pricing model to value the warrant liabilities. The warrant liabilities reclassified to equity as of April 1, 2025, as well as the assumptions used by the Company to value the warrant liabilities are summarized in the table below (in thousands, except for warrant data):
| Monte-Carlo Option Pricing Assumptions - April 1, 2025 | ||||||||||||||||||||||||||||
| Risk Free | FV of | |||||||||||||||||||||||||||
| # of | Stock | Dividend | Expected | Rate of | Expected | Warrant | ||||||||||||||||||||||
| Warrants | Price | Yield | Volatility | Return | Term | Liability | ||||||||||||||||||||||
| 1st Tranche | $ | % | % | % | $ | |||||||||||||||||||||||
| 2nd Tranche | $ | % | % | % | ||||||||||||||||||||||||
| 3rd Tranche | $ | % | % | % | ||||||||||||||||||||||||
| 4th Tranche | $ | % | % | % | ||||||||||||||||||||||||
| 5th Tranche | $ | % | % | % | ||||||||||||||||||||||||
| 6th Tranche | $ | % | % | % | ||||||||||||||||||||||||
| 7th Tranche | $ | % | % | % | ||||||||||||||||||||||||
| Jan-25 Tranche | $ | % | % | % | ||||||||||||||||||||||||
| Mar-25 Tranche | $ | % | % | % | ||||||||||||||||||||||||
| Warrant Liability Reclassified to equity | $ | |||||||||||||||||||||||||||
Debenture Convertible Feature
As of April 1, 2025 the Company utilized the Monte Carlo option-pricing model to value the debenture conversion feature. The liability reclassified to equity as of April 1, 2025, as well as the assumptions used by the Company to value the debenture conversion feature are summarized in the table below (in thousands):
| Monte-Carlo Option Pricing Assumptions - April 1, 2025 | ||||||||||||||||||||||||||||
| Risk Free | FV of | |||||||||||||||||||||||||||
| Stock | Dividend | Expected | Rate of | Discount | Expected | Warrant | ||||||||||||||||||||||
| Price | Yield | Volatility | Return | Rate | Term | Liability | ||||||||||||||||||||||
| 1st Tranche | $ | % | % | % | % | $ | ||||||||||||||||||||||
| 2nd Tranche | $ | % | % | % | % | |||||||||||||||||||||||
| 4th Tranche | $ | % | % | % | % | |||||||||||||||||||||||
| Jan-25 Tranche | $ | % | % | % | % | |||||||||||||||||||||||
| Mar-25 Tranche | $ | % | % | % | % | |||||||||||||||||||||||
| Conversion Feature Reclassified to equity | $ | |||||||||||||||||||||||||||
As of April 1, 2025, the IPO Warrants, Rep Warrants, and Private Placement Warrants (the “Equity Warrants”) are classified as equity due to the Company changing its functional currency to USD as of April 1, 2025. The strike prices of the warrants and the Company’s functional currency are both denominated in USD. The Company reassessed that the warrants met the classification criteria to be recorded as equity and the warrants were reclassified to additional-paid-in capital.
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12. SHARE CAPITAL
In
November 2025,
As of March 31, 2026 and December 31, 2025, the Company owed $.0 thousand worth of stock-based compensation to a former officer of the Company. The balance issuable was classified as an Obligation to issue shares.
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding for the periods presented. Diluted net loss per share is computed by giving effect to all potential weighted average dilutive common shares. For diluted net loss per share, the dilutive effect of outstanding awards is reflected by application of the treasury stock method and convertible securities by application of the if-converted method, as applicable.
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Basic net loss per share: | ||||||||
| Numerator | ||||||||
| Net (loss) income from continuing operations | $ | ( | ) | $ | ||||
| Net loss from discontinued operations | $ | $ | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator | ||||||||
| Basic weighted-average common shares outstanding | ||||||||
| Basic net loss per share for continuing operations | $ | ( | ) | $ | ||||
| Basic net loss per share for discontinued operations | $ | $ | ( | ) | ||||
| Basic net loss per share, total | $ | ( | ) | $ | ( | ) | ||
| Diluted net loss per share: | ||||||||
| Numerator | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ||||
| Net loss from discontinued operations | $ | $ | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Change in fair value of derivatives | $ | $ | ( | ) | ||||
| Estimated loss on conversions | $ | $ | ( | ) | ||||
| Change in fair value of convertible debenture warrants | $ | $ | ( | ) | ||||
| Interest expense, amortization of debt discount and issuance costs of convertible debentures | $ | $ | ||||||
| Diluted net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator | ||||||||
| Number of shares used in basic net loss per share computation | ||||||||
| Weighted-average effect of potentially dilutive securities: | ||||||||
| Shares issuable from converted debentures | ||||||||
| Conversions | ( | ) | ||||||
| Diluted weighted-average common shares outstanding | ||||||||
| Diluted net loss per share for continuing operations | $ | ( | ) | $ | ( | ) | ||
| Diluted net loss per share for discontinued operations | $ | $ | ( | ) | ||||
| Diluted net loss per share, total | $ | ( | ) | $ | ( | ) | ||
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13. REVENUE
The primary sources of revenue for the periods presented have been from the Company’s digital asset strategy and are as follows (in thousands):
| Three months ended | ||||||||
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Avalanche Protocol | $ | $ | ||||||
| Bitcoin Mining | ||||||||
| Total revenue | $ | $ | ||||||
14. RELATED PARTY TRANSACTIONS
Key management personnel include those persons having the authority and responsibility of planning, directing, and executing the activities of the Company. The Company has determined that its key management personnel consist of the Company’s officers and directors.
During
the three months ended March 31, 2026 and 2025, the Company incurred $
During
the three months ended March 31, 2026, the Company incurred $
During
the three months ended March 31, 2025, the Company incurred $
During
the three months ended March 31, 2025, the Company incurred $
There were no other payments to related parties for the three months ended March 31, 2026 and 2025, other than expense reimbursements in the ordinary course of business.
15. COMMITMENTS AND CONTINGENCIES
Contingencies
Litigation
In
August 2023, the Company’s former chief executive officer, Ingo Wilhelm Mueller filed a Notice of Civil Claim in which he alleges
that the Company wrongfully terminated his employment without notice, in breach of the parties’ underlying employment agreement.
Mr. Mueller alleges to have suffered damages including, among other things, a loss of base salary ($
The parties are in the discovery stage of litigation. The Company has produced relevant documents to Mr. Mueller and is awaiting Mr. Mueller’s production of relevant documents. The parties are also in the process of scheduling examinations for discovery. Management is instructing counsel to advance the matter given the relative strength of the Company’s case.
The likelihood of an unfavorable outcome is not probable given the facts supporting the Company’s ‘for cause’ termination of Mr. Mueller as well as the significant expense that Mr. Mueller would have to incur to advance this matter to trial.
In
September 2023, a vendor filed a Complaint with the Superior Court of California for Breach of Contract; Breach of the Covenant of Good
Faith and Fair Dealing; and Common Count: Goods and Services Rendered in relation to the purchase and sale agreement for vacant land,
known as the Coachella property. In January 2025, the Company settled the complaint and agreed to pay $
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On
March 27, 2024, BV Peeters Advocaten-Avocats (“Peeters”) summoned the Company to appear on May 31, 2024, at the First Chamber
of the Dutch-Speaking Division of the Business Court in Brussels. Peeters is seeking payment for €
On
July 11, 2024, the Company’s former general counsel filed a Notice of Civil Claim with the Supreme Court of British Columbia, in
which he alleges that the Company wrongfully terminated his employment without notice, in breach of the parties’ underlying employment
agreement. On January 6, 2025, the Company settled the Civil Claim with the Company’s former general counsel and agreed to pay
a settlement amount of $
16. SEGMENT INFORMATION
The
Company has chosen to organize its operating segments based on products or services offered. Each operating segment is also a reportable
segment (i.e.,
Our Bitcoin Mining operations are conducted in Alberta, Canada and Ohio, USA, which reflects the manner in which the Company’s Chief Operating Decision Maker (“CODM”), its Chief Executive Officer, reviews and assesses the performance of the business and allocates resources.
The information used by the CODM to assess performance and allocate resources includes various measures of segment profit, however, for the purposes of the disclosures required by ASC 280, Segment Reporting and ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, the Company has determined that the measure most consistent with the measurement principles used in measuring the corresponding amounts in the consolidated financial statements is net income. Segment financial information is used to monitor forecast versus actual results in order to make key operating decisions for each segment. The CODM evaluates the performance or allocate resources for each segment based on the Company’s assets or liabilities.
The following discloses key financial information including the significant segment expenses, in the context of deriving net income, which are regularly provided to and reviewed by the CODM reconciled to the segment’s net income:
| Avalanche Protocol | Bitcoin Mining | Corporate and Other | Total | |||||||||||||
| Three Months Ended March 31, 2026: | ||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Significant segment expenses: | ||||||||||||||||
| Cost of revenue, excluding depreciation | $ | $ | $ | $ | ||||||||||||
| Bitcoin operating costs | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Repairs and maintenance | ||||||||||||||||
| Share-based compensation | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Loss on disposal of operating assets | ||||||||||||||||
| Impairment of assets | ||||||||||||||||
| Realized loss digital asset transactions | ||||||||||||||||
| Unrealized loss on market valuation of digital assets | ||||||||||||||||
| Accretion of interest on debentures | ||||||||||||||||
| Other expense | ||||||||||||||||
| Total operating expenses and other expenses | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
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| Avalanche Protocol | Bitcoin Mining | Corporate and Other | Total | |||||||||||||
| For the Three Months Ended March 31, 2025: | ||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Significant segment expenses: | ||||||||||||||||
| Cost of revenue, excluding depreciation | $ | $ | $ | $ | ||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Repairs and maintenance | ||||||||||||||||
| Share-based compensation | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Unrealized loss on market valuation of digital assets | ||||||||||||||||
| Accretion of interest on debentures | ||||||||||||||||
| Change in fair value of derivative liabilities | ( | ) | ( | ) | ||||||||||||
| Foreign exchange loss (gain) | ||||||||||||||||
| (Gain) loss on conversion of convertible debt | ( | ) | ( | ) | ||||||||||||
| Loss on debt extinguishment | ||||||||||||||||
| Other (income) expense | ||||||||||||||||
| Net loss from discontinued operations | ||||||||||||||||
| Total operating expenses and other expenses (income) | ( | ) | ||||||||||||||
| Net loss | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
The following table summarizes the additions to long-lived assets, total long-lived assets, and total assets by segment, used by the CODM to assess segment performance:
| Avalanche Protocol | Bitcoin Mining | Corporate and Other | Total | |||||||||||||
| As of March 31, 2026 | ||||||||||||||||
| Digital assets, additions | $ | $ | $ | $ | ||||||||||||
| Balances: | ||||||||||||||||
| Property and equipment, net | $ | $ | $ | $ | ||||||||||||
| Digital assets, current and non-current | $ | $ | $ | $ | ||||||||||||
| Intangible assets, net | $ | $ | $ | $ | ||||||||||||
| Intangible asset held for sale | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| As of December 31, 2025 | ||||||||||||||||
| Property and equipment, additions | $ | $ | $ | $ | ||||||||||||
| Digital assets, additions | $ | $ | $ | $ | ||||||||||||
| Balances: | ||||||||||||||||
| Property and equipment, net | $ | $ | $ | $ | ||||||||||||
| Digital assets, current and non-current | $ | $ | $ | $ | ||||||||||||
| Intangible assets, net | $ | $ | $ | $ | ||||||||||||
| Intangible asset held for sale | $ | $ | $ | $ | ||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
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The following tables summarize revenue and certain assets, such as cash and cash equivalents, property, plant, and equipment and digital assets by geographic area based on the location of the underlying activity or rendering of services and location of the underlying assets:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenue | ||||||||
| Canada | $ | $ | ||||||
| United States | ||||||||
| Total Revenue | $ | $ | ||||||
| March 31, 2026 | December 31, 2025 | |||||||
| Assets | ||||||||
| Cash and cash equivalents for all segments | ||||||||
| Canada | $ | $ | ||||||
| United States | ||||||||
| Total cash and cash equivalents | $ | $ | ||||||
| Property Plant and Equipment | ||||||||
| Canada | $ | $ | ||||||
| United States | ||||||||
| Total property plant and equipment | $ | $ | ||||||
| Digital Assets | ||||||||
| Canada | $ | $ | ||||||
| United States | ||||||||
| Total digital assets, non-current | $ | $ | ||||||
17. SUBSEQUENT EVENTS
From
April 1, 2026 to May 14, 2026, the Company repurchased an additional common shares in the open market for a total cost of $
As discussed in Note 1, “Nature of Operations, Business Overview, “ on April 6, 2026, the Company announced the execution of a Front End Engineering & Design (“FEED”) proposal for the development of a 10 megawatt (MW) artificial intelligence / high performance compute (“AI/HPC”) Micro-Grid Data Center at the 4-31 Battery site in Alberta, Canada. On April 20, 2026, the Company executed a letter of intent with BlueFlare Energy Solutions Inc. (“BlueFlare”), an Alberta-based infrastructure developer, for the development of powered land capable of supporting a 10 MW AI/HPC micro-grid data center in Alberta, Canada. The Company also engaged BlueFlare as the infrastructure development partner for the project, and on May 6, 2026, ASCENT Consulting Ltd. was selected to lead engineering and design services for the Alberta site.
As discussed in Note 1, “Nature of Operations, NASDAQ Compliance,” the Company presented its appeal to the Hearing Panel (the “Panel”), and the hearing was held on April 21, 2026. On May 8, 2026, the Company received from the Panel an exception to cure its listing deficiencies and provides for the continued listing on The Nasdaq Stock Market subject to certain conditions. The conditions include, among other things, that the Company must demonstrate compliance with the minimum bid price of $ per share for a minimum of 10 consecutive trading days on or before July 6, 2026. The Company plans to complete a reverse stock split (the “RSS”) to cure the deficiency and will seek approval for the RSS at the annual shareholder meeting on May 29, 2026.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our historical financial statements and the notes to those statements and other financial information included elsewhere in this Quarterly Report. Certain statements in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” You should review the “Risk Factors” section of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
BUSINESS OVERVIEW AND STRATEGIC EVOLUTION
In late 2024, the Company initiated its strategic transformation into a diversified technology and digital asset infrastructure company through the acquisition of its first Bitcoin mining site in Alberta, Canada. What began as an entry point into the cryptocurrency sector less than 18 months ago has evolved rapidly into a comprehensive institutional platform bridging traditional capital markets with the onchain financial economy.
A defining milestone in this evolution was the closing of the Company’s $219.1 million financing in November 2025. This capital infusion provided the financial foundation to meaningfully expand the Company’s participation in the Avalanche ecosystem. The integration of Avalanche includes the establishment of a strategic digital asset treasury, the generation of recurring revenue through AVAX staking, and active pursuit of mergers and acquisitions. These potential acquisitions are focused on identifying cashflow positive businesses that can be optimized through the speed, scalability, and low transaction costs of the Avalanche blockchain.
Complementing these digital asset initiatives, the Company has leveraged its longstanding operational relationships and deep industry knowledge in Alberta to advance its physical infrastructure footprint. The Company is currently developing a 10 MW Tier 3 microgrid-powered data center, which has been designed and is being constructed in record time at a highly competitive cost per MW. This facility is engineered to support both high-performance Bitcoin mining and artificial intelligence / high performance compute (“AI/HPC”) workloads, reflecting the Company’s forward looking approach to multi-use digital infrastructure.
Management believes this three-pronged strategy of Bitcoin mining operations, Avalanche ecosystem participation, and data center development creates a robust and differentiated business model. It enables the Company to capitalize on the specialized expertise of its leadership team in both cryptocurrency and energy infrastructure. The strategy is expected to deliver stable cash flows in the short to medium term through Bitcoin mining and AVAX staking, while positioning the Company for substantial long-term value creation through the expansion of its data center platform and broader ecosystem investments.
Differentiated Business Model and Market Context
From 2020 through 2025, more than 172 publicly traded companies incorporated cryptocurrency assets onto their balance sheets. A significant portion of these entities operated primarily as passive treasury vehicles, often lacking independent revenue streams, operational infrastructure, or sustainable cash flow generation capabilities.
AVAX One has deliberately pursued a structurally different approach. The Company’s strategy is anchored in the ownership and operation of critical physical infrastructure that powers blockchain networks. By investing directly in mining operations and data centers, the Company generates independent, recurring cash flows that provide financial resilience and reduce exposure to the volatility-driven forced-seller dynamics experienced by many digital asset treasuries.
Furthermore, these infrastructure investments are designed to drive tangible value back into the Avalanche ecosystem. By increasing onchain activity and network utilization, the Company contributes to higher transaction volumes, which in turn generate additional token burns. This mechanism permanently reduces AVAX token supply while simultaneously enhancing the network’s real-world utility and economic security, outcomes that benefit both the Company and the broader Avalanche community.
Recent Operational and Infrastructure Initiatives
In recent periods, the Company has accelerated its growth trajectory through two concurrent and complementary infrastructure initiatives. First, the Company signed a Front End Engineering and Design (FEED) agreement for the development of a 10 MW AI/HPC-capable microgrid data center in Alberta, Canada. This facility is being purpose-built to meet the highest industry standards for reliability, efficiency, and scalability. Second, the Company completed the acquisition of 220 additional Bitcoin mining machines. This equipment deployment is expected to increase the Company’s operational hash rate capacity in Alberta by approximately 33%, meaningfully expanding its Bitcoin mining output and associated revenue potential.
Taken together, these initiatives represent a deliberate and disciplined expansion of the Company’s core strategy: to build sustainable, long-term cash flow by investing in both the physical infrastructure (data centers and power solutions) and the digital infrastructure (blockchain participation and staking) that underpins the future of the onchain economy.
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Strategic Outlook and Value Creation Opportunities
AVAX One is not merely accumulating AVAX tokens as a passive treasury asset. The Company is actively constructing next-generation data center infrastructure capable of supporting both leading blockchain protocols and the rapidly growing demands of artificial intelligence and high-performance computing workloads.
As these cashflow generating operations scale, the Company anticipates increased financial flexibility to pursue several value-enhancing initiatives. These include further expansion of its digital asset treasury, opportunistic acquisitions within the Avalanche ecosystem, and strategic investments that contribute to the overall health, security, and adoption of the Avalanche network.
Management remains confident that this integrated model of combining revenue producing infrastructure assets with active ecosystem participation will differentiate AVAX One in the market and create enduring value for shareholders as the convergence of cryptocurrency, artificial intelligence, and digital infrastructure continues to accelerate.
RECENT DEVELOPMENTS
NASDAQ Compliance
On March 13, 2026, the Company received a letter from Nasdaq that it no longer complies with Rule 5550(a)(2) of Nasdaq’s Listing Rules which require listed securities to maintain a minimum bid price of $1 per share. Based upon the closing bid price for the last 30 consecutive business days (January 29, 2026 to March 12, 2026), the Company no longer met this requirement.
The Company presented its appeal to the Hearing Panel (the “Panel”), and the hearing was held on April 21, 2026. On May 8, 2026, the Company received from the Panel an exception to cure its listing deficiencies and provides for the continued listing on The Nasdaq Stock Market subject to certain conditions. The conditions include, among other things, that the Company must demonstrate compliance with the minimum bid price of $1 per share for a minimum of 10 consecutive trading days on or before July 6, 2026. The Company plans to complete a reverse stock split (the "RSS") to cure the deficiency and will seek approval for the RSS at the annual shareholder meeting on May 29, 2026. The Company is confident that the RSS will be approved since enough shareholder votes in favor of the RSS have been secured as of May 5, 2026.
Data Center and Digital Infrastructure
On April 20, 2026, the Company executed a letter of intent with BlueFlare Energy Solutions Inc. (“BlueFlare”), an Alberta-based infrastructure developer, for the development of powered land capable of supporting a 10 MW AI/HPC Edge Compute facility. This initiative represents the Company’s formal expansion into the data center and digital infrastructure vertical, positioning AVAX One to participate in the rapidly accelerating demand for AI and high-performance computing capacity.
The initiative addresses the power bottleneck which is a foundational constraint for AI/HPC Edge computing capacity by presenting a scalable and replicable micro grid model in 10 MW increments. This advantageous differentiator is a key element to enabling the Company to achieve recurring revenue at scale. This transformative event demonstrates a power synergy with the Company’s existing Avalanche treasury and on-chain strategy by positioning the Company at the intersection of on-chain finance and the physical compute structure that will power it. Furthermore, this creates a clear path to recurring high-margin revenue through long-term infrastructure agreements with end clients thus creating sustainable shareholder value opportunities.
The Alberta site remains on schedule for end-client deployment readiness in Q1 2027. The Company also engaged BlueFlare as the infrastructure development partner for the project, and on May 6, 2026, ASCENT Consulting Ltd. was selected to lead engineering and design services for the Alberta site. This is a critical milestone that advances the project from letter of intent stage into formal technical execution.
Share Repurchase Program
In November 2025, the Company’s board of directors authorized a share repurchase program (the “Repurchase Program”) under which the Company may repurchase up to $40.0 million of its outstanding common shares, for a period of 12 months, subject to contractual requirements. The board of directors will periodically review the Company’s Repurchase Program and may decide to extend its term or increase the authorized amount. As of March 31, 2026, the Company has repurchased 3,273,383 shares in the open market for a total cost of $3.1 million pursuant to the Repurchase Program. Subsequently, the Company repurchased an additional 182,620 shares in the open market for a total cost of $88.5 thousand.
STATUS AS AN EMERGING GROWTH COMPANY
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies.
We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions from, without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (a) the last day of our fiscal year following the 5th anniversary of the closing of our initial public offering, (b) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (c) the last day of our fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, or Exchange Act (which would occur if the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter), or (d) the date on which we have issued more than $1 billion in nonconvertible debt during the preceding three-year period.
TRENDS AND UNCERTAINTIES IMPACTING OUR BUSINESS AND INDUSTRY
Digital Assets
We generate revenue from blockchain-based operations, comprised of two primary sources: (i) staking rewards earned from delegating and validator node operations, through the Avalanche Protocol and (ii) the production of digital assets through mining activities, in Bitcoin (“Bitcoin Mining”). We commenced our digital asset strategy with regards to the Avalanche Protocol in the fourth quarter of 2025 with our transition to AVAX One and with regard to Bitcoin Mining in the fourth quarter of 2024 with the acquisition of our first Bitcoin Mining facility. We currently own and operate three Bitcoin Mining facilities.
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Our digital assets were comprised of the following as of March 31, 2026 and December 31, 2025, which value may be materially impacted as the market value of digital assets fluctuates.
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Quantity | Cost Basis | Fair Value | Quantity | Cost Basis | Fair Value | |||||||||||||||||||
| AVAX tokens | 12,011,270.866 | $ | 150,552 | $ | 107,021 | 12,409,212.272 | $ | 160,040 | $ | 152,509 | ||||||||||||||
| Bitcoin | 21.145 | 1,980 | 1,443 | 13.272 | 1,397 | 1,161 | ||||||||||||||||||
| Total digital assets | $ | 152,532 | $ | 108,464 | $ | 161,437 | $ | 153,670 | ||||||||||||||||
Management believes, given our recent investments, coupled with our relative position and liquidity, we are well-positioned to execute on our long-term growth strategy.
Energy Cost
Energy cost is one of the most significant cost drivers for Bitcoin Mining operations and these costs can be highly volatile and sensitive to geopolitical events and weather conditions, such as winter storms and earthquakes, which impact supply and demand for power regionally. We believe these costs are effectively managed through our power purchase agreement which allow us to obtain natural gas required to generate power at our mining facilities at favorable prices. Though energy prices are less predictable, our power purchase agreement gives us greater flexibility and ability to actively manage the energy we consume with the goal of increasing energy efficiency and profitability.
Concentrations and Current Vulnerability
Our principal activities consist primarily from investing, staking and evaluating digital tokens technologies that run on the Avalanche public blockchain network. Due to the current nature of our operations and the scale of business transacted on the Avalanche Network, a concentration could potentially result in a vulnerability. The concentration and potential associated vulnerabilities include, but are not limited to:
| ● | A decline in, or loss of, staking rewards earned from the staking of AVAX tokens delegated to one or more validator nodes on the network, | |
| ● | A decline in, or loss of, our AVAX holdings and its utility to the Avalanche Network and a source of liquidity for our business, and | |
| ● | Disruption to the nature and extent of the business plan should the Avalanche public blockchain network fail or become redundant due to technological obsolescence or regulatory action. |
The AVAX token performs various functions within the Avalanche ecosystem, including incentivizing network security and functionality and acting as the payment currency on the primary network. Therefore, this concentration may result in vulnerability to a near-term severe impact, and at least possible that there could be events outside of our control that may result in a severe impact in the near term.
As a result, of the foregoing, we believe a concentration exists as of the date of these financial statements, and a dissolution of the Avalanche Foundation or an inability of the Avalanche public blockchain network and/or AVAX tokens to function as expected, could result in near-term severe impacts to our business.
RESULTS OF OPERATIONS FOR THE three months ended March 31, 2026 and 2025
Revenues
Total revenue was comprised of the following during the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | Net Change | |||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||
| Avalanche Protocol | $ | 1,927 | $ | - | $ | 1,927 | 100 | % | ||||||||
| Bitcoin Mining | 584 | 273 | 311 | 114 | % | |||||||||||
| Total Revenue | $ | 2,511 | $ | 273 | $ | 2,238 | ||||||||||
We generate revenue from blockchain-based operations and comprises two primary sources: (i) staking rewards earned from delegating and validator node operations, primarily through our Avalanche Protocol and (ii) the production of digital assets through mining activities, primarily Bitcoin Mining.
Our Avalanche Protocol operations commenced in the fourth quarter of 2025 in connection with our transition to AVAX One and the implementation of our digital asset strategy. Our Avalanche Protocol revenues are generated through network-based smart contracts. We stake our crypto assets on our own validator nodes and nodes from third-party operators. Through these contracts, we provide crypto assets to stake to a node for the purpose of validating transactions and adding blocks to a respective blockchain network. We define the duration of our smart contracts, typically lasting from a few days to several weeks, and these contracts require that the crypto assets staked remain locked up for the duration.
Pursuant to our Bitcoin Mining, we earn revenue from the production of certain digital assets through mining activities. Our Bitcoin Mining operations commenced in December 2024 with the acquisition of first mining facility in Alberta, Canada (the “Redwater acquisition”) and then in January 2025 we added an additional mining facility with the Bald Eagle acquisition.
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Operating Expenses
Operating expenses were comprised of the following during the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | Net Change | |||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||
| Cost of revenue, excluding depreciation | $ | 1,198 | $ | 221 | $ | 977 | 442 | % | ||||||||
| Bitcoin operating costs | 42 | - | 42 | 100 | % | |||||||||||
| Selling, general and administrative | 2,266 | 1,345 | 921 | 68 | % | |||||||||||
| Repairs and maintenance | 80 | 86 | (6 | ) | -7 | % | ||||||||||
| Share-based compensation | 253 | 127 | 126 | 99 | % | |||||||||||
| Depreciation and amortization | 253 | 260 | (7 | ) | -3 | % | ||||||||||
| Loss on disposal of operating assets | 259 | - | 259 | 100 | % | |||||||||||
| Impairment of liquid staking tokens | 1,127 | - | 1,127 | 100 | % | |||||||||||
| Realized loss on digital asset transactions | 5,297 | - | 5,297 | 100 | % | |||||||||||
| Unrealized loss on market valuation of digital assets | 36,302 | 36 | 36,266 | 100739 | % | |||||||||||
| Total Operating Expenses | $ | 47,077 | $ | 2,075 | $ | 45,002 | 2169 | % | ||||||||
Total operating expenses increased primarily due to the following:
| ● | The increase in cost of revenue, excluding depreciation of $1.0 million is directly related to the increase in our Bitcoin Mining operations. | |
| ● | Selling, general and administrative expenses increased primarily due to investor relations ($0.6 million) related to additional campaigns to promote the Company, coupled with office expenses ($0.6 million) primarily due to insurance costs, partially offset by the decline in severance expense ($0.1 million), shareholder/regulatory ($61.0 thousand) related to exchange listing expenses and business consulting ($51.0 thousand). | |
| ● | The impairment of assets of $1.1 million is directly attributable to the liquid staking tokens (the tAVAX tokens) due to the decline in the market value of AVAX tokens and the realized loss on digital asset transactions of $5.3 million is a direct attributable to the deployment of AVAX tokens to tAVAX tokens, which resulted in a loss on the deployment date due to the decline in the market value of AVAX tokens. | |
| ● | The increase in unrealized loss of on market valuation of digital assets is primarily due to the decline in market value of our AVAX tokens. |
Other (Expenses) Income
Total other (expenses) income were comprised of the following during the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | Net Change | |||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||
| Accretion of interest on debentures | $ | (1,818 | ) | $ | (971 | ) | $ | (847 | ) | 87 | % | |||||
| Change in fair value of derivative liabilities | - | 2,977 | (2,977 | ) | -100 | % | ||||||||||
| Foreign exchange loss | - | (57 | ) | 57 | -100 | % | ||||||||||
| Gain on conversion of convertible debt | - | 87 | (87 | ) | -100 | % | ||||||||||
| Loss on debt extinguishment | - | (115 | ) | 115 | -100 | % | ||||||||||
| Other expense | (7 | ) | (7 | ) | - | 0 | % | |||||||||
| Total other (expenses) income, net | $ | (1,825 | ) | $ | 1,914 | $ | (3,739 | ) | ||||||||
Other expenses increased primarily due to the change in fair value of derivative liabilities and the increase in accretion of interest on debentures. The change in fair value of derivative liabilities is directly attributable to the reclass of derivatives to additional-paid-in capital during the second quarter of 2025 as a result of the conversion of our functional currency, from the Canadian dollar to the United States dollar, effective April 1, 2025. The increase in accretion of interest on debentures is primarily due to the issuance of additional debentures.
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Operating Segments
We have chosen to organize our operating segments based on products or services offered. Each operating segment is also a reportable segment (i.e., operating segments have not been aggregated). Our operating and reportable segments at March 31, 2026, include Avalanche Protocol and Bitcoin Mining. All other activities, including financing, are carried out through the corporate entity. We evaluate the performance of each of the segments using operating income (loss) to provide a consistent and comparable measure of our performance between periods. Our calculations of operating income (loss) herein may be different from the calculations used by other companies, therefore, comparability may be limited. The accounting policies for the operating segments are the same as those disclosed in the notes to the unaudited condensed consolidated financial statements in this Quarterly Report, specifically Part I, Item 1. Financial Statements, Note 2, “Summary of Significant Accounting Policies.”
The following table summarizes our total revenues, by segment, during the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | Net Change | |||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||
| Avalanche Protocol | $ | 1,927 | $ | - | $ | 1,927 | 100 | % | ||||||||
| Bitcoin Mining | 584 | 273 | 311 | 114 | % | |||||||||||
| Total Revenue | $ | 2,511 | $ | 273 | $ | 2,238 | ||||||||||
Total revenue increased during the three months ended March 31, 2026 primarily due to the Avalanche Protocol operations, which commenced operations in the fourth quarter of 2025 with the implementation of our digital asset strategy, coupled with the increase in our Bitcoin Mining operations primarily due to the increase in our Bitcoin Mining infrastructure.
The following table summarized our operating income (loss), by segment, during the three months ended March 31, 2026 and 2025 (in thousands):
| Three Months Ended March 31, | Net Change | |||||||||||||||
| 2026 | 2025 | $ | % | |||||||||||||
| Avalanche Protocol | $ | (41,158 | ) | $ | - | $ | (41,158 | ) | 100 | % | ||||||
| Bitcoin Mining | (927 | ) | (191 | ) | (736 | ) | 385 | % | ||||||||
| Corporate | (2,481 | ) | (1,611 | ) | (870 | ) | 54 | % | ||||||||
| Total Operating loss | $ | (44,566 | ) | $ | (1,802 | ) | $ | (42,764 | ) | |||||||
The total increase in operating loss during the three months ended March 31, 2026 is primarily attributable to the decline in market value of AVAX tokens, which resulted in an unrealized loss on market valuation of digital assets ($36.3 million), coupled with an impairment of assets related to the liquid staking tokens ($1.1 million) and the realized loss on digital asset transactions ($5.3 million) related to the deployment of AVAX tokens to the liquid staking tokens (tAVAX tokens), partially offset by the increase in revenue ($2.2 million). The operating loss was further impacted by the increase in cost of revenue, excluding depreciation ($1.0 million), which is directly related to the increase in our Bitcoin Mining operations and the increase in selling, general and administrative expenses ($0.9 million) primarily due to costs associated with promoting the Company and insurance.
LIQUIDITY AND CAPITAL RESOURCES
Management’s Assessment of Liquidity
Our primary need for liquidity is to fund working capital requirements, capital expenditures, and for general corporate purposes. Our ability to fund operations and make planned capital expenditures and debt service obligations depends on future operating performance and cash flows, which are subject to prevailing economic conditions, financial markets, business and other factors. The cash on hand is expected to be sufficient to fund our operating expenses and capital expenditure requirements for at least twelve months from the date these financial statements are issued.
Though we experienced a loss from operations of approximately $44.6 million during the three months ended March 31, 2026, this loss included $43.0 million of non-cash charges related to: 1) depreciation and amortization ($0.3 million); 2) impairment of assets ($1.1 million); and 3) realized and unrealized losses on digital asset transactions and market valuations ($5.3 million and $36.3 million, respectively). Adjusting for these non-cash charges, the adjusted operating loss would be $1.6 million.
Cash Flow Summary
The following information has been derived from the accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. The change in cash and cash equivalents during the three months ended March 31, 2026 and 2025 is as follows (presented in thousands):
| 2026 | 2025 | Net Change | ||||||||||
| Net loss | $ | (46,391 | ) | $ | (145 | ) | $ | (46,246 | ) | |||
| Non-cash items | 45,378 | (1,476 | ) | 46,854 | ||||||||
| Net change in operating assets and liabilities | (336 | ) | (552 | ) | 216 | |||||||
| Operating activities | (1,349 | ) | (2,173 | ) | 824 | |||||||
| Investing activities | (2,548 | ) | (4,765 | ) | 2,217 | |||||||
| Financing activities | 3,662 | 7,933 | (4,271 | ) | ||||||||
| Effect of exchange rate changes on cash | - | (133 | ) | 133 | ||||||||
| Change in cash | $ | (235 | ) | $ | 862 | $ | (1,097 | ) | ||||
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Operating Activities
Net cash used in operating activities was $1.4 million and $2.2 million during the three months ended March 31, 2026 and 2025, respectively, a decrease of $0.8 million, primarily due to the net change in operating assets and liabilities.
Non-cash items increased primarily due to the unrealized loss on digital assets of $36.3 million, asset impairments of $1.1 million, realized loss on digital asset transactions of $5.3 million and the change in amortization of debt issuance costs of $0.9 million, coupled with the change in fair value of derivative liabilities of $3.0 million. The net change in operating assets and liabilities is primarily due the net change in prepaid expenses and other current assets of $2.5 million, partially offset by the increase in revenue from digital asset production $2.2 million.
Investing Activities
Net cash used in investing activities during the three months ended March 31, 2026 was directly attributable to the purchase of equipment and digital assets. During the comparable prior year period, the Company paid $4.8 million for an acquisition within the Bitcoin Mining segment.
Financing Activities
Net cash provided by financing activities was $3.7 million during the three months ended March 31, 2026 as compared to the $7.9 million of net cash provided during the comparable prior year period. The net change is primarily due to decrease in proceeds from debentures of $1.5 million, coupled with the shares repurchased in the open market of $3.0 million.
Off Balance Sheet Arrangements
None.
Significant Accounting Policies
See the notes to our unaudited condensed consolidated financial statements for the three months ended March 31, 2026 and 2025, included within this Quarterly report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a registrant that qualifies as a smaller reporting company, the Company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation and supervision of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2026. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2026, our disclosure controls and procedures were, in design and operation, effective at a reasonable assurance level.
Changes in Internal Controls Over Financial Reporting
There were no changes to our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, in designing and evaluating the disclosure controls and procedures, management recognizes that any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute 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. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
For a description of material legal proceedings in which we are involved, see Note 15, “Commitments and Contingencies” of the Notes to our Unaudited Condensed Consolidated Financial Statements included under Part I, Item 1 of this Quarterly Report on Form 10-Q. which is incorporated herein by reference.
Item 1A. Risk Factors
There are no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K filed with the SEC on March 31, 2026, under the heading Part I, Item 1A., “Risk Factors,” except for the following -
Risks Related to AVAX Delegation, Staking, Liquid Staking and Lock-Up Periods
We engage in the delegation and staking of AVAX tokens, including through liquid staking arrangements. These activities expose us to significant risks that could result in partial or complete loss of staked tokens, reduced liquidity, price depreciation of our staked positions, and material adverse effects on our business, financial condition, results of operations, and prospects.
In particular, our liquid staking activities are conducted through Treehouse, where we hold tAVAX and sAVAX tokens. Both tAVAX and sAVAX are issued and supported by smart contracts deployed on the Avalanche C-Chain, including the BENQI Protocol, a decentralized liquid staking and validator infrastructure protocol that issues interest-bearing sAVAX. Although the BENQI Protocol has undergone third-party security audits, smart contracts are inherently vulnerable to undiscovered bugs, coding errors, or exploits. Any such vulnerability could be exploited, resulting in partial or total loss of the underlying staked AVAX tokens. Smart contract risk is inherent in all DeFi protocols and cannot be eliminated through audits or other risk mitigation measures.
The BENQI Protocol is managed by relatively small teams and governed by decentralized autonomous organizations (“DAOs”) controlled by holders of its governance tokens. We do not hold governance tokens and therefore have no ability to influence protocol governance decisions. Token holders could vote to implement changes that materially and adversely affect the terms of liquid staking, including modifications to fee structures, redemption processes, validator selection criteria, or other operational parameters. Such governance actions, or the failure of governance processes, could reduce the value or redeemability of our liquid staking tokens. In addition, the BENQI Protocol (or related protocols) could cease operations, experience a governance failure, or be subject to malicious attacks that compromise its functionality or security.
Liquid staking tokens such as tAVAX and sAVAX are less liquid than the underlying AVAX token. While holders may sell these tokens on decentralized exchanges, such sales may incur significant slippage and result in proceeds substantially below the theoretical exchange rate to AVAX, particularly during periods of market stress or low liquidity. Neither tAVAX nor sAVAX is widely listed on centralized exchanges, which concentrates trading activity in on-chain liquidity pools and may exacerbate price dislocations and volatility during periods of elevated selling pressure. The value of both tAVAX and sAVAX is directly correlated with the value of AVAX, which has historically experienced, and may continue to experience, significant price volatility. Although these liquid staking tokens are designed to maintain a predictable and increasing exchange rate relative to AVAX, they may trade at a discount to their theoretical value on secondary markets due to liquidity constraints, market sentiment, perceived protocol risks, or other factors.
There can be no assurance that we will be able to redeem or sell our liquid staking tokens at or near their theoretical exchange rate or in a timely manner. Any of the foregoing risks could result in material losses on our staked positions, impair our liquidity, and have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Demand for Data Center Space, Power and Connectivity
Our business depends upon the demand for data center space, power, and connectivity. We are expanding our business to own, acquire, develop, and operate data centers. A reduction in demand for data center space, power, or connectivity would materially and adversely affect our business, financial condition, results of operations, and cash flows.
Our substantial development pipeline and expansion activities make us particularly vulnerable to general economic slowdowns as well as adverse developments in the data center, Internet, data communications, and broader technology industries. Any such slowdown or adverse development could result in reduced corporate information technology (“IT”) spending or decreased demand for data center capacity. In addition, changes in industry practices, technological advancements, or the emergence of alternative technologies could reduce or render obsolete the demand for physical data center space that we provide.
Our customers may elect to develop new data centers for their own use, expand their existing data centers, or consolidate their operations into data centers owned or operated by third parties. Any of these actions could reduce demand for our data centers (particularly newly developed facilities), result in the loss of one or more key or potential customers, or place downward pressure on our pricing and occupancy rates. Furthermore, mergers, acquisitions, or consolidations among technology companies could further reduce the number of our existing and potential customers, increase our customer concentration, and make us more dependent on a smaller number of customers.
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If our customers are acquired by or merge with entities that are not our customers, the resulting company may discontinue or significantly reduce its use of our data centers. We cannot assure you that we will be able to retain our customers, attract new customers, or maintain or increase occupancy and pricing levels at our facilities.
Any of the foregoing factors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Risks Related to Competition in the Data Center Industry
We face significant competition in the data center market, which may adversely affect our ability to lease space, maintain occupancy rates, and achieve favorable rental rates at our facilities.
We compete with existing data center operators as well as new entrants into the market, including entrants who may acquire our current competitors. Many of our competitors and potential competitors have material competitive advantages over us, including greater name recognition, longer operating histories, established relationships with current or potential customers, significantly greater financial, marketing, and other resources, and more ready access to capital. These advantages may allow them to respond more quickly to new or emerging opportunities, develop or acquire additional data center capacity, and compete more effectively for customers.
If our competitors offer data center space that customers or potential customers perceive to be superior to ours (based on factors such as available power, security, location, connectivity, or other attributes), or if they offer rental rates at or below current market rates or the rates we are seeking, we may lose existing or potential customers, face pressure to reduce our rental rates, or incur significant costs to enhance or upgrade our facilities. In addition, many competitors are continuing to develop additional data center space. An increase in the overall supply of data center capacity, whether from our competitors or otherwise, could lead to lower rental rates, longer leasing periods, increased vacancy rates, or delays in leasing our properties, including newly developed space.
Furthermore, if customers or potential customers require services or capabilities that we do not currently offer, we may be unable to secure their business. We cannot assure you that we will be able to compete successfully against current or future competitors.
Any of the foregoing factors could have a material adverse effect on our occupancy rates, rental revenues, business, financial condition, results of operations, and cash flows.
Any failure of our physical or information technology or operational technology infrastructure or services could lead to significant costs and disruptions.
Our business depends on providing customers with highly reliable services, including with respect to power supply, physical security, cybersecurity, and maintenance of environmental conditions. We may fail to provide such services because our operations are vulnerable to, among other things, mechanical or telecommunications failure, power outage, human error, physical or electronic security breaches, cyberattacks, war, terrorism, fire, earthquake, pandemics, hurricane, flood and other natural disasters, sabotage and vandalism.
Substantially all of our customer agreements include terms requiring us to meet certain service level commitments. A failure to meet these or other commitments or equipment damage in our data centers could subject us to contractual liability, including service level credits against customer rent payments, legal liability and monetary damages, regulatory sanctions, or, in certain cases of repeated failures, the right by the customer to terminate the agreement. Service interruptions, equipment failures or security breaches could also materially impact our brand and reputation globally and lead to customer contract terminations or non-renewals and an inability to attract customers in the future.
We and our third-party providers are vulnerable to cyberattacks and security breaches that could materially disrupt or compromise our operations, data and results.
We face evolving risks that threaten the confidentiality, integrity, and availability of information systems and data, including from state-sponsored espionage actors, financially motivated hackers, hacktivists and insiders, as well as through diverse attack vectors, such as social engineering/phishing, malware (including ransomware), human or technological error, or due to “bugs,” misconfigurations and known and unknown vulnerabilities in hardware, software, systems and processes that support our business. Even if vulnerabilities are publicly known or identified through our security tools, we cannot guarantee that patches or mitigating measures will be implemented before a threat actor can exploit them.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 2, 2026 and as part of the Company’s 2025 convertible debt facility, institutional investors purchased an additional tranche of $7,000,000 in convertible debentures with a 10% original issue discount for gross proceeds of $6,300,000 and received 3,013,245 warrants due January 2, 2027. The warrants are exercisable at any time and from time to time and expire July 2, 2029. The convertible debentures and warrants were issued with an exercise price of $2.41 per share.
Item 703 Disclosure on Share Repurchases
The following table represents information with respect to AVAX One’s repurchase of common shares during the quarter ended March 31, 2026:
| Period | Total Number of Common Shares Purchased (1) | Average Price Paid Per Share (2) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | |||||||||
| January 1 - 31 | 640,500 | $ | 1.59 | 640,500 | ||||||||
| February 1 - 28 | 1,599,538 | $ | 0.72 | 1,599,538 | ||||||||
| March 1 - 31 | 850,000 | $ | 0.79 | 850,000 | ||||||||
| Total | 3,090,038 | 3,090,038 | ||||||||||
| (1) | In November 2025, the Company’s board of directors authorized a share repurchase program (the “Repurchase Program”) under which the Company may repurchase up to $40 million of its outstanding common shares, for a period of 12 months, subject to contractual requirements. Repurchases are being executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans. The Company is not obligated to repurchase any specific number of shares, and the program may be suspended or discontinued at any time. For additional information related to share repurchases, see Note 12 to the unaudited condensed consolidated financial statements included in Part I, Item. 1 Financial Statements of this Quarterly Report. | |
| (2) | Average price paid per share includes costs associated with the repurchases. |
From April 1, 2026 to May 14, 2026, the Company repurchased 182,620 common shares with an average price paid per share of $ 0.47, leaving approximately $36.8 million that may be repurchased under the Repurchase Program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
| 31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
| 31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
| 32.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| 32.2 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| 101.ins | Inline XBRL Instance Document |
| 101.sch | Inline XBRL Taxonomy Schema Document |
| 101.cal | Inline XBRL Taxonomy Calculation Document |
| 101.def | Inline XBRL Taxonomy Linkbase Document |
| 101.lab | Inline XBRL Taxonomy Label Linkbase Document |
| 101.pre | Inline XBRL Taxonomy Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed or furnished herewith |
The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act of the Exchange Act.
| 34 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AVAX ONE TECHNOLOGY LTD. | ||
| Date: May 15, 2026 | By: | /s/ Jolie Kahn |
| Jolie Kahn | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Date: May 15, 2026 | By: | /s/ Chris Polimeni |
| Chris Polimeni | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| 35 |