PowerCompute (PWCM) flags going concern risk as debt and Bitcoin losses mount
PowerCompute, Inc. reported continued losses from its Bitcoin mining and specialty finance operations for the quarter and six months ended June 30, 2026. Total assets were $37.1 million with stockholders’ equity of $15.5 million, down sharply from December 31, 2025 as Bitcoin prices and digital asset values declined.
For the six-month period, revenue was $4.2 million while the net loss attributable to the company widened to $14.7 million from $5.3 million a year earlier, driven largely by a $5.1 million loss on the fair value of Bitcoin, a $4.9 million loss on digital assets receivable, and higher mining-related costs. Operating cash outflow was $7.2 million.
The company had cash of $0.9 million and Bitcoin with fair value of $8.4 million on hand, much of it pledged as loan collateral, against total debt of about $19.6 million, including loans under the Galaxy Loan Facility and other lenders. Management concluded that these losses, negative working capital, and near-term debt maturities raise substantial doubt about the company’s ability to continue as a going concern. Subsequent actions included refinancing key loans, additional ATM equity sales, and the launch of an AI and high-performance computing infrastructure initiative leveraging 26 MW of power capacity.
Positive
- Refinancing and debt reduction post-quarter: After June 30, 2026 the company fully repaid the $7.0 million Liebel loan and reduced the Brown Family Trust loan by $250 thousand via refinancing and ATM proceeds, easing part of its near-term debt burden.
- Strategic expansion into AI/HPC infrastructure: In July 2026 the company initiated a new high-performance computing and artificial intelligence infrastructure business, acquiring its first GPU (about 101.7 teraflops) and beginning to sell capacity to Vast.AI, creating a potential new revenue stream beyond Bitcoin mining.
Negative
- Net loss nearly tripled year over year: For the six months ended June 30, 2026, net loss attributable to the company expanded to $14.7 million from $5.3 million in the prior-year period, reflecting significant fair value losses on Bitcoin and digital assets receivable plus higher mining costs.
- Severe deterioration in equity and assets: Total stockholders’ equity declined from $28.9 million to $15.5 million and total assets fell from $51.3 million to $37.1 million since December 31, 2025, largely due to losses tied to digital asset revaluations.
- Going concern uncertainty disclosed: Management reported substantial doubt about the company’s ability to continue as a going concern, citing cumulative losses of approximately $49.3 million since 2024, $7.2 million operating cash outflow in six months, negative working capital, and heavy short-term debt.
- High leverage and collateralized Bitcoin: As of June 30, 2026, debt totaled about $19.6 million, including $11.0 million Galaxy borrowings and loans from Liebel and Brown, backed by Bitcoin collateral; much of this was scheduled to mature within twelve months, increasing refinancing risk.
- Significant decline in Bitcoin holdings’ value: The fair value of Bitcoin holdings on the balance sheet dropped to about $8.4 million from $18.5 million at December 31, 2025, contributing to a $5.1 million loss on Bitcoin fair value and pressuring the company’s treasury and collateral base.
Filing Explained
The ATM issued new shares while debt moved into a 30-day Bitcoin-secured loan, changing both ownership and near-term financing mechanics.
This Form 10-Q is an unaudited quarterly report covering June 30, 2026, and it also reports subsequent financing activity through August 11. The company sold
The filing states that the ATM permits gradual sales of new shares, not a single completed sale. About
A one-for-twenty-five reverse split became effective on
The Arch loan automatically rolls for successive 30-day periods unless either party gives non-renewal notice, with its interest rate and Bitcoin price floor and ceiling reset at each rollover. The Brown loan's principal was reduced to
Key Figures
Key Terms
going concern financial
Digital assets receivable, net financial
Galaxy Loan Facility financial
at the market offering financial
hashrate technical
collar feature financial
Earnings Snapshot
FAQ
How did PowerCompute (PWCM) perform financially in the first half of 2026?
What going concern issues did PowerCompute (PWCM) disclose?
What is the status of PowerCompute’s (PWCM) Bitcoin holdings and related risks?
How leveraged is PowerCompute (PWCM) and who are its key lenders?
What AI and high-performance computing plans has PowerCompute (PWCM) announced?
How is PowerCompute (PWCM) raising capital to support operations and debt service?
AI-generated analysis. How Rhea-AI works. Not financial advice.
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)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. employer identification no.) |
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(Address of principal executive offices) |
(Zip code) |
Registrant’s telephone number, including area code:
(Former name)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |
Trading symbol |
Name of each exchange on which registered |
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The registrant had
POWERCOMPUTE, INC.
TABLE OF CONTENTS
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PART I. |
FINANCIAL INFORMATION |
3 |
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Item 1. |
Financial Statements |
4 |
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PowerCompute, Inc. and Subsidiaries Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025 |
4 |
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PowerCompute, Inc. and Subsidiaries Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025 (unaudited) |
5 |
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PowerCompute, Inc. and Subsidiaries Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 (unaudited) |
6 |
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PowerCompute, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2026 and 2025 (unaudited) |
7 |
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Notes to Unaudited Consolidated Financial Statements |
8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
33 |
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Item 4. |
Controls and Procedures |
34 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
35 |
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Item 1A. |
Risk Factors |
35 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
37 |
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Item 3. |
Defaults Upon Senior Securities |
37 |
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Item 4. |
Mine Safety Disclosures |
37 |
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Item 5. |
Other Information |
37 |
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Item 6. |
Exhibits |
38 |
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SIGNATURES |
39 |
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3
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
PowerCompute, Inc. and Subsidiaries Consolidated Balance Sheets
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June 30, |
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December 31, |
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2026 |
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2025 |
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Assets |
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Cash |
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$ |
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Marketable securities |
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Prepaid expenses and other assets |
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Finance receivables |
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Digital assets - current (Note 2) |
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Digital assets - collateral (Note 2) |
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Digital assets receivable, net (Note 2) |
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Galaxy loan derivative asset (Note 4) |
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Income tax receivable |
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Current assets |
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Fixed assets, net (Note 3) |
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Intangible assets, net (Note 3) |
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Deposits on mining equipment |
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Investment in Seastar Medical Holding Corporation |
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Digital assets - long-term (Note 2) |
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Digital assets - collateral (Note 2) |
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Right of use assets (Note 5) |
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Other assets |
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Long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Accounts payable and accrued expenses |
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Note payable - short-term (Note 4) |
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Master digital currency loan (Note 4) |
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Due to related parties (Note 7) |
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Current portion of lease liability (Note 5) |
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Total current liabilities |
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Note payable - long-term (Note 4) |
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Lease liability - net of current portion (Note 5) |
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Long-term liabilities |
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Total liabilities |
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Stockholders’ equity (Note 6) |
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Preferred stock, par value $ |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total PowerCompute stockholders’ equity |
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Non-controlling interest |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
PowerCompute, Inc. and Subsidiaries Consolidated Statements of Operations (unaudited)
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Three Months ended June 30, |
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Six Months ended June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenues: |
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Digital mining revenues |
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$ |
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$ |
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$ |
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$ |
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Specialty finance revenue |
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Rental revenue |
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Total revenues |
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Operating costs and expenses: |
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Digital mining cost of revenues (exclusive of depreciation and amortization shown below) |
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Curtailment and energy sales |
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( |
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( |
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( |
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( |
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Staff costs and payroll |
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Depreciation and amortization |
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Loss (gain) on fair value of Bitcoin, net |
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( |
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( |
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Professional fees |
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Selling, general and administrative |
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Real estate management and disposal |
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Collection costs |
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Settlement costs with associations |
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Loss (gain) on disposal of assets |
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( |
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( |
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Other operating costs |
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Total operating costs and expenses |
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Operating income (loss) |
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( |
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( |
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( |
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Unrealized gain (loss) on marketable securities |
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( |
) |
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( |
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Unrealized gain (loss) on investment and equity securities |
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( |
) |
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( |
) |
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( |
) |
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Impairment loss on prepaid mining machine deposit |
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( |
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( |
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- |
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Gain on Galaxy loan derivative |
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- |
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Loss on fair value of purchased Bitcoin, net |
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( |
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Loss on fair value of digital assets receivable |
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( |
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( |
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Change in credit loss reserve on digital assets receivable |
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Interest expense |
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( |
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( |
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( |
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Interest income |
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Income (loss) before income taxes |
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( |
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( |
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( |
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Income tax expense |
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Net income (loss) |
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$ |
( |
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$ |
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$ |
( |
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$ |
( |
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Less: loss (gain) attributable to non-controlling interest |
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( |
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Net income (loss) attributable to PowerCompute, Inc. |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Less: deemed dividends (Note 6) |
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( |
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( |
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Net income (loss) attributable to common shareholders |
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$ |
( |
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$ |
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$ |
( |
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$ |
( |
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Basic income (loss) per common share (Note 1) |
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$ |
( |
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$ |
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$ |
( |
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$ |
( |
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Diluted income (loss) per common share (Note 1) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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Weighted average number of common shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
PowerCompute, Inc. and Subsidiaries Consolidated Statements of Cash Flows
(unaudited)
|
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Six Months ended June 30, |
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|||||
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2026 |
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2025 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Depreciation and amortization |
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Noncash lease expense |
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Amortization of debt issue costs and debt discount |
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Stock option expense |
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Accrued interest expense on finance lease |
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Loss (gain) on fair value of Bitcoin, net |
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( |
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Loss on fair value of digital assets receivable |
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Impairment loss on mining machine deposit |
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Unrealized loss (gain) on marketable securities |
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( |
) |
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Gain on Galaxy loan derivative |
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( |
) |
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Change in credit loss reserve on digital assets receivable |
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( |
) |
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Unrealized loss (gain) on investment and equity securities |
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( |
) |
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Loss (gain) on disposal of fixed assets |
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( |
) |
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Write-off of income tax receivable |
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Change in operating assets and liabilities: |
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Prepaid expenses and other assets |
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Due to related party |
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Accounts payable and accrued expenses |
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( |
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Mining of digital assets |
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( |
) |
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( |
) |
Lease liability payments |
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( |
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( |
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Net cash used in operating activities |
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( |
) |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Net collections (investment) of finance receivables - original product |
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( |
) |
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Net collections (investment) in finance receivables - special product |
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( |
) |
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Capital expenditures |
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( |
) |
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( |
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Collection of note receivable |
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Proceeds from sale of fixed assets |
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Investment in digital assets - Tether |
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( |
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( |
) |
Proceeds from sale of Bitcoin |
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Proceeds from the sale of Tether |
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Change in deposits for mining equipment |
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( |
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Distribution to members |
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( |
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Net cash provided by investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Insurance financing repayments |
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( |
) |
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( |
) |
Proceeds from warrant exercise, net of issuance costs |
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Proceeds from the issuance of common stock, net of issuance costs |
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Issuance costs |
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( |
) |
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Net cash provided by (used in) financing activities |
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( |
) |
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NET DECREASE IN CASH |
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( |
) |
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( |
) |
CASH - BEGINNING OF PERIOD |
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CASH - END OF PERIOD |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES |
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Insurance financing |
|
$ |
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$ |
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||
Recognition of Galaxy loan derivative |
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$ |
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$ |
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||
Digital assets transferred to digital assets receivable, net |
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$ |
|
|
$ |
|
||
SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION |
|
|
|
|
|
|
||
Cash paid for taxes |
|
$ |
|
|
$ |
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
PowerCompute, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders’ Equity
For the Six Months Ended June 30, 2026 and 2025
(unaudited)
|
|
Common Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Additional paid-in capital |
|
|
Accumulated Deficit |
|
|
Non-Controlling Interest |
|
|
Total Equity |
|
||||||
Balance - December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Member distribution |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Issuance costs |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance - March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Net income (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
( |
) |
|
|
|
||
Balance - June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance - December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Warrant exercise |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Net income (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance - March 31, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock option expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Warrant exercise |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Common stock issued |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||||
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance - June 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
All share and per-share amounts have been adjusted retroactively to reflect a one-for-twenty-five (1:25) reverse stock split, including rounding of fractional shares.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
POWERCOMPUTE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and principles of consolidation
The accompanying unaudited consolidated financial statements include the accounts of PowerCompute, Inc., previously known as LM Funding America, Inc. (“we,” “our,” “PWCM,” or the “Company”), and its wholly-owned subsidiaries: US Digital Mining and Hosting Co., LLC (“US Digital”) (includes all
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in the annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The interim consolidated financial statements as of June 30, 2026 and for the three and six months ended June 30, 2026 and June 30, 2025, respectively, are unaudited. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of the results for the interim periods. The accompanying consolidated balance sheet as of December 31, 2025, is derived from the audited consolidated financial statements presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
There were no changes to the Company’s most significant estimates and assumptions, significant accounting policies, or recent accounting pronouncements that were disclosed in Note 2 - Summary of Significant Accounting Policies included in the Form 10-K other than as discussed below.
Reverse Stock Split
Corporate Name and Ticker Symbol Change
On July 20, 2026, the Company filed a Certificate of Amendment to its Certificate of Incorporation to change its corporate name from LM Funding America, Inc. to “PowerCompute, Inc.” The Name Change became effective at 12:01 a.m., Eastern Time, on July 22, 2026. In connection with the name change, the Company’s common stock began trading on the Nasdaq Capital Market under the new ticker symbol “PWCM” on July 22, 2026.
Going Concern
The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. On August 27, 2014, FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s ability to Continue as a Going Concern, which requires management to assess a company’s ability to continue as a going concern within one year from financial statement issuance and to provide related footnote disclosures in certain circumstances. The evaluation of going concern under the accounting guidance requires significant judgment which involves the Company to consider that it has historically incurred losses in recent years as it has prepared to grow its business through expansion and acquisition opportunities. The Company must also consider its current liquidity as well as future market and economic conditions that may be deemed outside the control of the Company as it relates to obtaining financing and generating future profits.
As of June 30, 2026, the Company had approximately $
8
Subsequent to June 30, 2026, and prior to the issuance of these financial statements, the Company was able to fully repay the $
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates include the evaluation of probable losses on balances due from third parties, the realization of deferred tax assets, the evaluation of contingent losses related to litigation and reserves on notes receivables, estimates of the recoverability and useful lives of long-lived assets and stock-based compensation. Our estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the consolidated financial statements.
Income Taxes
The Company’s calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in various taxing jurisdictions. The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate of whether it is more likely than not that additional taxes will be required. The Company had
Deferred income taxes are recognized in the consolidated financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from net operating losses, differences in depreciation methods of archived images, and property and equipment, stock-based and other compensation, and other accrued expenses. A valuation allowance is established when it is determined that it is more likely than not that some or all of the deferred tax assets will not be realized.
The application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from management's estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. Interest and penalties are included in tax expense.
Income tax expense/(benefit) from operations for the three and six months ended June 30, 2026 and 2025 was
9
Basic income (loss) per share is calculated as net income (loss) to common stockholders divided by the weighted average number of common shares outstanding during the period. The number of outstanding shares used for the EPS calculation includes outstanding penny warrants. Refer to Note 6 – Stockholder’s Equity.
Diluted income (loss) per share for the periods presented equals basic income (loss) per share as the effect of any stock-based compensation awards and warrant repricing would be anti-dilutive.
The anti-dilutive stock-based compensation awards consisted of:
|
|
|
|
|
|
|
||
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Stock Options |
|
|
|
|
|
|
||
Stock Warrants |
|
|
|
|
|
|
||
The following table illustrates the computation of basic and diluted EPS for the three and six months ended June 30, 2026 and 2025:
|
Three months ended June 30, 2026 |
|
|
Three months ended June 30, 2025 |
|
||||||||||||||||||
|
Income (loss) (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
|
Income (loss) (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
||||||
Net income (loss) attributable to PowerCompute, Inc. |
$ |
( |
) |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|||||
Less: deemed dividends |
|
( |
) |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||
Basic and diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income (loss) attributable to common shareholders |
|
( |
) |
|
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
$ |
|
||||
|
Six months ended June 30, 2026 |
|
|
Six months ended June 30, 2025 |
|
||||||||||||||||||
|
Loss (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
|
Loss (Numerator) |
|
|
Shares (Denominator) |
|
|
Per-Share Amount |
|
||||||
Net loss attributable to PowerCompute, Inc. |
$ |
( |
) |
|
|
|
|
|
|
|
$ |
( |
) |
|
|
|
|
|
|
||||
Less: deemed dividends |
$ |
( |
) |
|
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
||||
Basic and diluted EPS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net loss attributable to common shareholders |
$ |
( |
) |
|
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
$ |
( |
) |
||
10
Note 2. Digital Assets and Digital Assets Receivable, net
Digital assets consisted of the following:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Bitcoin |
|
$ |
|
|
$ |
|
||
Tether |
|
|
|
|
|
|
||
Digital assets - current |
|
|
|
|
|
|
||
Bitcoin - long-term |
|
|
|
|
|
|
||
Total digital assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Bitcoin |
|
|
|
|
|
|
||
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Number of Bitcoin held |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Carrying basis - per Bitcoin |
|
$ |
|
|
$ |
|
||
Fair value - per Bitcoin |
|
$ |
|
|
$ |
|
||
Carrying basis of Bitcoin |
|
$ |
|
|
$ |
|
||
Fair value of Bitcoin |
|
$ |
|
|
$ |
|
||
The carrying basis represents the valuation of Bitcoin at the time the Company earns the Bitcoin through mining activities or the cost paid for purchased Bitcoin. Fair value of Bitcoin was determined using Level 1 inputs. As of June 30, 2026 and December 31, 2025 approximately
The following table presents a roll-forward of Bitcoin for the six months ended June 30, 2026 and 2025:
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
Bitcoin beginning of period |
|
$ |
|
|
$ |
|
||
Addition of Bitcoin from mining activities |
|
|
|
|
|
|
||
Bitcoin transferred as collateral for Galaxy loan |
|
|
( |
) |
|
|
- |
|
Disposition of Bitcoin from sales |
|
|
( |
) |
|
|
( |
) |
Loss on fair value of purchased Bitcoin, net |
|
|
- |
|
|
|
( |
) |
Gain (loss) on fair value of Bitcoin, net |
|
|
( |
) |
|
|
|
|
End of period |
|
$ |
|
|
$ |
|
||
The Company recognized realized loss (gain) from dispositions of Bitcoin during the three and six months ended June 30, 2026 and 2025 of approximately ($
Digital Assets Receivable, net
As required under the Galaxy Loan Facility established in October 2025, the Company has pledged
The digital assets receivable is initially measured upon transfer at fair value and subsequently remeasured at fair value as of the balance sheet date. For the three and six months ended June 30, 2026 and 2025, the Company recognized a decrease in fair value of approximately $
The digital assets receivable balance was evaluated for possible credit losses, in accordance with ASC 326 - Financial Instruments - Credit Losses. An allowance for credit losses of
11
A summary of digital assets receivable, net is as follows:
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
|
|
|
|
|
||
Digital assets receivable, net |
$ |
|
|
$ |
|
||
Credit loss reserve on digital assets receivable |
|
|
|
|
( |
) |
|
End of period |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
|
June 30, 2026 |
|
|
|
|
||
|
|
|
|
|
|
||
Beginning of year |
$ |
|
|
|
|
||
Transfer of Bitcoin to digital assets receivable, net |
|
|
|
|
|
||
Change in credit loss reserve on digital assets receivable |
|
|
|
|
|
||
Loss on fair value of digital assets receivable |
|
( |
) |
|
|
|
|
End of period |
$ |
|
|
|
|
||
12
Note 3. Fixed Assets and Intangible Assets, net
The components of fixed assets as of June 30, 2026 and December 31, 2025 are as follows:
|
|
Useful Life |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||
Mining machines |
|
|
$ |
|
|
|
$ |
|
|
|||
Mining site equipment |
|
|
|
|
|
|
|
|
|
|||
Building |
|
|
|
|
|
|
|
|
|
|||
Real estate assets owned |
|
|
|
|
|
|
|
|
|
|||
Furniture, computer and office equipment |
|
|
|
|
|
|
|
|
|
|||
Land |
|
|
|
|
|
|
|
|
|
|
||
Gross fixed assets |
|
|
|
|
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
|
|
|
( |
) |
|
|
|
( |
) |
Fixed assets, net |
|
|
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
As of June 30, 2026 and December 31, 2025, there were approximately
The loss (gain) on disposal of fixed assets during the three and six months ended June 30, 2026 and 2025 was approximately ($
Intangible assets as of June 30, 2026 and December 31, 2025 consist of the following:
|
|
Useful Life (Years) |
June 30, 2026 |
|
|
December 31, 2025 |
|
||||
Power and interconnection rights |
|
$ |
|
|
|
$ |
|
|
|||
Gross intangible assets |
|
|
|
|
|
|
|
|
|
||
Less: accumulated amortization |
|
|
|
|
( |
) |
|
|
|
( |
) |
Total intangible assets, net |
|
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
||
During the three and six months ended June 30, 2026 and 2025 the Company recognized approximately $
Note 4. Debt and Other Financing Arrangements
Galaxy Loan Facility
On October 29, 2025, the Company entered into a Master Digital Currency Loan Agreement (the “Galaxy Loan Facility”) with Galaxy Digital LLC (“Galaxy”), which establishes the terms and conditions pursuant to which the Company may borrow U.S. Dollars and/or specified digital currencies under the Galaxy Loan Facility. On October 30, 2025, the Company made a draw under the Galaxy Loan Facility and borrowed a principal sum of $
The settlement amount of the loans borrowed under the Loan Agreement are adjusted based on the Bitcoin price relative to a contractual floor and ceiling market price of Bitcoin (“Collar Feature”), and is cash settled.
During the first half of 2026, the Company amended the Galaxy Loan Facility on January 28, February 27, and April 6 to extend the loan and modify the collar's pricing terms, resulting in realized derivative settlement losses of approximately $
The Collar Feature is an embedded derivative requiring bifurcation under ASC 815-15. The fair value of the Collar Feature is calculated using a Black-Scholes calculation using Level 3 inputs. Significant inputs for the fair value of the Collar Feature for the January, February and April modifications include the volatility of Bitcoin observed for a similar term as the remaining term of the loan of
13
The derivative asset of approximately $
Debt of the Company consisted of the following as of June 30, 2026 and December 31, 2025:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $ |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $ |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $ |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Secured loan with Brown Family Enterprises LLC. The note matures on |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Loan with SE & AJ Liebel Limited Partnership. $ |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Loan with SE & AJ Liebel Limited Partnership. $ |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Loan with Galaxy Digital LLC. Approximately $ |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Debt discount |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
Minimum required principal payments on the Company's debt as of June 30, 2026 are as follows:
Maturity |
|
Amount |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
The Company subsequently refinanced the Galaxy Loan Facility and the SE & AJ Liebel Limited Partnership loans. See Note 9. Subsequent Events.
14
Note 5. Commitments and Contingencies
Leases
Lease expense recognized for the three and six months ended June 30, 2026 and 2025 was approximately $
The following table presents supplemental balance sheet information related to leases as of June 30, 2026 and December 31, 2025:
|
|
Balance Sheet Line Item |
June 30, 2026 |
|
December 31, 2025 |
|
||
Assets |
|
|
|
|
|
|
||
ROU assets - operating lease |
|
Right of use asset, net |
$ |
|
$ |
|
||
ROU assets - finance lease |
|
Right of use asset, net |
|
|
|
|
||
Total lease assets |
|
|
$ |
|
$ |
|
||
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Current lease liabilities - operating lease |
|
Current portion of lease liability |
$ |
|
$ |
|
||
Current lease liabilities - finance lease |
|
Current portion of lease liability |
|
|
|
|
||
Long-term lease liabilities - operating lease |
|
Lease liability - net of current portion |
|
|
|
|
||
Long-term lease liabilities - finance lease |
|
Lease liability - net of current portion |
|
|
|
|
||
Total lease liabilities |
|
|
$ |
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted-average remaining lease term (in years) - operating lease |
|
|
|
|
|
|
||
Weighted-average discount rate - operating lease |
|
|
|
% |
|
% |
||
Weighted-average remaining lease term (in years) - finance lease |
|
|
|
|
|
|
||
The following table presents supplemental cash flow information and non-cash activity related to leases for the six months ended June 30, 2026 and 2025:
Lease Supplemental Cash Flow Table |
|
|
June 30, |
|
||||
|
|
|
2026 |
|
2025 |
|
||
Operating cash flow information |
|
|
|
|
|
|
||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
$ |
( |
) |
$ |
( |
) |
Non-cashflow information |
|
|
|
|
|
|
||
Accrued interest expense on finance lease |
|
|
$ |
|
$ |
|
||
The following table presents maturities of lease liabilities on an undiscounted basis as of June 30, 2026:
Lease Maturity Table |
|
|
|
|
|
|
|
|||
|
|
Operating Leases |
|
Finance Leases |
|
Total Leases |
|
|||
2026 |
|
|
|
|
|
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|
|||
2027 |
|
|
|
|
|
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|
|||
2028 |
|
|
|
|
|
|
|
|||
2029 |
|
|
- |
|
|
|
|
|
||
2030 and thereafter |
|
|
- |
|
|
- |
|
|
- |
|
(less: imputed interest) |
|
|
( |
) |
|
( |
) |
|
( |
) |
|
|
$ |
|
$ |
|
$ |
|
|||
Legal Proceedings
Except as described below, we are not currently a party to material pending or known threatened litigation proceedings. However, we frequently become party to litigation in the ordinary course of business, including either the prosecution or defense of claims arising from contracts by and between us and client Associations. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense, and settlement costs, diversion of management resources and other factors.
15
The Company accrues for contingent obligations, including estimated legal costs, when the obligation is probable and the amount is reasonably estimable. As facts concerning contingencies become known, the Company reassesses its position and makes appropriate.
Uptime Purchase Agreement Matter
In October 2021, we entered into a sale and purchase agreement (the “Uptime Purchase Agreement”) with Uptime Armory LLC (“Uptime”) to purchase
Uptime Hosting Agreement Matter
In October 2021, US Digital also entered into a hosting agreement with Uptime Hosting LLC (the “Hosting Agreement”) to host the Company’s
CFTC Enforcement Action
On September 30, 2024, the Commodity Futures Trading Commission (“CFTC”) filed an enforcement action in the U.S. District Court for the Southern District of Florida, styled Commodity Futures Trading Commission v. Traders Domain FX LTD d/b/a The Traders Domain, et al., Case No. 1:24-cv-23745-RKA (the “CFTC Action”). Among the named defendants were Algo Capital LLC (“Algo Capital”) and certain insiders and affiliates of Algo Capital previously involved in state court Assignment for the Benefit of Creditors (“ABC”) proceedings. The Company’s claims against Robert D Collazo, Uptime, Uptime Hosting LLC, Bit5ive, Block Consulting Services, LLC, 6301 Southwest Ranches LLC were under the jurisdiction of the ABC proceedings therefore such claims are now a part of the CFTC Action.
On October 3, 2024, the District Court entered an order granting the CFTC’s motion for the appointment of a receiver (the “Receivership Order”). All assets that are collected from the individuals and entities named in the CFTC action will be remitted to the Receiver for administration and potential distribution under the supervision of the federal court. The receiver is currently in the process of identifying and recovering assets. There has been no significant development in this case in 2026. The likelihood and amount of recovery of the Company's outstanding claims against Uptime, Uptime Hosting LLC and Bit5ive cannot be estimated at this time.
Note 6. Stockholders’ Equity
Reverse Stock Split
At the Market Program
On March 27, 2026, the Company entered into an at the market offering agreement (the “Sales Agreement”) with Maxim Group LLC (the “Agent”), pursuant to which the Company may, from time to time, at the Company’s discretion, offer and sell shares of the Company’s common stock, having an aggregate offering price of up to $
16
and was declared effective on November 21, 2024. A prospectus supplement related to the Company’s at the market offering (“ATM”) program with the Agent under the Sales Agreement was filed with the SEC on March 27, 2026. The ATM program will remain in effect until the Sales Agreement is terminated by either the Company or Agent, with the Company having the right to terminate the agreement at any time upon
The Company sold approximately
As of June 30, 2026, an aggregate gross sales limit of approximately $
Stock Options
The following is a summary of the stock option plan activity during the six months ended June 30, 2026 and 2025:
|
|
2026 |
|
|
2025 |
|
||||||||||
|
|
Number of |
|
|
Weighted Average |
|
|
Number of |
|
|
Weighted Average |
|
||||
|
|
Options |
|
|
Exercise Price |
|
|
Options |
|
|
Exercise Price |
|
||||
Options outstanding at beginning of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options outstanding at end of the period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Options exercisable at end of the period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Stock compensation expense recognized for the three and six months ended June 30, 2026 and 2025 related to stock options was approximately $
The aggregate intrinsic value of the outstanding common stock options as of June 30, 2026 and December 31, 2025 was
Warrants
The following is a summary of the warrant activity during the six months ended June 30, 2026 and 2025:
|
|
2026 |
|
|
2025 |
|
||||||||||
|
|
Number of Warrants |
|
|
Weighted Average Exercise Price |
|
|
Number of Warrants |
|
|
Weighted Average Exercise Price |
|
||||
Warrants outstanding at beginning of the year |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Issued |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants outstanding and exercisable at end of the period |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
During the three and six months ended June 30, 2026,
The outstanding 2021 public warrants to purchase an aggregate of
17
deemed dividend. Loss attributable to common shareholders was increased by the calculated value transferred to the holder of approximately $
The aggregate intrinsic value of the outstanding common stock warrants as of June 30, 2026 and December 31, 2025 was approximately $
As of June 30, 2026, there were
Note 7. Related Party Transactions
Legal services for the Company associated with the collection of delinquent assessments from property owners was performed by a law firm (“Business Law Group”, or “BLG”) which was owned solely by Bruce M. Rodgers, the chairman and CEO of the Company, until and through the date of its initial public offering in 2015. Following the initial public offering, Mr. Rodgers transferred his interest in BLG to other attorneys at the firm through a redemption of his interest in the firm. The law firm has historically performed collection work primarily on a deferred billing basis wherein the law firm receives payment for services rendered upon collection from the property owners or at amounts ultimately subject to negotiations with the Company.
On February 1, 2022, the Company consented to the assignment by BLG to the law firm BLG Association Law, PLLC (“BLGAL”) of the Services Agreement, dated April 15, 2015, previously entered into by the Company and BLG (the “Services Agreement”). The Services Agreement had set forth the terms under which BLG would act as the primary law firm used by the Company and its association clients for the servicing and collection of association accounts. Bruce M. Rodgers is a
Under the agreement, the Company paid BLG a fixed monthly fee of $
The Company had originally engaged BLG on behalf of many of its Association clients to service and collect the Accounts and to distribute the proceeds as required by Florida law and the provisions of the purchase agreements between the Company and the Associations. This engagement was subsequently assigned to BLGAL as described above. Ms. Gould, who is a Director of the Company, worked as the General Manager of BLG and works as the General Manager of BLGAL.
Amounts paid to BLGAL for the three and six months ended June 30, 2026 and 2025 were approximately $
Pursuant to the Services Agreement, as amended, in effect during the three and six months ended June 30, 2026 and 2025, the Company paid all costs (lien filing fees, process and serve costs) incurred in connection with the collection of amounts due from property owners. Any recovery of these collection costs is accounted for as a reduction in expense incurred. The Company incurred expenses related to collection costs for the three and six months ended June 30, 2026 and 2025 in the amounts of approximately $
The Company also shares office space, personnel and related common expenses with BLGAL. All shared expenses, including rent, are charged to BLGAL based on an estimate of actual usage. Any expenses of BLGAL paid by the Company that have not been reimbursed or settled against other amounts are included within due to related parties in the accompanying consolidated balance sheet. BLGAL was charged for office sub-lease for three and six months ended June 30, 2026 and 2025 for a total of approximately $
Amounts payable to BLGAL as of June 30, 2026 and December 31, 2025 were approximately $
Note 8. Segment Information
The Company applies ASC 280 Segment Reporting in determining its reportable segments. The Company has
No operating segments have been aggregated to form the reportable segments. The corporate oversight function, and other
18
components that may earn revenues that are only incidental to the activities of the Company are aggregated and included in the “All Other” category.
The Specialty Finance segment generates revenue from providing funding to nonprofit community associations. The Mining, HPC and Treasury Operations segment generates revenue from the Bitcoin the Company earns through its mining activities.
The following tables present revenue and segment income (loss) for the Company's reportable segments and reconciliations to consolidated amounts:
|
Three Months Ended June 30, 2026 |
|
||||||||||
|
Specialty Finance |
|
Mining, HPC and Treasury Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
$ |
|
$ |
- |
|
$ |
|
|||
Digital mining cost of revenue |
|
- |
|
|
|
|
- |
|
|
|
||
Curtailment and energy sales |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Staff costs and payroll |
|
|
|
|
|
|
|
|
||||
Loss on fair value of mined bitcoin, net |
|
- |
|
|
|
|
- |
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Gain on disposal of fixed assets |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Other segment expenses (1) |
|
|
|
|
|
|
|
|
||||
Operating loss |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Unrealized loss on investment and equity securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Unrealized gain on marketable securities |
|
- |
|
|
- |
|
|
|
|
|
||
Gain on Galaxy loan derivative |
|
- |
|
|
|
|
- |
|
|
|
||
Loss on fair value of digital assets receivable |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Impairment loss on prepaid mining machine deposits |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Change in credit loss reserve on digital assets receivable |
|
- |
|
|
|
|
- |
|
|
|
||
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Interest expense |
|
- |
|
|
( |
) |
|
( |
) |
|
( |
) |
Loss before income taxes |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fixed asset additions |
|
- |
|
|
|
|
- |
|
|
|
||
|
Six Months Ended June 30, 2026 |
|
||||||||||
|
Specialty Finance |
|
Mining, HPC and Treasury Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
$ |
|
$ |
- |
|
$ |
|
|||
Digital mining cost of revenue |
|
- |
|
|
|
|
- |
|
|
|
||
Curtailment and energy sales |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Staff costs and payroll |
|
|
|
|
|
|
|
|
||||
Loss on fair value of mined bitcoin, net |
|
- |
|
|
|
|
- |
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Gain on disposal of fixed assets |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Other segment expenses (1) |
|
|
|
|
|
|
|
|
||||
Operating loss |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Loss on fair value of digital assets receivable |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Change in credit loss reserve on digital assets receivable |
|
- |
|
|
|
|
- |
|
|
|
||
Unrealized gain on investment and equity securities |
|
- |
|
|
- |
|
|
|
|
|
||
Unrealized gain on marketable securities |
|
- |
|
|
- |
|
|
|
|
|
||
Unrealized gain on Galaxy loan derivative |
|
- |
|
|
|
|
- |
|
|
|
||
Impairment loss on prepaid mining machine deposits |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Interest expense |
|
- |
|
|
( |
) |
|
( |
) |
|
( |
) |
Loss before income taxes |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fixed asset additions |
|
- |
|
|
|
|
|
|
|
|||
19
|
Three Months Ended June 30, 2025 |
|
||||||||||
|
Specialty Finance |
|
Mining, HPC and Treasury Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
$ |
|
$ |
- |
|
$ |
|
|||
Digital mining cost of revenue |
|
- |
|
|
|
|
- |
|
|
|
||
Curtailment and energy sales |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Staff costs and payroll |
|
|
|
|
|
|
|
|
||||
Gain on fair value of Bitcoin, net |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Loss on disposal of fixed assets |
|
- |
|
|
|
|
- |
|
|
|
||
Other segment expenses (1) |
|
|
|
|
|
|
|
|
||||
Operating income (loss) |
|
( |
) |
|
|
|
( |
) |
|
|
||
Unrealized loss on investment and equity securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Unrealized loss on marketable securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Interest expense |
|
- |
|
|
( |
) |
|
( |
) |
|
( |
) |
Income (loss) before income taxes |
|
( |
) |
|
|
|
( |
) |
|
|
||
Fixed asset additions |
|
- |
|
|
|
|
|
|
|
|||
|
Six Months Ended June 30, 2025 |
|
||||||||||
|
Specialty Finance |
|
Mining, HPC and Treasury Operations |
|
All Other |
|
Total |
|
||||
Revenue, net |
$ |
|
$ |
|
$ |
|
$ |
|
||||
Digital mining cost of revenue |
|
- |
|
|
|
|
- |
|
|
|
||
Curtailment and energy sales |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Staff costs and payroll |
|
|
|
|
|
|
|
|
||||
Gain on fair value of Bitcoin, net |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Depreciation and amortization |
|
|
|
|
|
|
|
|
||||
Loss on disposal of fixed assets |
|
- |
|
|
|
|
- |
|
|
|
||
Other segment expenses (1) |
|
|
|
|
|
|
|
|
||||
Operating loss |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Loss on fair value of purchased Bitcoin, net |
|
- |
|
|
( |
) |
|
- |
|
|
( |
) |
Unrealized loss on investment and equity securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Unrealized loss on marketable securities |
|
- |
|
|
- |
|
|
( |
) |
|
( |
) |
Interest income |
|
- |
|
|
- |
|
|
|
|
|
||
Interest expense |
|
- |
|
|
( |
) |
|
( |
) |
|
( |
) |
Loss before income taxes |
|
( |
) |
|
( |
) |
|
( |
) |
|
( |
) |
Fixed asset additions |
|
|
|
|
|
|
|
|
||||
1)
Note 9. Subsequent Events
ATM Program
The Company sold approximately
20
December RDO Pre-funded Warrants
During July 2026, the remaining
Debt Refinancing
On July 27, 2026, the Company, through its wholly owned subsidiary US Digital, entered into a bridge loan transaction (the “Bridge Loan”) under which it borrowed an aggregate of approximately $
On August 3, 2026, the Company, through US Digital, entered into new loan facility (the “Loan Facility”) with Arch pursuant to which Arch made available to US Digital a non-recourse, collared, 30-day rolling loan secured by US Digital’s Bitcoin (a “Collar Loan”). On August 3, 2026, US Digital borrowed an aggregate of approximately $
Extension of Loan with Brown Family Enterprises
On July 27, 2026, the Company paid $
Artificial Intelligence Infrastructure Business
In July 2026, we announced the expansion of our business into high-performance computing (“HPC”) and artificial intelligence (“AI”) infrastructure to take advantage of the
In July 2026, we acquired
Bitcoin mining and Bitcoin treasury operations currently remain our primary business. Consistent with the approach taken by other Bitcoin mining companies that have begun to diversify into HPC and AI infrastructure, we intend to continue operating our Bitcoin mining business to generate cash flow and help fund our operations while we build out our new HPC and AI business line. Over time, we expect our capital allocation to increasingly reflect investment in additional GPUs, power capacity, and data center infrastructure necessary to support HPC and AI workloads, and we may pursue additional strategic arrangements, such as hosting agreements, leasing arrangements, or joint ventures, to accelerate this expansion.
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis should be read in conjunction with the Unaudited Consolidated Financial Statements and Notes for the three and six months ended June 30, 2026, and with the Annual Report on Form 10-K for the year ended December 31, 2025.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs, and plans and objectives of management for future operations, are forward-looking statements. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” “anticipate,” “project,” “predict,” “plan,” “intend,” or “estimate,” “guidance,” and other similar expressions, or the negative of these expressions. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking.
We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties, and assumptions about us that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Important factors which could materially affect our results and our future performance include, without limitation:
22
Overview
PowerCompute, Inc. (“we”, “our”, “PWCM”, or the “Company”) currently maintains three distinct business operations: our Bitcoin treasury operations, Bitcoin mining business, and our specialty finance business. In July 2026, we announced our business expansion into artificial intelligence (“AI”) infrastructure and high-performance computing (“HPC”).
Artificial Intelligence Infrastructure Business
In July 2026, we announced the expansion of our business into high-performance computing (“HPC”) and artificial intelligence (“AI”) infrastructure to take advantage of the 26 MW of power under our control. This expansion follows a broader industry trend in which other companies that, like us, have historically focused on Bitcoin mining have sought to redeploy their power and infrastructure assets to support AI and HPC workloads for hyperscalers and other AI and HPC customers.
In July 2026, we acquired one graphics processing unit (“GPU”) with approximately 101.7 teraflops of capacity, representing our initial investment in HPC-capable computing hardware. We began selling our computing capacity to Vast.AI in July 2026 under a demand pricing model, pursuant to which the pricing we receive for our computing capacity will vary based on prevailing market demand for such capacity.
Bitcoin mining and Bitcoin treasury operations currently remain our primary business. Consistent with the approach taken by other Bitcoin mining companies that have begun to diversify into HPC and AI infrastructure, we intend to continue operating our Bitcoin mining business to generate cash flow and help fund our operations while we build out our new HPC and AI business line. Over time, we expect our capital allocation to increasingly reflect investment in additional GPUs, power capacity, and data center infrastructure necessary to support HPC and AI workloads, and we may pursue additional strategic arrangements, such as hosting agreements, leasing arrangements, or joint ventures, to accelerate this expansion.
Bitcoin Treasury Operations and Strategy
In August 2025, we launched our Bitcoin treasury operations. During August 2025 we raised approximately $21.3 million in net proceeds from capital raises and we purchased approximately 164 Bitcoins in August 2025 with substantially all of the proceeds from such offering, with the remainder used for working capital purposes. During December 2025, we raised an additional approximately $5.9 million in net proceeds from capital raises and we purchased an additional 47 Bitcoins with substantially all of the proceeds from such offering.
Our Bitcoin treasury strategy for the next twelve months includes acquiring and holding Bitcoin using cash flows from operations that exceed working capital requirements, and from time to time, subject to market conditions, issuing equity or debt securities or engaging in other capital raising transactions with the objective of using the proceeds to purchase Bitcoin. We have not set any specific target for the amount of Bitcoin we seek to hold, and we will continue to monitor market conditions in determining whether to engage in additional Bitcoin purchases. This overall strategy also contemplates that we may periodically sell Bitcoin for general corporate purposes or in connection with strategies that generate tax benefits in accordance with applicable law, enter into additional capital raising transactions, including those that could be collateralized by our Bitcoin holdings, and consider pursuing strategies to create income streams or otherwise generate funds using our Bitcoin holdings.
We currently maintain a formal, documented strategy that governs circumstances under which we acquire or monetize our Bitcoin holdings. Decisions to purchase or sell Bitcoin are made on a case-by-case basis at management’s discretion, taking into account factors such as our liquidity, general market conditions, and anticipated cash requirements. As of June 30, 2026, Bitcoin represented 100% of our treasury holdings. We do have small holdings of Tether outside of our treasury holdings that value in the aggregate less than $10,000 and are used for purchases with merchants that accept such crypto assets as payment. We do not currently engage in hedging activities. We have not implemented derivative transactions, futures, options, swaps, or other financial instruments to reduce our exposure to Bitcoin price volatility. Any future hedging activity, if undertaken, would be determined by management on a discretionary basis.
Bitcoin Mining Business
Our Bitcoin mining business operation deploys our computing power to mine Bitcoin and validate transactions on the Bitcoin network. We believe that developments in Bitcoin mining have created an opportunity for us to deploy capital and conduct large-scale mining operations in the United States. We conduct this business through a wholly owned subsidiary, US Digital, which we formed in 2021 to develop and operate our Bitcoin mining business.
Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. In Bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the Bitcoin network. A company’s computing power measured in hashrate is generally considered to be one of the most important metrics for evaluating Bitcoin mining companies.
We obtain Bitcoin as a result of our mining operations, and we sell Bitcoin from time to time to support our operations and strategic growth. We do not currently plan to engage in regular trading of Bitcoin (other than as necessary to convert our Bitcoin into U.S.
23
dollars) or to engage in hedging activities related to our holding of Bitcoin; however, our decision to hold or sell Bitcoin at any given time may be impacted by the Bitcoin market, which has been historically characterized by significant volatility. Currently, we do not use a formula or specific methodology to determine whether or when we will sell Bitcoin that we hold, or the number of Bitcoins we will sell. Rather, decisions to hold or sell Bitcoins are currently determined by management by monitoring the market in real time.
The value of Bitcoin has historically been subject to wide swings. The carrying value of each Bitcoin we hold reflects the price of one Bitcoin quoted on the active exchange at the end of the reporting period. Therefore, negative swings in the market price of Bitcoin could have a material impact on our earnings and on the carrying value of our Bitcoin. The following table provides a range of intraday low and intraday high Bitcoin prices between December 31, 2022 through June 30, 2026.
Range of intraday Bitcoin prices |
|
|
|
|
|
||
Quarterly Reporting Periods Ended |
Minimum Price |
|
|
Maximum Price |
|
||
December 31, 2022 |
$ |
15,486 |
|
|
$ |
21,474 |
|
March 31, 2023 |
$ |
16,489 |
|
|
$ |
29,178 |
|
June 30, 2023 |
$ |
24,750 |
|
|
$ |
31,422 |
|
September 30, 2023 |
$ |
24,915 |
|
|
$ |
31,838 |
|
December 31, 2023 |
$ |
26,544 |
|
|
$ |
44,800 |
|
March 31, 2024 |
$ |
38,501 |
|
|
$ |
73,836 |
|
June 30, 2024 |
$ |
56,500 |
|
|
$ |
72,777 |
|
September 30, 2024 |
$ |
49,050 |
|
|
$ |
70,000 |
|
December 31, 2024 |
$ |
58,864 |
|
|
$ |
108,389 |
|
March 31, 2025 |
$ |
76,555 |
|
|
$ |
109,358 |
|
June 30, 2025 |
$ |
74,421 |
|
|
$ |
112,000 |
|
September 30, 2025 |
$ |
105,120 |
|
|
$ |
124,533 |
|
December 31, 2025 |
$ |
80,525 |
|
|
$ |
126,296 |
|
March 31, 2026 |
$ |
60,000 |
|
|
$ |
97,964 |
|
June 30, 2026 |
$ |
58,115 |
|
|
$ |
82,814 |
|
The following reflects the financial summary of our Bitcoin holdings:
Bitcoin |
|
|
|
|
|
|
|
||
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
||
Number of Bitcoin held |
|
|
144.6 |
|
|
|
211.4 |
|
|
|
|
|
|
|
|
|
|
||
Carrying basis - per Bitcoin |
|
$ |
69,005 |
|
|
$ |
100,863 |
|
|
Fair value - per Bitcoin |
|
$ |
58,417 |
|
|
$ |
87,505 |
|
|
Carrying basis of Bitcoin |
|
$ |
9,978,073 |
|
|
$ |
21,322,419 |
|
|
Fair value of Bitcoin |
|
$ |
8,447,252 |
|
|
$ |
18,494,338 |
|
|
As of June 30, 2026 and December 31, 2025, we held approximately 145 and 211 Bitcoin, respectively. The fair value of our Bitcoin as of June 30, 2026 and December 31, 2025 was approximately $8.5 million and $18.5 million, respectively, on our consolidated balance sheet. This does not include 174 Bitcoins valued at approximately $10.2 million as of June 30, 2026 and 145 Bitcoin valued at approximately $12.7 million as of December 31, 2025 classified as Digital assets receivable, net. As of June 30, 2026 and December 31, 2025 approximately 131.8 Bitcoin and 88 Bitcoin, respectively (with an approximate fair value of $7.7 million) were held in a custody account as collateral for the Company’s $7.0 million loans with SE & AJ Liebel Limited Partnership and were classified within “Digital assets - collateral” on the consolidated balance sheets.
The following is a summary of the average cost of revenues for mining each Bitcoin during the three and six months ended June 30, 2026 and 2025:
24
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Cost of Revenues - Analysis of costs to mine one Bitcoin (per Bitcoin amounts are actual) |
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bitcoin Mined |
|
27.9 |
|
|
|
18.4 |
|
|
|
54.2 |
|
|
|
42.7 |
|
Digital mining revenues |
$ |
2,008,220 |
|
|
$ |
1,806,364 |
|
|
$ |
3,986,400 |
|
|
$ |
4,080,304 |
|
Average revenue of each Bitcoin mined (1) |
$ |
71,979 |
|
|
$ |
98,172 |
|
|
$ |
73,550 |
|
|
$ |
95,557 |
|
Digital mining cost of revenues and curtailment and energy sales |
$ |
1,426,202 |
|
|
$ |
1,065,130 |
|
|
$ |
2,926,951 |
|
|
$ |
2,463,739 |
|
Miner related depreciation (2) |
$ |
662,766 |
|
|
$ |
1,981,510 |
|
|
$ |
1,303,102 |
|
|
$ |
3,961,602 |
|
Direct costs to mine including non-cash depreciation |
$ |
2,088,968 |
|
|
$ |
3,046,640 |
|
|
$ |
4,230,053 |
|
|
$ |
6,425,341 |
|
Direct costs to mine one Bitcoin - Energy/hosting fees only (3) |
$ |
51,118 |
|
|
$ |
57,888 |
|
|
$ |
54,003 |
|
|
$ |
57,699 |
|
Direct costs to mine one Bitcoin - including miner related depreciation expense |
$ |
74,873 |
|
|
$ |
165,578 |
|
|
$ |
78,045 |
|
|
$ |
150,476 |
|
Cost of mining one Bitcoin as % of average Bitcoin mining revenue - energy/hosting fees only |
|
71 |
% |
|
|
59 |
% |
|
|
74 |
% |
|
|
60 |
% |
Cost of mining one Bitcoin as % of average Bitcoin mining revenue - including miner related depreciation expense |
|
104 |
% |
|
|
169 |
% |
|
|
106 |
% |
|
|
157 |
% |
(1) Average revenue of each Bitcoin mined is calculated by dividing the sum of Bitcoin mining revenue by the total number of Bitcoin mined during the respective periods. See the table "Range of intraday Bitcoin prices" for information on the range of intraday Bitcoin prices for quarterly periods.
(2) Miner-related depreciation includes depreciation and amortization related to intangible assets, buildings, equipment and mining machines used in the mining process.
(3) Weighted average cost of mining one Bitcoin is calculated by dividing the sum of total hosting fee expense by the total Bitcoin mined during the respective periods.
The Company’s Bitcoin unit activity during the six months ended June 30, 2026 and 2025 was as follows:
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
Beginning of Year |
|
211.4 |
|
|
|
150.2 |
|
Production of Bitcoin |
|
54.2 |
|
|
|
42.7 |
|
Sale of Bitcoin |
|
(91.8 |
) |
|
|
(37.1 |
) |
Bitcoin transferred for loan collateral |
|
(29.0 |
) |
|
|
- |
|
Fees |
|
(0.2 |
) |
|
|
(0.3 |
) |
End of Period |
|
144.6 |
|
|
|
155.5 |
|
Power prices are the most significant cost driver for our wholly owned locations. Energy prices can be highly volatile and global events (including the war in Ukraine and the resulting natural gas shortage) can cause power prices to increase. Our wholly owned and operated sites in Oklahoma and Mississippi are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs. Such prices are governed by power purchase agreements and said prices can change hour to hour. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms, polar vortices and hurricanes, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates.
Our management team makes real-time determinations on the need and timing during which we should curtail our operations. We curtail when power prices exceed the value we would receive for the corresponding fixed Bitcoin reward. This means if Bitcoin’s value decreases or energy prices increase, our curtailment will increase; likewise, when Bitcoin’s value increases and energy prices decrease, our curtailment will decrease. Our management team manages this decision on an hour-by-hour basis for our owned site.
The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners' expected useful life. Such non-cash depreciation amounts are recorded within the consolidated statements of operations and comprehensive loss as “Depreciation and Amortization”. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a “per Bitcoin” basis, calculated by dividing miner depreciation expense in our hosted facilities by the number of Bitcoin mined in the hosted facilities. On a “per Bitcoin” ratio, direct costs to mine including miner depreciation expense was approximately $75 thousand and $78 thousand for the three and six months ended June 30, 2026, respectively, and approximately $166 thousand and $150 thousand for the three and six months ended June 30, 2025, respectively.
The Company utilizes a third-party broker to facilitate our participation in demand response programs at our Oklahoma site. The sale of power under these programs was approximately $0.1 million and $0.5 million for the three and six months ended June 30, 2026, respectively and approximately $0.2 million and $0.4 million for the three and six months ended June 30, 2025, respectively.
25
Mining Sites
As of June 30, 2026, we own approximately 7,500 machines with total hashing capacity of approximately 0.85 EH/s as compared to approximately 7,200 machines as of December 31, 2025 with total hashing capacity of approximately 0.75 EH/s.
The mining machines are installed at the following locations:
• 15 MW hosting site located in Calumet, Oklahoma (the “Oklahoma site”) with approximately 4,528 installed Antminer machines which have a total projected hashrate of 538 PH.
• 11 MW hosting site located in Columbus, Mississippi (the “Columbus site”) with approximately 2,350 installed Antminer machines which have a total projected hashrate of 233 PH.
Reverse Stock Split
On June 24, 2026, the Board approved a one-for-twenty-five (1:25) reverse split of the Company’s issued and outstanding common stock, par value $0.001 per share, pursuant to which every twenty-five outstanding shares of common stock was converted into one share of common stock (the “Reverse Stock Split”). The Reverse Stock Split was effected by the filing of an amendment to our Certificate of Incorporation on July 9, 2026 which provided that the Reverse Stock Split became effective at 12:01 a.m. Eastern Time on July 13, 2026. No fractional shares shall be issued in the Reverse Stock Split and, in lieu thereof, any person who would otherwise be entitled to a fractional share of common stock as a result of the Reverse Stock Split received one share of common stock. The Company’s common stock began trading on The Nasdaq Capital Market on a split-adjusted basis on July 13, 2026. The Company has retroactively adjusted all share amounts and per share data herein to give effect to the Reverse Stock Split.
Corporate Name and Ticker Symbol Change
On July 20, 2026, the Company filed a Certificate of Amendment to its Certificate of Incorporation to change its corporate name from LM Funding America, Inc. to “PowerCompute, Inc.” The Name Change became effective at 12:01 a.m., Eastern Time, on July 22, 2026. In connection with the name change, the Company’s common stock began trading on the Nasdaq Capital Market under the new ticker symbol “PWCM” on July 22, 2026.
Results of Operations
Summarized Consolidated Statements of Operations |
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|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months ended June 30, |
|
|
Six Months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenue |
|
$ |
2,116,584 |
|
|
$ |
1,928,324 |
|
|
$ |
4,225,551 |
|
|
$ |
4,299,661 |
|
Operating costs and expenses |
|
|
5,971,677 |
|
|
|
1,504,809 |
|
|
|
14,512,919 |
|
|
|
8,975,986 |
|
Operating income (loss) |
|
|
(3,855,093 |
) |
|
|
423,515 |
|
|
|
(10,287,368 |
) |
|
|
(4,676,325 |
) |
Other loss |
|
|
(710,470 |
) |
|
|
(363,015 |
) |
|
|
(4,393,737 |
) |
|
|
(670,174 |
) |
Income (loss) before income taxes |
|
|
(4,565,563 |
) |
|
|
60,500 |
|
|
|
(14,681,105 |
) |
|
|
(5,346,499 |
) |
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net income (loss) |
|
|
(4,565,563 |
) |
|
|
60,500 |
|
|
|
(14,681,105 |
) |
|
|
(5,346,499 |
) |
Less: loss (gain) attributable to non-controlling interest |
|
|
1,253 |
|
|
|
40,054 |
|
|
|
(2,419 |
) |
|
|
48,379 |
|
Net loss attributable to PowerCompute, Inc. |
|
$ |
(4,564,310 |
) |
|
$ |
100,554 |
|
|
$ |
(14,683,524 |
) |
|
$ |
(5,298,120 |
) |
The Three Months Ended June 30, 2026 compared with the Three Months Ended June 30, 2025
Revenues
During the three months ended June 30, 2026, total revenues increased by approximately $0.2 million, to approximately $2.1 million from approximately $1.9 million for the three months ended June 30, 2025.
Digital mining revenue increased in the three months ended June 30, 2026 by approximately $0.2 million to approximately $2.0 million from approximately $1.8 million for the three months ended June 30, 2025.
Bitcoin mining revenues are determined by two main drivers: quantity of Bitcoin mined and the price of Bitcoin on the date the Bitcoin is mined. During the three months ended June 30, 2026, we mined 27.9 Bitcoins with an average Bitcoin price of approximately $72 thousand as compared to 18.4 Bitcoins with an average Bitcoin price of approximately $98 thousand during the three months ended June 30, 2025. The increase in Bitcoin mining revenue for the three months ended June 30, 2026 was attributable
26
to an increase in the number of miners actively mining offset in part by a decrease in Bitcoin price and decreased difficulty rate, which increased our share of the global hashrate.
Operating Expenses
During the three months ended June 30, 2026, operating expenses increased by approximately $4.5 million to approximately $6.0 million from approximately $1.5 million for the three months ended June 30, 2025. The increase in operating expenses is primarily due to the following factors:
Fair Market Adjustment on mined digital assets
The fair market adjustment on mined digital assets resulted in a loss of approximately $1.3 million for the three months ended June 30, 2026 compared to a gain of $3.8 million for the three months ended June 30, 2025.
Digital mining cost of revenues
Bitcoin mining costs increased by approximately $0.3 million to approximately $1.6 million for the three months ended June 30, 2026 from approximately $1.3 million for the three months ended June 30, 2025 primarily due to an increase in the number of miners active at the Oklahoma and Mississippi sites, and the idling of some mining machines during the prior year quarter. Mining costs as a percentage of digital mining revenue increased to approximately 78.2% from approximately 71.3% due to the lower Bitcoin price.
Curtailment and energy sales
Compensation from curtailment and energy sales was approximately $0.1 million for the three months ended June 30, 2026 compared to approximately $0.2 million for the three months ended June 30, 2025.
Staff costs and payroll
Compensation costs for three months ended June 30, 2026 was relatively flat at approximately $1.1 million from approximately $1.1 million for the three months ended June 30, 2025 primarily due to decrease in incentive compensation offset by increased staff costs associated with the Oklahoma and Mississippi sites.
Depreciation and amortization
Depreciation and amortization for three months ended June 30, 2026 decreased to approximately $0.8 million compared to approximately $2.0 million for the three months ended June 30, 2025 primarily due to the impairment of mining machines in the fourth quarter of 2025.
Other Income (Expense)
Loss on fair value of digital assets receivable
The Company incurred an approximately $1.7 million and nil loss on the fair value of the digital assets receivable Bitcoin assets in custody for the Company’s loan facility with Galaxy Digital LLC for the three months ended June 30, 2026 and 2025, respectively.
Gain on Galaxy loan derivative
The Company recognized a $1.7 million gain and nil gain on the fair value of the derivative instrument attached to the Galaxy loan for the three months ended June 30, 2026 and 2025, respectively.
Interest expense
The Company recognized approximately $0.7 million of interest expense for the three months ended June 30, 2026 as compared to approximately $0.2 million for the three months ended June 30, 2025 due to an increase in secured borrowings and interest resulting from the Galaxy loan derivative instrument.
Income Tax Expense
During the three months ended June 30, 2026, the Company generated an approximately $4.6 million net loss before income taxes and the Company increased its income tax valuation allowance by approximately $1.1 million, which offset the Company’s incurred net income tax benefit of approximately $1.1 million which resulted in no income tax expense being recognized for the three months ended June 30, 2026. During the three months ended June 30, 2025, the Company generated an approximately $0.1 million net income before income taxes and the Company increased its income tax valuation allowance by approximately $0.1 million, which offset the Company’s incurred net income tax benefit of approximately $0.1 million which resulted in no income tax expense being recognized for the three months ended June 30, 2025.
Net Income (Loss)
During the three months ended June 30, 2026, net loss was approximately ($4.6) million as compared to net income of approximately $0.1 million for the three months ended June 30, 2025.
27
Net Loss Attributable to Non-Controlling Interest
The Company owns 69.5% of the equity interests of LMFAO Sponsor LLC. As such, there was an approximately $1 thousand net loss for the three months ended June 30, 2026 attributable to the Non-Controlling Interest as compared to an approximately $40 thousand net loss for the three months ended June 30, 2025.
Net Income (Loss) Attributable to PowerCompute, Inc.
During the three months ended June 30, 2026, net loss attributable to PowerCompute, Inc. was approximately ($4.6) million as compared to net income of approximately $0.1 million for the three months ended June 30, 2025.
Net Income (Loss) Attributable to Common Shareholders
During the three months ended June 30, 2026 and 2025, net income (loss) attributable to common shareholders was approximately $40 thousand and nil higher, respectively, than net income (loss) attributable to PowerCompute, Inc. due to deemed dividends related to warrant repricing. During the three months ended June 30, 2026, net loss attributable to common shareholders was approximately ($4.6) million as compared with net income of approximately $0.1 million for the three months ended June 30, 2025.
The Six Months Ended June 30, 2026 compared with the Six Months Ended June 30, 2025
Revenues
During the six months ended June 30, 2026, total revenues decreased by approximately $0.1 million, to approximately $4.2 million from approximately $4.3 million for the six months ended June 30, 2025.
Digital mining revenue decreased in the six months ended June 30, 2026 by approximately $0.1 million to approximately $4.0 million from approximately $4.1 million for the six months ended June 30, 2025.
Bitcoin mining revenues are determined by two main drivers: quantity of Bitcoin mined and the price of Bitcoin on the date the Bitcoin is mined. During the six months ended June 30, 2026, we mined approximately 54.2 Bitcoin with an average Bitcoin price of approximately $74 thousand as compared to approximately 42.7 Bitcoins with an average Bitcoin price of approximately $96 thousand during the six months ended June 30, 2025. The decrease in Bitcoin mining revenue for the six months ended June 30, 2026 was attributable to a decrease in Bitcoin price, offset in part by the decreased difficulty rate, which increased our share of the global hashrate and an increase in the number of miners actively mining.
Operating Expenses
During the six months ended June 30, 2026, operating expenses increased by approximately $5.5 million to approximately $14.5 million from approximately $9.0 million for the six months ended June 30, 2025. The increase in operating expenses is primarily due to the following factors:
Fair Market Adjustment on mined digital assets
The fair market adjustment on mined digital assets resulted in a loss of approximately $5.1 million for the six months ended June 30, 2026 compared to a gain of approximately $2.0 million for the six months ended June 30, 2025.
Digital mining cost of revenues
Bitcoin mining costs increased by approximately $0.6 million to approximately $3.4 million for the six months ended June 30, 2026 from approximately $2.8 million for the six months ended June 30, 2025 primarily due to an increase in the number of miners active at the Oklahoma and Mississippi sites as compared to third party hosting sites, and the idling of some mining machines during the prior year quarter. Mining costs as a percentage of digital mining revenue increased to approximately 86% from approximately 70% due to the overall lower average Bitcoin price.
Curtailment and energy sales
Compensation from curtailment and energy sales was approximately $0.5 million for the six months ended June 30, 2026 compared to approximately $0.4 million for the six months ended June 30, 2025.
Staff costs and payroll
Compensation costs for six months ended June 30, 2026 increased by approximately $0.3 million to approximately $2.4 million from approximately $2.1 million for the six months ended June 30, 2025 primarily due to increased staff costs associated with the Oklahoma and Mississippi sites.
28
Depreciation and amortization
Depreciation and amortization for six months ended June 30, 2026 decreased to approximately $1.7 million compared to approximately $4.1 million for the six months ended June 30, 2025 primarily due to the impairment of mining machines in the fourth quarter of 2025.
Loss (gain) on disposal of mining equipment
Loss (gain) on disposal of mining equipment was approximately ($3) thousand and approximately $0.3 million for the six months ended June 30, 2026 and 2025, respectively.
Other Income (Expense)
Loss on fair value of digital assets receivable
The Company incurred an approximately $4.9 million and nil loss on the fair value of the digital assets receivable Bitcoin assets in custody for the Company’s loan facility with Galaxy Digital LLC for the six months ended June 30, 2026 and 2025, respectively.
Gain on Galaxy loan derivative
The Company recognized an approximately $1.7 million gain and nil gain on the fair value of the derivative instrument attached to the Galaxy loan for the six months ended June 30, 2026 and 2025, respectively.
Interest expense
The Company recognized approximately $1.2 million of interest expense for the six months ended June 30, 2026 as compared to approximately $0.4 million for the six months ended June 30, 2025 due to an increase in secured borrowings and interest resulting from the Galaxy loan derivative.
Income Tax Expense
During the six months ended June 30, 2026, the Company generated an approximately $14.7 million net loss before income taxes and the Company increased its income tax valuation allowance by approximately $3.6 million, which offset the Company’s incurred net income tax benefit of approximately $3.6 million which resulted in no income tax expense being recognized for the six months ended June 30, 2026. During the six months ended June 30, 2025, the Company generated an approximately $5.3 million net loss before income taxes and the Company increased its income tax valuation allowance by approximately $1.5 million, which offset the Company’s incurred net income tax benefit of approximately $1.5 million, resulting in no income tax expense being recognized during the period.
Net Loss
During the six months ended June 30, 2026, net loss was approximately $14.7 million as compared to net loss of approximately $5.3 million for the six months ended June 30, 2025.
Net Loss (Income) Attributable to Non-Controlling Interest
The Company owns 69.5% of the equity interests of LMFAO Sponsor LLC. As such, there is an approximately ($2) thousand net income for the six months ended June 30, 2026 attributable to the Non-Controlling Interest as compared to an approximately $48 thousand net loss for the six months ended June 30, 2025.
Net Loss Attributable to PowerCompute, Inc.
During the six months ended June 30, 2026, net loss attributable to PowerCompute, Inc. was approximately $14.7 million as compared to net loss of approximately $5.3 million for the six months ended June 30, 2025.
Net Loss Attributable to Common Shareholders
During the six months ended June 30, 2026 and 2025, net loss attributable to common shareholders was approximately $40 thousand and nil higher, respectively, than net loss attributable to PowerCompute, Inc. due to deemed dividends related to warrant repricing. During the six months ended June 30, 2026, net loss attributable to common shareholders was approximately $14.7 million as compared with approximately $5.3 million for the six months ended June 30, 2025.
29
Liquidity and Capital Resources
General
Our primary sources of liquidity are our cash and cash equivalents, Bitcoin generated from our digital mining operations and proceeds from borrowings. As of June 30, 2026, we had approximately $0.9 million of cash and cash equivalents and approximately $8.5 million of digital assets (approximately 144.6 Bitcoins with average fair value of approximately $58 thousand), of which $7.7 million is pledged as collateral against outstanding borrowings, compared with approximately $1.4 million of cash and cash equivalents and approximately $18.5 million of digital assets (approximately 211.4 Bitcoin with average fair value of approximately $88 thousand), of which $7.7 million is pledged as collateral against outstanding borrowings, at December 31, 2025.
This does not include 174 Bitcoins and 145 Bitcoins valued at approximately $10.2 million and $12.7 million, as of June 30, 2026 and December 31, 2025, respectively, classified as Digital assets receivable, net. We currently have access to equity financing through equity and debt financing. Cash management continues to be a top priority. We expect to incur negative operating cash flows as we work to increase our digital mining revenue and maintain operational efficiencies.
Our working capital needs may increase in the future as we continue to expand and enhance our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our then current business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control.
No assurance can be given that we will be successful in raising the required capital at a reasonable cost and at the required times, or at all. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital, we may not be able to continue our business operations in the Bitcoin mining industry which could adversely impact our business, financial condition and results of operations.
Equity Financing Transactions
At the Market Program
On March 27, 2026, the Company entered into an at the market offering agreement (the “Sales Agreement”) with Maxim Group LLC (the “Agent”), pursuant to which the Company may, from time to time, at the Company's discretion, offer and sell shares of the Company’s common stock, having an aggregate offering price of up to $75,000,000 (the “Shares”), through the Agent, acting as sales agent. The ATM program will remain in effect until the Sales Agreement is terminated by either the Company or Agent, with the Company having the right to terminate the agreement at any time upon 10 days’ notice and the Agent having the right to terminate at any time. The Company sold approximately 179,000 shares and generated approximately $795,000 in net proceeds for the three and six months ended June 30, 2026.
As of June 30, 2026, an aggregate gross sales limit of approximately $74.2 million remains available for issuance under the ATM program.
As of June 30, 2026 and December 31, 2025, our liquidity was comprised of:
|
|
June 30, 2026 |
|
|
|
December 31, 2025 |
|
||
Cash and cash equivalents |
$ |
|
853,788 |
|
|
$ |
|
1,424,426 |
|
Bitcoin - current portion |
|
|
751,547 |
|
|
|
|
2,563,474 |
|
Bitcoin collateral - current portion |
|
|
5,500,000 |
|
|
|
|
5,500,000 |
|
Bitcoin - long-term |
|
|
- |
|
|
|
|
8,233,035 |
|
Bitcoin collateral - long-term |
|
|
2,200,000 |
|
|
|
|
2,200,000 |
|
Bitcoin receivable |
|
|
10,183,164 |
|
|
|
|
12,678,014 |
|
Marketable securities |
|
|
43,110 |
|
|
|
|
37,380 |
|
End of Period |
$ |
|
19,531,609 |
|
|
$ |
|
32,636,329 |
|
|
|
|
|
|
|
|
|
||
The Company's cash flow summary for the six months ended June 30, 2026 and 2025 are as follows:
|
|
Six Months ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Cash flows used in operating activities |
|
$ |
(7,222,882 |
) |
|
$ |
(5,713,495 |
) |
Cash flows provided by investing activities |
|
|
6,315,278 |
|
|
|
3,106,085 |
|
Cash flows provided by (used in) financing activities |
|
|
336,966 |
|
|
|
(417,162 |
) |
Net decrease in cash |
|
|
(570,638 |
) |
|
|
(3,024,572 |
) |
Cash - beginning of year |
|
|
1,424,426 |
|
|
|
3,378,152 |
|
Cash - end of period |
|
$ |
853,788 |
|
|
$ |
353,580 |
|
30
Cash from Operations
Net cash used in operations was approximately $7.2 million during the six months ended June 30, 2026 compared with net cash used in operations of approximately $5.7 million during the six months ended June 30, 2025. The mining of Bitcoin is considered a noncash item for operating purposes which totaled approximately $4.0 million and $4.1 million for the six months ended June 30, 2026 and 2025, respectively.
Cash from Investing Activities
For the six months ended June 30, 2026 net cash provided by investing activities was approximately $6.3 million as compared to net cash provided by investing activities of approximately $3.1 million for the six months ended June 30, 2025. The proceeds from the sale of Bitcoin is considered an investing activity which totaled approximately $6.6 million and $3.3 million for the six months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2025, the Company received net payments of approximately $0.2 million from the collection of Symbiont sale receivable while investing approximately $1.0 million on deposits for Bitcoin mining equipment.
Cash from Financing Activities
Net cash provided by financing activities was approximately $0.3 million compared to net cash used in financing activities of approximately $0.4 million for the six months ended June 30, 2026 and 2025, respectively.
Debt
Galaxy Loan Facility
On October 29, 2025, the Company entered into a Master Digital Currency Loan Agreement (the “Galaxy Loan Facility”) with Galaxy Digital LLC (“Galaxy”). On October 30, 2025, the Company made a draw under the Galaxy Loan Facility and borrowed a principal sum of $11 million (the “October 2025 Loan”). In connection with the October 2025 Loan, the Company granted to Galaxy a security interest in 145 Bitcoin owned by the Company as collateral. This security interest was subsequently increased to 174 Bitcoin in the six months ended June 30, 2026.
The settlement amount of the loans borrowed under the Loan Agreement are adjusted based on the Bitcoin price relative to a contractual floor and ceiling market price of Bitcoin (“Collar Feature”), and is cash settled.
During the first half of 2026, the Company amended the Galaxy Loan Facility on January 28, February 27, and April 6 to extend the loan and modify the collar's pricing terms, resulting in realized derivative settlement losses of approximately $48 thousand and gains of $67 thousand and $214 thousand, respectively. On May 26, 2026, the Company extended the Galaxy Loan Facility from June 26, 2026 through August 28, 2026 with no other terms modified.
The Collar Feature is an embedded derivative requiring bifurcation under ASC 815-15. The fair value of the Collar Feature is calculated using a Black-Scholes calculation using Level 3 inputs. Significant inputs for the fair value of the Collar Feature for the January, February and April modifications include the volatility of Bitcoin observed for a similar term as the remaining term of the loan of 32.4%-59.25% and short-term treasury interest rates of 3.5%. The derivatives are classified as a debt discount and amortized over the life of the contract.
The derivative asset of approximately $980 thousand and $48 thousand was classified as “Galaxy loan derivative asset” on the consolidated balance sheets as of June 30, 2026 and December 31, 2025, respectively.
Debt Refinancing
On July 27, 2026, the Company, through its wholly owned subsidiary US Digital, entered into a bridge loan transaction (the “Bridge Loan”) under which it borrowed an aggregate of $18.1 million from ChainFi Inc. d/b/a Arch Lending (“Arch”) under two separate Promissory Notes (the “Bridge Notes”). The purpose of the Bridge Loan was to fund the repayment in its entirety of the Company’s $18 million in aggregate indebtedness to Galaxy Digital LLC and SE & AJ Liebel Limited Partnership in advance of the completion of a secured term loan facility with Arch to be secured by the Bitcoin in the Company’s treasury. The Bridge Notes were paid off in full in connection with the Company’s loan facility with Arch.
On August 3, 2026, the Company, through US Digital, entered into new loan facility (the “Loan Facility”) with Arch pursuant to which Arch made available to US Digital a non-recourse, collared, 30-day rolling loan secured by US Digital’s Bitcoin (a “Collar Loan”). On August 3, 2026, US Digital borrowed an aggregate of $18.1 million in an initial 30-day Collar Loan under the Loan Facility secured by 307 Bitcoin (with mutually agreed upon floor and ceiling prices) and bearing interest at 2.0% per annum, which loan was used to pay off the Bridge Notes. Under the Loan Facility, the Collar Loan automatically rolls over for successive 30-day periods unless either party provides notice of non-renewal, and at each rollover date, the interest rate, floor price, and ceiling price are re-set based on then-prevailing market conditions. At each maturity, if the Bitcoin reference price is below the agreed-upon floor price, the Borrower may elect to walk away, repay the loan and recover the collateral, or it may roll the loan by curing the shortfall. The terms and conditions of the Loan Facility are set forth in a Loan and Security Agreement that was entered into by US Digital and Arch on August 3, 2026.
31
Extension of Loan with Brown Family Enterprises
On July 28, 2026, we entered into a Third Amendment to Secured Promissory Note with Brown Family Enterprises, LLC under which the Company and Brown Family Enterprises agreed to extend the maturity date of the $1.5 million loan from Brown Family Enterprises to December 31, 2026.
Debt of the Company consisted of the following as of June 30, 2026 and December 31, 2025:
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $9,218 was required upfront. Eleven installment payments of $16,743 are to be made over the loan term. The note matured on June 1, 2026. Annualized interest was 9.45%. |
|
|
- |
|
|
|
100,461 |
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $6,900 was required upfront. Six installment payments of $12,604 are to be made over the loan term. The note matured on June 1, 2026. Annualized interest was 9.45%. |
|
|
- |
|
|
|
75,627 |
|
|
|
|
|
|
|
|
||
Financing agreement with Imperial PFS that is unsecured. Down payment of $50,635 was required upfront. Ten installment payments of $47,553 are to be made over the loan term. The note matured on August 1, 2026 and was repaid in full. Annualized interest is 8.6%. |
|
|
95,106 |
|
|
|
380,423 |
|
|
|
|
|
|
|
|
||
Secured loan with Brown Family Enterprises LLC. The note matures on December 31, 2026. Interest was 11% per annum. |
|
|
1,500,000 |
|
|
|
1,500,000 |
|
|
|
|
|
|
|
|
||
Loan with SE & AJ Liebel Limited Partnership. $2.2 million of Bitcoin has been pledged as collateral. The note had a maturity date of September 15, 2027. The note was repaid in full on July 27, 2026. Interest was 12% per annum. |
|
|
2,000,000 |
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
||
Loan with SE & AJ Liebel Limited Partnership. $5.5 million of Bitcoin has been pledged as collateral. The note had a maturity date of August 6, 2026. The note was repaid in full on July 27, 2026. Interest was 12% per annum. |
|
|
5,000,000 |
|
|
|
5,000,000 |
|
|
|
|
|
|
|
|
||
Loan with Galaxy Digital LLC. Approximately $10.2 million and $12.7 million worth of Bitcoin have been pledged as collateral as of June 30, 2026 and December 31, 2025, respectively. The note was repaid in full on July 27, 2026. Interest was 0% per annum. |
|
|
11,000,000 |
|
|
|
11,000,000 |
|
|
|
|
|
|
|
|
||
Debt discount |
|
|
(244,825 |
) |
|
|
(196,259 |
) |
|
|
$ |
19,350,281 |
|
|
$ |
19,860,252 |
|
The following table presents maturities of debt on an undiscounted basis as of June 30, 2026:
Maturity |
|
Amount |
|
|
2026 |
|
|
17,595,106 |
|
2027 |
|
|
2,000,000 |
|
|
|
$ |
19,595,106 |
|
|
|
|
|
|
Non-GAAP Financial Measures
Our reported results are presented in accordance with U.S. generally accepted accounting principles (“GAAP”). We also disclose Earnings before Interest, Tax, Depreciation and Amortization (“EBITDA”) and Core Earnings before Interest, Tax, Depreciation and Amortization (“Core EBITDA”) which adjusts for unrealized loss (gain) on investment and equity securities, loss (gain) on disposal of mining equipment, loss on impairment of prepaid mining machine deposits, and stock compensation expense and option expense, all
32
of which are non-GAAP financial measures. We believe these non-GAAP financial measures are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of Bitcoin miners.
The following tables reconcile net loss, which we believe is the most comparable GAAP measure, to EBITDA and Core EBITDA:
|
|
Three Months ended June 30, |
|
|
|
Six Months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
|
2026 |
|
|
2025 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
(4,565,563 |
) |
|
$ |
60,500 |
|
|
|
$ |
(14,681,105 |
) |
|
$ |
(5,346,499 |
) |
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
Interest expense |
|
|
687,087 |
|
|
|
227,546 |
|
|
|
|
1,232,258 |
|
|
|
448,452 |
|
Depreciation and amortization |
|
|
840,142 |
|
|
|
2,039,343 |
|
|
|
|
1,669,970 |
|
|
|
4,076,921 |
|
Income (loss) before interest, taxes & depreciation |
|
$ |
(3,038,334 |
) |
|
$ |
2,327,389 |
|
|
|
$ |
(11,778,877 |
) |
|
$ |
(821,126 |
) |
Unrealized loss (gain) on investment and equity securities |
|
|
1,111 |
|
|
|
130,890 |
|
|
|
|
(12,913 |
) |
|
|
156,874 |
|
Impairment loss on prepaid mining machine deposits |
|
|
17,193 |
|
|
|
- |
|
|
|
|
17,193 |
|
|
|
- |
|
Loss (gain) on disposal of mining equipment |
|
|
(2,739 |
) |
|
|
99,578 |
|
|
|
|
(2,739 |
) |
|
|
286,359 |
|
Stock compensation and option expense |
|
|
199,299 |
|
|
|
24,621 |
|
|
|
|
530,448 |
|
|
|
135,426 |
|
Core income (loss) before interest, taxes & depreciation |
|
$ |
(2,823,470 |
) |
|
$ |
2,582,478 |
|
|
|
$ |
(11,246,888 |
) |
|
$ |
(242,467 |
) |
Critical Accounting Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of the consolidated financial statements in conformity with GAAP requires our management to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure or inclusion of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period. There are no critical accounting estimates for the six months ended June 30, 2026.
There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in our Annual Report on Form 10-K. For a description of our critical accounting policies and estimates, see Part I, Item 1, Note 1, “Summary of Significant Accounting Policies” in our notes to the unaudited consolidated financial statements in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
Please refer to Note 1 in our unaudited consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of June 30, 2026.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to make disclosures under this item.
33
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2026.
(b) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
34
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently a party to material litigation proceedings, and we are not subject to any known material threatened legal proceedings other than described under Note 5 of our Consolidated Financial Statements included herein under the caption “Legal Proceedings.” In addition to the foregoing, we periodically become a party to litigation in the ordinary course of business, including either the prosecution or defense of claims arising from contracts by and between us and client Associations. Regardless of the outcome, litigation can have an adverse impact on us because of prosecution, defense, and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
Other than the updated risk factors set forth below, there have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
Risks Related to our High-Performance Computing and Artificial Intelligence Services Business
Our transition to HPC and AI infrastructure services may not be successful and involves significant execution risk.
Our strategy to expand into HPC and AI infrastructure services is subject to significant execution risk. The successful conversion of our existing mining infrastructure to HPC and AI applications requires substantial capital investment, technical expertise in data center design and operations for GPU-intensive workloads, and the ability to attract and retain qualified engineering and sales personnel. There can be no assurance that we will be able to successfully convert our existing facilities, that converted facilities will meet the technical requirements of potential customers, or that the economic returns from HPC and AI operations will exceed those available from our existing Bitcoin mining operations. The transition may require the displacement of Bitcoin mining hardware and significant retrofit or replacement of data center infrastructure, which could result in impairment expenses, accelerated depreciation, and additional capital expenditures during the transition period.
We have limited operating history in HPC and AI infrastructure services.
We have a limited operating history providing GPU-as-a-service to customers for HPC and AI applications. Our limited experience in this market, including with respect to sales, marketing, customer onboarding, service level management, and infrastructure optimization for GPU-intensive workloads, may limit our ability to compete effectively against established data center operators and cloud service providers with significantly greater experience, resources, and customer relationships. Our limited track record may also make it difficult to attract new customers or negotiate favorable contract terms.
Tariffs and trade restrictions may increase our equipment costs and delay deployment timelines.
Our HPC/AI infrastructure operations require specialized hardware, including GPU servers, networking equipment, cooling systems, and power distribution components, a significant portion of which is manufactured outside the United States. Tariffs, trade restrictions, or export controls could materially increase our capital expenditure requirements, delay equipment procurement timelines, reduce the economic viability of planned conversions, or limit our ability to procure next-generation hardware. There can be no assurance that we will be able to pass increased costs on to customers or that alternative domestic supply sources will be available at competitive prices.
Our diversification into HPC and AI services may divert management attention and resources from our existing operations.
Our efforts to diversify revenue streams through HPC and AI infrastructure services require significant management time and attention, including with respect to customer negotiations, facility design and construction oversight, personnel recruitment, technology evaluation, and strategic planning. These activities may divert management focus from optimizing our existing bitcoin mining operations, potentially resulting in decreased mining efficiency, missed opportunities in digital asset markets, or failure to adequately manage operational risks in our core business. The allocation of capital to HPC and AI development may also reduce resources available for Bitcoin mining fleet upgrades or capacity expansion, which could affect our competitive position in digital asset mining.
The demand for HPC and AI infrastructure services is uncertain and depends on factors outside our control.
Our increased focus on high-density data center infrastructure for AI and HPC applications may not be successful and depend on the continuing development of, and demand for, large-scale computing infrastructure for AI model training, inference, and related applications. Demand for our services could be adversely affected by a slowdown in AI investment by enterprise customers, consolidation among hyperscale cloud providers, technological advances that reduce computing requirements for AI workloads, regulatory restrictions on AI development or deployment, economic recession, or other factors outside our control. There can be no assurance that the current growth in demand for AI computing infrastructure will continue at historical rates or at all.
35
Risks Related to our Securities
If we are unable to continue to comply with the continued listing requirements of the The Nasdaq Capital Market, including the proposed rule that would require a $5 million Market Value of Listed Securities, we could be delisted from Nasdaq, which would seriously harm the liquidity of our stock and our ability to raise capital.
Our common stock is currently listed on The Nasdaq Capital Market. In order to maintain that listing, we must maintain compliance with the continued listing requirements and standards of The Nasdaq Capital Market. There can be no assurances that we will be able to comply with the applicable listing requirements and standards of The Nasdaq Capital Market.
On January 13, 2026, Nasdaq filed a proposed rule change with the Securities and Exchange Commission, or SEC, to adopt a new continued listing requirement requiring the maintenance of a minimum Market Value of Listed Securities, or MVLS, of at least $5 million. Under the proposal, a company that fails to maintain an MVLS of at least $5 million for 30 consecutive business days would be subject to suspension and delisting proceedings with no cure right and limited appeal rights. The rule change applies to companies listed on the Nasdaq Capital Market, including the Company. The proposed rule was approved by the SEC on July 22, 2026, and was subsequently stayed on July 29, 2026, pending review by the SEC. It’s not certain whether or when the MVLS rule will retake effect. As we do not currently maintain a MVLS of at least $5.0 million and, to the extent our MVLS does not exceed $5.0 million within 30 consecutive business days of the MVLS rule retaking effect, we expect to be in violation of the new rule, which could trigger an immediate suspension and delisting from Nasdaq. We can provide no assurance that we will be able to regain compliance with this new MVLS requirement if and when it retakes effect.
There is no guarantee that we will be able to remain in compliance with Nasdaq’s listing requirements in the future. Any failure to maintain compliance with continued listing requirements of the Nasdaq Capital Market could result in delisting of our common stock from the Nasdaq Capital Market and negatively impact our company and holders of our common stock, including by reducing the willingness of investors to hold our common stock because of the resulting decreased price, liquidity and trading of our common stock, limited availability of price quotations and reduced news and analyst coverage. Delisting may adversely impact the perception of our financial condition, cause reputational harm with investors, our employees and parties conducting business with us and limit our access to debt and equity financing.
Risks Related to our Financial Condition
Our indebtedness under our Bitcoin-secured loan facility is substantial, and we may be unable to roll over or refinance this indebtedness on commercially reasonable terms, or at all.
We recently incurred a significant amount of indebtedness under a new loan facility with ChainFi Inc. d/b/a Arch Lending, pursuant to which our wholly owned subsidiary, US Digital Mining and Hosting Co, LLC, borrowed approximately $18.1 million under an initial 30-day, non-recourse, collared rolling loan secured by 307 Bitcoin and bearing interest at 2.0% per annum. Although the loan facility automatically rolls over for successive 30-day periods unless either party provides notice of non-renewal, the interest rate, floor price, and ceiling price are reset at each rollover date based on then-prevailing market conditions. As a result, we may be required to accept less favorable terms in connection with future rollovers, including higher interest rates or less favorable collateral-related economics, or we may be unable to continue rolling over the loan on terms acceptable to us.
If we are unable to roll over, refinance, or otherwise repay this indebtedness at maturity on commercially reasonable terms, we may be required to use available cash, seek alternative financing, sell assets, pledge additional collateral, or take other actions that could adversely affect our liquidity, financial condition, and business operations. In addition, if the Bitcoin reference price is below the agreed-upon floor price at maturity, we may be required to cure the shortfall in order to roll the loan, repay the loan to recover the collateral, or elect to walk away from the collateral, any of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our operating losses and indebtedness may currently and in the future raise substantial doubt as to our ability to continue as a going concern.
In connection with the filing of this Quarterly Report on Form 10-Q, we evaluated our ability to continue as a going concern for the twelve months following the issuance of the financial statements contained herein. The Company has experienced significant operating losses over the past two and a half years (2024 through 2026) with cumulative losses of approximately $49.3 million. As of June 30, 2026, the Company had $854 thousand available cash on-hand and Bitcoin with a fair market value of $8.5 million (of which $7.7 million is pledged as collateral against outstanding borrowings). In addition, the Company had Bitcoin with a fair market value of $10.2 million classified as Digital assets receivable which was pledged as collateral against $11 million of borrowings. This indebtedness was refinance through our above-described credit facility with Arch. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Management's plans to address these conditions include a plan to refinance certain indebtedness and the continued use of its ATM program. The ATM program is currently effective and has been utilized to raise capital; however, future proceeds under the ATM program depend, among other things, on the Company's ability to maintain compliance with Nasdaq's continued listing requirements,
36
including applicable market value requirements, market conditions, trading volume, the Company's stock price, and other factors that are not within the Company's control.
As of the date these financial statements are issued, management has not concluded that its plans are probable of mitigating the conditions and events that raise substantial doubt within one year after the date these financial statements are issued. Accordingly, substantial doubt about the Company's ability to continue as a going concern has not been alleviated. The financial statements included in this report do not reflect any adjustments that may be required if the Company is unable to continue as a going concern.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities.
None.
(b) Use of Proceeds.
None.
(c) Repurchase of Securities.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
a) None.
b) None.
c) During the six months ended June 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
37
Item 6. Exhibits
The following documents are filed as a part of this report or are incorporated herein by reference.
EXHIBIT NUMBER |
DESCRIPTION |
|
3.1* |
Certificate of Incorporation of PowerCompute Inc., as amended |
|
3.2 |
Amended and Restated By-Laws of PowerCompute Inc. (incorporated by reference to Exhibit 3.2 to the Form 10-8 filed on July 20, 2026) |
|
10.1 |
Promissory Note, dated July 27, 2026, in principal amount of $11,005,502.75 by US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on July 31, 2026) |
|
10.2 |
Promissory Note, dated July 27, 2026, in principal amount of $7,063,342.53 by US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on July 31, 2026) |
|
10.3 |
Loan and Security Agreement, dated August 3, 2026, between US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.1 to the Form 8-K filed August 5, 2026) |
|
10.4 |
Collar Loan Annex, dated August 3, 2026, between US Digital Mining & Hosting Co, LLC and ChainFi Inc. d/b/a Arch Lending (incorporated by reference to Exhibit 10.2 to the Form 8-K filed August 5, 2026) |
|
10.5 |
Third Amendment to Secured Promissory Note, dated July 28, 2026, by PowerCompute, Inc. payable to Brown Family Enterprises, LLC (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on July 31, 2026) |
|
31.1* |
Rule 13a – 14(a) Certification of the Principal Executive Officer |
|
31.2* |
Rule 13a – 14(a) Certification of the Principal Financial Officer |
|
32.1* |
Written Statement of the Principal Executive Officer, Pursuant to 18 U.S.C. § 1350 |
|
32.2* |
Written Statement of the Principal Financial Officer, Pursuant to 18 U.S.C. § 1350 |
|
|
|
|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
|
|
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
|
|
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
* Filed herewith.
38
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
|
|
LM FUNDING AMERICA, INC. |
|
|
|
|
|
Date: August 14, 2026 |
|
By: |
/s/ Bruce M. Rodgers |
|
|
|
Bruce M. Rodgers |
|
|
|
Chief Executive Officer and Chairman of the Board |
|
|
|
(Principal Executive Officer) |
|
|
|
|
Date: August 14, 2026 |
|
By: |
/s/ Richard Russell |
|
|
|
Richard Russell |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Accounting Officer) |
39