QumulusAI Q3 operating loss widens to $41.6M
A September 2026 contract carries approximately $211.9 million in future revenue, with approximately $21.2 million in cash prepayments received in October 2026.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Form Type
10-Q
QumulusAI, Inc. reported third-quarter revenue of $14.8 million, compared with $3.1 million a year earlier; compute power revenue was $14.1 million versus $1.4 million. Its operating loss was $41.6 million, compared with $2.8 million, and net loss was $14.4 million versus $9.5 million.
For the nine months, revenue was $24.9 million versus $8.1 million, while operating loss was $54.8 million versus $5.9 million. Net loss was $86.8 million, compared with net income of $0.8 million, including a $73.9 million loss on issuance of a convertible note. Operating activities provided $54.3 million of cash, compared with a $2.5 million use in the prior-year period; property and equipment purchases were $137.0 million.
Management said recurring operating losses and an accumulated deficit of $124.2 million raised substantial doubt about the company’s ability to continue as a going concern for one year from issuance. At September 30, 2026, cash was $21.9 million and restricted cash was $9.2 million. In September 2026, the company entered a contract for approximately $211.9 million in future revenue and received approximately $21.2 million in cash prepayments in October 2026. Management concluded additional approved USD.AI draws and use of new and existing lending partners would alleviate the doubt.
4 points · 1 major3 major · 3 points
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Hollow bars mark forward-looking points. How the balance works
Positive
- Major point. Forward-looking: it has not happened yet and may not happen.September contract: approximately $211.9 million in future revenue. 2× market cap
- Moderate pointQ3 revenue: $14.8 million, versus $3.1 million a year earlier.
- Moderate pointOperating cash flow: $54.3 million provided, versus $2.5 million used.
- Minor pointNine-month revenue: $24.9 million, versus $8.1 million.
Negative
- Major point. Forward-looking: it has not happened yet and may not happen.Going-concern assessment: substantial doubt; management concluded its plans will alleviate it.
- Major pointQ3 operating loss: $41.6 million, versus $2.8 million a year earlier.
- Major pointNine-month net loss: $86.8 million, versus net income of $0.8 million.
Filing Explained
The September balance sheet reports liabilities of $368,810,803 against equity of $25,251,549, alongside completed share issuances that diluted existing ownership.
QumulusAI’s unaudited 10-Q reports 34,699,038 common shares issued and outstanding at
Under the supplied definition, issuing additional shares reduces existing holders’ percentage ownership absent offsetting changes; the reported increase therefore diluted holders who did not receive offsetting shares.
At
Key Figures
Third-quarter revenue: $14.8 million versus $3.1 million
Compute power revenue: $14.1 million versus $1.4 million
Third-quarter operating loss: $41.6 million versus $2.8 million
+5 more
8 metrics
Third-quarter revenue
$14.8 million versus $3.1 million
Three months ended September 30, 2026 and 2025
Compute power revenue
$14.1 million versus $1.4 million
Three months ended September 30, 2026 and 2025
Third-quarter operating loss
$41.6 million versus $2.8 million
Three months ended September 30, 2026 and 2025
Nine-month revenue
$24.9 million versus $8.1 million
Nine months ended September 30, 2026 and 2025
Nine-month net result
$86.8 million net loss versus $0.8 million net income
Nine months ended September 30, 2026 and 2025
Operating cash flow
$54.3 million provided versus $2.5 million used
Nine months ended September 30, 2026 and 2025
Future contract revenue
Approximately $211.9 million
Contract entered into in September 2026
Cash prepayments
Approximately $21.2 million
Received in October 2026 under the September 2026 contract
Key Terms
GPU-as-a-Service, going concern, deferred revenue, Full-Pay-Per-Share, +1 more
5 terms
GPU-as-a-Service technical
"Growth in the Company's GPU-as-a-Service business"
GPU-as-a-Service is a pay-as-you-go model that lets businesses rent powerful graphics processing units (GPUs) over the internet instead of buying the hardware outright. It matters to investors because it lowers upfront costs and speeds time-to-market for companies using AI, data analysis, or 3D rendering—similar to renting a high-performance car for a specific trip rather than owning one—and can make firms more flexible, scalable, and capital-efficient.
going concern financial
"substantial doubt about the Company's ability to continue as a going concern"
Going concern is the accounting assumption that a company will keep operating and meeting its obligations for the foreseeable future. The phrase matters most when a company or its auditors disclose substantial doubt about it, a formal warning that the business may not have enough resources to continue without raising money, restructuring, or selling assets. That language in a filing or press release signals elevated financial risk.
deferred revenue financial
"Advance payments are recorded as deferred revenue"
Cash a company has already received for goods or services it has promised but not yet delivered; it's recorded as a liability because the company still owes that product, service, or future revenue recognition. For investors, deferred revenue signals upcoming work or deliveries that will convert into reported sales over time and affects short-term obligations, cash flow quality, and how quickly a firm can grow recognized revenue—think of it like prepaid subscriptions or gift cards a business must honor later.
Full-Pay-Per-Share technical
"Full-Pay-Per-Share ("FPPS") payout method"
Simple Agreement for Future Equity financial
"Simple Agreement for Future Equity ("SAFE")"
A simple agreement for future equity is an investment contract that gives an investor the right to receive company shares at a later financing event or sale instead of getting shares immediately. Think of it like a voucher that converts into ownership once the company’s value is formally set; it matters to investors because it fixes how and when ownership is awarded, affects how much of the company they ultimately own, and influences dilution and return potential.
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What was QMLS’s net loss in Q3 2026?
QumulusAI recorded a consolidated net loss of $14.4 million for Q3 2026, compared with $9.5 million in Q3 2025. For the nine months, it reported a net loss of $86.8 million, compared with net income of $0.8 million.
What steps did QMLS cite to address its going-concern doubt?
Management identified additional approved draws under the USD.AI protocol and use of new and existing lending partners. It also said the company continued to see increased revenue and net cash inflows from operations as it invested in high-performance computing infrastructure, and concluded its plans would alleviate substantial doubt for one year from issuance.
How does QMLS share revenue with RunPod?
For marketplace sales, QumulusAI receives 80% of Net Revenue received by RunPod from its customers. For direct sales, the transaction price is based on a fixed price per hour of compute power provided.
AI-generated analysis. How Rhea-AI works. Not financial advice.
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM | ||
(Mark One)
For the quarterly period ended September 30, 2026
OR
For the transition period from ________________ to __________________
Commission File Number: 001-43398
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
(Address of principal executive offices) (Zip Code) | ||||||||
(877 ) 420-9242
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
☒ | Smaller reporting company | |||||||||||||
Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 3, 2026, there were 34,846,795 shares of common stock of the registrant outstanding.
1
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TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION | ||||||||
Item 1. | Condensed Consolidated Financial Statements: | Page | ||||||
Condensed Consolidated Balance Sheets as of September 30, 2026 and December 31, 2025 | 4 | |||||||
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2026 and 2025 | 5 | |||||||
Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2026 and 2025 | 6 | |||||||
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2026 and 2025 | 7 | |||||||
Notes to Condensed Consolidated Financial Statements | 8 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 42 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 63 | ||||||
Item 4. | Controls and Procedures | 63 | ||||||
PART II—OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings | 65 | ||||||
Item 1A. | Risk Factors | 65 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 65 | ||||||
Item 3. | Defaults Upon Senior Securities | 66 | ||||||
Item 4. | Mine Safety Disclosures | 66 | ||||||
Item 5. | Other Information | 66 | ||||||
Item 6. | Exhibits | 67 | ||||||
Signatures | 68 | |||||||
2
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As used in this report, references to “QumulusAI,” the “Company,” “we,” “our” or “us,” unless the context otherwise requires, refer to QumulusAI, Inc. and its subsidiaries, all of which are consolidated in the Company’s condensed consolidated financial statements.
All trademarks, trade names or service marks referred to in this report are the property of their respective owners.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to the safe harbor created by those sections. In addition, the Company or others on the Company’s behalf may make forward-looking statements from time to time in oral presentations, including telephone conferences and/or web casts open to the public, in press releases or reports, on the Company’s website, or otherwise. All statements other than statements of historical facts included in this report or expressed by the Company orally from time to time that address activities, events, or developments that the Company expects, believes, or anticipates will or may occur in the future are forward-looking statements, including, in particular, the statements about the Company’s plans, objectives, strategies, and prospects regarding, among other things, the Company’s financial condition, results of operations, business strategy, and short-term and long-term business operations and objectives. The Company has identified some of these forward-looking statements in this report with words like “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “target,” “plan,” “expect,” or the negative of these words or other words and terms of similar meaning. The use of future dates is also an indication of a forward-looking statement. Forward-looking statements may be contained in the notes to the Company’s condensed consolidated financial statements and elsewhere in this report, including under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Forward-looking statements are based on current expectations about future events affecting the Company and are subject to uncertainties and factors that affect all businesses operating within the Company’s market as well as matters specific to the Company. These uncertainties and factors are difficult to predict, and many of them are beyond the Company’s control. The following are some of the uncertainties and factors known to us that could cause the Company’s actual results to differ materially from what the Company has anticipated in its forward-looking statements:
•The Company’s recent growth may not be indicative of its future growth.
•The Company has a limited number of suppliers for significant components of the equipment it uses to build and operate its platform and provide its solutions and services.
•The Company may be unable to access sufficient power or may face increased costs to procure power, prolonged power outages, shortages, or capacity constraints.
•The Company’s data center facilities may experience damage, interruption, or a security breach.
•Growth in the Company’s graphics processing unit ("GPU")-as-a-service business is dependent on the availability of data center capacity, and failure to secure suitable facilities could adversely affect its business and results of operations.
•The Company’s blockchain mining operations expose it to risks that could materially adversely affect its business, operating results, financial condition, and future prospects.
•A substantial portion of the Company’s hosting revenue is driven by a limited number of customers.
•A substantial portion of the Company’s current GPU-as-a-Service revenue is generated through a single channel partner, which the Company may be unable to retain.
•The Company may not realize the aggregate contracted fees of the customer contracts it has entered into, including as a result of termination or amendment, which could have a material adverse impact on its business, financial condition and results of operations.
•The Company may fail to efficiently enhance its platform and develop and sell new solutions and services and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements, or preferences.
•Artificial intelligence technology is new, and the continued rapid pace of developments in the artificial intelligence field are inherently uncertain.
•The Company may be unable to obtain additional capital to fund its business and support its growth.
•The Company’s operating results may fluctuate significantly.
•The Company faces intense competition and could lose market share to its competitors.
•There may be a network or data security incident against the Company, or its third-party providers.
•The Company has a history of generating losses and may not be able to achieve profitability.
•The Company makes substantial investments in its technology and infrastructure, which may be unsuccessful.
•The Company’s platform may encounter performance problems.
•There may be a failure of the Company’s information technology systems or those of one or more of its information technology service providers, business partners, vendors, suppliers, or other third-party service providers.
•The Company has a limited operating history at its current scale.
•The Company relies on its management team and other key employees.
•The Company relies on the ability to obtain, maintain, protect, and enforce its intellectual property rights.
•The Company is subject to laws, regulations, and industry requirements related to data privacy, data protection and information security, and user protection across different markets where the Company conducts its business, and such laws, regulations, and industry requirements are constantly evolving and changing.
•The Company may be unable to continue as a going concern.
•The Company will incur significant increased costs and management resources as a result of operating as a public company.
•The Company has a substantial amount of indebtedness.
•The Company’s USD.AI financing arrangement may not provide any future funding, remains subject to various approvals and documentation, and may leave the Company unable to access financing when needed on favorable terms or at all.
•The market price of the Company’s shares of common stock may be volatile.
For more information regarding these and other uncertainties and factors that could cause the Company’s actual results to differ materially from what the Company has anticipated in its forward-looking statements or otherwise could materially adversely affect its business, financial condition or results of operations, see the disclosure under “Risk Factors” in the Company’s Registration Statement on Form S-1, as amended (File No. 333-292514), as updated by Part II, Item 1A of this report.
All forward-looking statements included in this report are expressly qualified in their entirety by the foregoing cautionary statements. The Company wishes to caution readers not to place undue reliance on any forward-looking statement that speaks only as of the date made and to recognize that forward-looking statements are predictions of future results, which may not occur as anticipated. Actual results could differ materially from those anticipated in the forward-looking statements and from historical results due to the uncertainties and factors described above and others that the Company may consider immaterial or does not anticipate at this time. Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, the Company does not know whether its expectations will prove correct. The Company’s expectations reflected in its forward-looking statements can be affected by inaccurate assumptions the Company might make or by known or unknown uncertainties and factors, including those described above. The risks and uncertainties described above are not exclusive, and further information concerning the Company and its business, including factors that potentially could materially affect its financial results or condition, may emerge from time to time.
The Company assumes no obligation to update, amend, or clarify forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements. The Company advises you, however, to consult any further disclosures the Company makes on related subjects in its annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K that the Company files with or furnishes to the SEC.
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PART I—FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUMULUSAI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2026 | December 31, 2025 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash | $ | $ | |||||||||
| Restricted cash | |||||||||||
Accounts receivable, net of allowance for credit losses of $ | |||||||||||
| Deposits on power equipment - current | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Operating right-of-use assets, net | |||||||||||
| Finance right-of-use assets, net | |||||||||||
| Equity method investments | |||||||||||
| Investment in equity securities | |||||||||||
| Deposits on power equipment | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Dividend payable | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Deferred revenue - current portion | |||||||||||
| Current portion of notes payable | |||||||||||
| Current portion of notes payable - related party | |||||||||||
| Current portion of USD.AI protocol loans | |||||||||||
| Operating lease liabilities - current portion | |||||||||||
| Finance lease liabilities - current portion | |||||||||||
| Deferred tax liability | |||||||||||
| Total current liabilities | |||||||||||
| Long-term notes payable, net of current portion | |||||||||||
| Operating lease liabilities, net of current portion | |||||||||||
| Finance lease liabilities, net of current portion | |||||||||||
| Warrant liability | |||||||||||
| Deferred revenue, net of current portion | |||||||||||
| Additional convertible notes option liability | |||||||||||
| USD.AI protocol loans, net of current portion | |||||||||||
| Convertible note payable | |||||||||||
| Other non-current liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 24) | |||||||||||
| Shareholders' Equity | |||||||||||
Preferred stock - no par value; | |||||||||||
Common stock - no par value; | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total shareholders' equity attributable to QumulusAI shareholders | |||||||||||
| Non-controlling interests | |||||||||||
| Total shareholders' equity | |||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
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QUMULUSAI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Revenue from cryptocurrency mining | $ | $ | $ | $ | |||||||||||||||||||
| Revenue from mining hosting services | |||||||||||||||||||||||
| Revenue from compute power | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Costs and expenses | |||||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | |||||||||||||||||||||||
| General and administrative expenses | |||||||||||||||||||||||
| Sales and marketing expenses | |||||||||||||||||||||||
| Depreciation and amortization expense | |||||||||||||||||||||||
| Total costs and expenses | |||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expenses) | |||||||||||||||||||||||
| Income from equity method investments | |||||||||||||||||||||||
| Gain on sale of equity method investments | |||||||||||||||||||||||
| Gain on remeasurement of investment in TCM | |||||||||||||||||||||||
| Change in fair value of warrant liability | ( | ( | |||||||||||||||||||||
| Change in fair value of digital assets | |||||||||||||||||||||||
| Change in fair value of convertible note | |||||||||||||||||||||||
| Change in fair value of additional convertible notes option | |||||||||||||||||||||||
| Gain on sale or disposal of property and equipment | |||||||||||||||||||||||
| Loss on settlement of lease liability | ( | ( | |||||||||||||||||||||
| Loss on issuance of convertible note | ( | ||||||||||||||||||||||
| Loss on extinguishment of debt | ( | ( | |||||||||||||||||||||
| Other income (expense), net | ( | ( | |||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
| Total other income (expenses), net | ( | ( | |||||||||||||||||||||
| Income (loss) before income tax expense | ( | ( | ( | ||||||||||||||||||||
| Income tax expense (benefit) | ( | ( | |||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Less: deemed dividend on conversion of preferred stock | |||||||||||||||||||||||
| Less: net income (loss) in non-controlling interests | ( | ||||||||||||||||||||||
| Net loss attributable to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share attributable to common shareholders, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average common stock outstanding, basic and diluted | |||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
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QUMULUSAI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
| Series A Preferred Stock | Series B Preferred Stock | Series C Preferred Stock | Series D Preferred Stock | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Shareholders' Equity (Deficit) attributable to QumulusAI shareholders | Non-Controlling Interests | Total Shareholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2026 | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance costs | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for services | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants as consideration payable to customer | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital distributions to joint venture partners | — | — | — | — | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of convertible notes | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for services | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Capital distributions to joint venture partners | — | — | — | — | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2026 | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance cost | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Preferred Stock | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance cost | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock upon partial conversion of convertible note | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of Common Stock and Series D Preferred Stock for the acquisition of TCM | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exchange of TCM stock options resulting in issuance of stock options in acquisition | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of issuance cost | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for settlement of lease liability | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of options | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reissuance of common stock to TCM founders for shares previously forfeited | — | — | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Redemption of preferred stock for cash | — | — | — | — | — | — | ( | ( | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock upon partial conversion of convertible note | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for settlement of lease liability | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants to purchase equipment | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants for services | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock | ( | ( | ( | ( | ( | ( | ( | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
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QUMULUSAI, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income (loss) | $ | ( | $ | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization expense | |||||||||||
| Amortization of right-of-use assets | |||||||||||
| Amortization of loan origination costs | |||||||||||
| Amortization of discount on convertible note | |||||||||||
| Provision for credit losses | |||||||||||
| Amortization of premium on loan receivable | ( | ||||||||||
| Non-cash interest expense | |||||||||||
| Recovery of credit losses | ( | ||||||||||
| Interest expense under finance lease obligations | |||||||||||
| Income from equity method investments | ( | ( | |||||||||
| Gain on sale of equity method investments | ( | ||||||||||
| Gain on remeasurement of investment in TCM | ( | ||||||||||
| Change in fair value of warrant liability | ( | ||||||||||
| Change in fair value of digital assets | ( | ||||||||||
| Change in fair value of convertible note | ( | ||||||||||
| Change in fair value of additional convertible notes option | ( | ||||||||||
| Change in deferred taxes | ( | ||||||||||
| Stock-based compensation | |||||||||||
| Issuance of common stock for services | |||||||||||
| Issuance of warrants for services | |||||||||||
| Issuance of warrants as consideration payable to customer | |||||||||||
| Noncash revenue recognized from receipt of equity securities | ( | ||||||||||
| Gain on sale or disposal of property and equipment | ( | ( | |||||||||
| Loss on issuance of convertible note | |||||||||||
| Loss on extinguishment of debt | |||||||||||
| Loss on settlement of lease liability | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Due from related party | |||||||||||
| Prepaid expenses and other current assets | ( | ( | |||||||||
| Other assets | ( | ||||||||||
| Proceeds from sale of digital assets | |||||||||||
| Mining of digital assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Accrued expenses | |||||||||||
| Deferred revenue | |||||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Intangible assets | ( | ( | |||||||||
| Due to related party | ( | ||||||||||
| Other non-current liabilities | |||||||||||
| Net cash provided by (used in) operating activities | ( | ||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Proceeds from sale of property and equipment | |||||||||||
| Proceeds from disposal of property and equipment | |||||||||||
| Proceeds from collections of loans receivable | |||||||||||
| Deposits on power equipment | ( | ||||||||||
| Data center set up costs | ( | ||||||||||
| Purchase of equity securities | ( | ||||||||||
| Proceeds from sale of U.S. dollar coin | |||||||||||
| Proceeds from sale of digital asset reserve | |||||||||||
| Cash acquired as part of business acquisition | |||||||||||
| Dividends paid on common stock | ( | ||||||||||
| Proceeds from sale of equity method investments | |||||||||||
| Distributions from equity method investments | |||||||||||
| Distributions to joint venture partners | ( | ||||||||||
| Net cash (used in) provided by investing activities | ( | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Proceeds from sale of common stock, net of issuance costs | |||||||||||
| Redemption of preferred stock | ( | ||||||||||
| Repayments on finance lease obligations | ( | ( | |||||||||
| Proceeds from convertible note payable | |||||||||||
| Proceeds from notes payable, net of issuance costs | |||||||||||
| Proceeds from notes payable - related party | |||||||||||
| Proceeds from exercise of warrants | |||||||||||
| Proceeds from exercise of options | |||||||||||
| Proceeds from line of credit, net of issuance costs | |||||||||||
| Repayments of line of credit | ( | ( | |||||||||
| Repayments of notes payable | ( | ( | |||||||||
| Repayments of notes payable - related party | ( | ( | |||||||||
| Repayments of convertible note payable - related party | ( | ||||||||||
| Repayments of convertible notes payable | ( | ||||||||||
| Net cash provided by financing activities | |||||||||||
| NET CHANGE IN CASH AND RESTRICTED CASH | |||||||||||
| CASH AND RESTRICTED CASH, beginning of period | |||||||||||
| CASH AND RESTRICTED CASH, end of period | $ | $ | |||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | |||||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Cash paid for interest | $ | $ | |||||||||
| Non-cash financing and investing activities | |||||||||||
| Issuance of warrants for property and equipment | $ | $ | |||||||||
| Issuance of warrants as offering costs | $ | $ | |||||||||
| Non-cash contribution to equity method investment | $ | $ | |||||||||
| Issuance of common stock for settlement of lease liability | $ | $ | |||||||||
| Conversion of preferred stock to common stock | $ | $ | |||||||||
| Issuance of Common Stock and Series D Preferred Stock for the acquisition of TCM | $ | $ | |||||||||
| Exchange of TCM stock options resulting in issuance of stock options in acquisition | $ | $ | |||||||||
| Issuance of preferred stock upon partial conversion of convertible note | $ | $ | |||||||||
| Transfer of leased assets to property and equipment upon lease buyout | $ | $ | |||||||||
| Issuance of common stock for conversion of convertible notes | $ | $ | |||||||||
| Acquisition of right-of-use asset in exchange for lease obligations | $ | $ | |||||||||
| Lease liabilities arising from obtaining right-of-use assets | $ | $ | |||||||||
See accompanying notes to condensed consolidated financial statements.
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QUMULUSAI, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Organization and Nature of Operations
The Company
QumulusAI, Inc. (“QumulusAI” or the “Company”) is a Georgia corporation headquartered in Atlanta, Georgia. The Company is a cloud infrastructure provider specializing in the deployment of graphics processing unit (“GPU”)-powered computing solutions for artificial intelligence (“AI”) applications. The Company’s customers include small and mid-market participants, such as machine learning teams, AI infrastructure companies, and research institutions, as well as large enterprises that utilize the Company’s platform for long-term deployments or supplemental on-demand compute capacity.
WAHA Technologies, Inc. (“WAHA”) and WAHA, Inc. (subsequently renamed SPRE Commercial Group, Inc., or “SPRE”) were both incorporated in 2019. SPRE’s operations were focused on data center assets and operations, while WAHA’s operations were focused on blockchain managed services. In December 2022, WAHA and SPRE completed a corporate roll-up and became wholly owned subsidiaries of a newly formed holding company, Global Digital Holdings, Inc. (“GDH”). In October 2023, GDH made a minority investment in The Cloud Minders, Inc. (“TCM”), a company focused on GPU-as-a-Service (“GPUaaS”) assets and operations. In April 2025, GDH acquired the remaining outstanding interests in TCM, and TCM became a wholly owned subsidiary of GDH. In connection with this acquisition, GDH rebranded its combined operations under the QumulusAI name. On August 18, 2025, GDH changed its name to QumulusAI, Inc.
The Company's Registration Statement on Form S-1, as amended (File No. 333-292514), filed in connection with the Company's direct listing, was declared effective by the Securities and Exchange Commission (the “SEC”) on July 14, 2026. The Company's common stock began trading publicly on the Nasdaq Global Market under the symbol “QMLS” on July 16, 2026.
Reverse Stock Split
The Company effected a 1-for-3 reverse stock split (“Reverse Stock Split”) on September 30, 2025, pursuant to which every three shares of the Company’s issued and outstanding common stock were combined into one share of common stock. The Reverse Stock Split had no impact on the authorized number of shares of common stock, which continue to have no par value. Unless otherwise indicated, all share and per share information prior to the Reverse Stock Split date of September 30, 2025 in these condensed consolidated financial statements is retroactively adjusted to reflect the Reverse Stock Split, prior to the rounding of any fractional shares. Any fractional share resulting from the Reverse Stock Split was rounded up to the next whole number of shares.
Going Concern
Pursuant to Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40), management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. Management’s evaluations are based on relevant conditions and events that are known and reasonably knowable as of the date the financial statements were issued.
The Company has incurred recurring operating losses since inception resulting in an accumulated deficit of $124,247,844 as of September 30, 2026. For the nine months ended September 30, 2026, the Company had an operating loss of $54,753,230 . The Company’s operations have been funded partially through the issuance of debt and equity instruments. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these condensed consolidated financial statements.
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At September 30, 2026, the Company had cash of $21,909,713 and restricted cash of $9,225,679 , which is restricted for servicing debt. The Company’s plans to alleviate the substantial doubt include completing additional approved draws under the USD.AI protocol and utilizing new and existing lending partners. The Company also entered into a significant revenue contract in September 2026 for approximately $211,900,000 in future revenue, under which the Company received
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approximately $21,200,000 in cash prepayments in October 2026. The Company continues to see increased revenue and net cash inflows from operations as it has invested in additional HPC infrastructure. Accordingly, management concluded these plans will alleviate the substantial doubt about the Company’s ability to continue as a going concern for the one-year period extending from the date of issuance of these condensed consolidated financial statements.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
Basis of Presentation
Non-Controlling Interests
The Company follows Accounting Standards Codification ("ASC") 810, Consolidation, which governs the accounting for and reporting of non-controlling interests (“NCIs”) in partially owned consolidated entities and the loss of control of those entities. NCI positions are reported as a separate component of consolidated shareholders’ equity from the equity attributable to QumulusAI’s shareholders for all periods presented. The net income (loss) attributable to the NCIs is separately presented in the accompanying condensed consolidated statements of operations resulting from the Company’s consolidation of QAI Moon, SPRE Brooklyn and SPRE NKC as VIEs for which the Company is the primary beneficiary.
Reclassifications
Certain reclassifications have been made to the prior period financial statements to conform to the current period financial statement presentation. Certain expenses that were previously classified as general and administrative were reclassified to sales and marketing on the condensed consolidated statements of operations. In addition, certain balances related to deposits on power equipment classified as non-current assets were reclassified to current assets on the condensed consolidated balance sheets. These reclassifications had no effect on total assets, net income (loss), or shareholders’ equity.
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Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Management's estimates and assumptions include, but are not limited to, estimating the fair value of consideration of acquisitions, the accounting for business combinations and allocating purchase price, valuation and estimating the useful life of identifiable intangible assets, valuation of goodwill, estimates used for forecast in business combinations, allowance for credit losses, financial instruments recorded at a fair value on a recurring basis, revenue recognition, collectability of accounts receivable, valuation of convertible note payable, fair value of assets and liabilities assumed in acquisitions, valuation of stock-based awards, salvage values and estimated useful lives of property and equipment, valuation of deferred taxes and uncertain tax positions, valuation of common stock and warrant liabilities, and other assumptions used to measure stock-based compensation, determination of incremental borrowing rate, and estimates for transfers of investments and valuation of assets. Management's estimates and assumptions are derived from and are continually evaluated based upon available information, judgment, and experience.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivable.
The Company maintains cash balances in various financial institutions. At times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limit. As of September 30, 2026 and December 31, 2025, interest-bearing accounts and non-interest bearing accounts were insured by the Federal Deposit Insurance Corporation up to $250,000 per financial institution. In lieu of insurance, the financial institution may collateralize the commercial paper with U.S. government securities, in which case they become repurchase agreements. The Company has not experienced any losses in such accounts and monitors the credit worthiness of the financial institutions with which they conduct business. Management believes that the Company is not exposed to significant credit risk with respect to its cash balances.
The following table presents customers that individually accounted for 10% or more of total revenue or accounts receivable, net for the periods presented:
| Revenue | Accounts Receivable, net | ||||||||||||||||||||||||||||||||||
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| Customers | 2026 | 2025 | 2026 | 2025 | September 30, 2026 | December 31, 2025 | |||||||||||||||||||||||||||||
| Customer A | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer B | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer C | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer D | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer E | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer F | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer G | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer H | % | % | % | % | % | % | |||||||||||||||||||||||||||||
| Customer I | % | % | % | % | % | % | |||||||||||||||||||||||||||||
Cash and Restricted Cash
For purposes of the condensed consolidated balance sheets and condensed consolidated statements of cash flows, the Company considers cash in operating bank accounts and cash on hand as cash.
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Cash that is restricted as to withdrawal or use under the terms of certain contractual agreements are recorded as restricted cash in current assets on the condensed consolidated balance sheets. At September 30, 2026, the Company had a restricted cash balance of $9,225,679 .
The following table provides a reconciliation of cash and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Cash | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash and restricted cash shown in the condensed consolidated statements of cash flows | $ | $ | |||||||||
Digital Assets
Crypto Assets
The Company accounts for crypto assets in accordance with ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which requires entities to measure certain crypto assets at fair value with changes recognized in the condensed consolidated statements of operations for each reporting period. The Company’s crypto assets consist of Bitcoin, which has not been determined to be a stablecoin or derivative and is within the scope of ASU 2023-08. The Company has deemed the price of crypto assets to be a Level 1 input under the ASC 820, Fair Value Measurement, hierarchy because it is based on observable quoted prices in the Company’s principal market for identical assets. The Company’s crypto assets are received in exchange for services transferred to a customer and are converted to cash daily. Cash proceeds from the sale of digital assets are classified within operating activities in the Company’s consolidated statements of cash flows.
The Company acquires crypto assets through its network operations and holds these crypto assets. Each crypto asset acquisition is considered its own “lot” with its own cost basis based on the crypto asset-to-U.S. dollar ("USD") conversion price from the Company’s principal market at time of acquisition. Any realized gain/loss on the disposition of crypto assets is calculated on a weighted-average basis.
Principal Market and Fair Value Determination
To determine which market is the Company’s principal market (or in the absence of a principal market, the most advantageous market) for purposes of determining fair value of individual digital assets, the Company follows ASC 820, which outlines the application of fair value accounting. ASC 820 determines fair value to be the price that would be received for digital assets in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820 requires the Company to assume that the digital asset is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.
The Company transacts in a Brokered Market, a Dealer Market, Principal-to-Principal Markets and Exchange Markets, each as defined in the FASB Master Glossary (collectively, "Digital Asset Markets"). In determining which of the eligible Digital Asset Markets is the Company’s principal market, the Company reviews these criteria in the following order:
•First, the Company determines which Digital Asset Markets for the relevant digital asset are accessible to the Company.
•Second, the Company sorts the remaining Digital Asset Markets from high to low by market-based volume of the digital asset traded on each Digital Asset Markets in the trailing twelve months.
•Third, the Company then selects a Digital Asset Market as its principal market based on the highest market-based volume in comparison to the other Digital Asset Markets on the list.
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The Company determines its principal market (or in the absence of a principal market, the most advantageous market) annually to determine (i) if there have been recent changes to each Digital Asset Market’s trading volume in the trailing twelve months, (ii) if any Digital Asset Markets to which the Company has access have developed, ceased to operate, or become inaccessible, or (iii) if recent changes to each Digital Asset Market’s price stability have occurred that would materially impact the selection of the principal market and necessitate a change in the Company’s determination of its principal market.
The Company’s holdings of Bitcoin are recorded at fair value, as determined using the period-end closing price at 16:00:00 coordinated universal time ("UTC") for Bitcoin on the Company’s principal markets, New York Digital Investment Group and Coinbase (the “Principal Markets”), and changes in fair value are recognized as a change in fair value of digital assets on the condensed consolidated statements of operations.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value should be based on assumptions market participants would use when pricing an asset or liability. U.S. GAAP provides a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Assets and liabilities that are required to be recorded at fair value on the balance sheet are categorized based on the inputs to valuation techniques as follows:
•Level 1. These are assets and liabilities where values are based on unadjusted quoted prices for identical assets in an active market the Company has the ability to access.
•Level 2. These are assets and liabilities where values are based on similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active, and model derived prices whose inputs are observable or whose significant value drivers are observable.
•Level 3. Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company's warrant liability, convertible notes payable, and additional convertible notes option liability are measured at fair value on a recurring basis. See Note 5 - Fair Value of Financial Instruments, for further information regarding the valuation techniques and classification of these instruments within the fair value hierarchy.
The fair values of financial instruments including cash, accounts receivable, accounts payable, accrued expenses, and other current assets and liabilities approximate their respective carrying values due to the short maturities of those instruments. The fair value of notes payable approximates the carrying value, principally because of the maturity dates and the current terms applicable to the notes payable.
Financial Instruments — Credit Losses
Under the current expected credit loss ("CECL") impairment model, the Company estimates its allowance for credit losses on its accounts receivables. The allowance is determined using the peer-based loss rate method, which applies a loss rate derived from the credit loss experience of comparable peer companies to the gross accounts receivable balance as of the balance sheet date. Accounts receivable are written off against the allowance when they are deemed uncollectible, and recoveries are credited to the allowance when collected.
The Company develops and documents its allowance for credit losses on its loans receivable based on debtor type, while also taking into account factors that may influence credit risk, such as macroeconomic conditions and liquidity risks. The allowance for loans receivable is determined using the Probability of Default and Loss Given Default methods.
The Company considers current conditions and reasonable and supportable forecasts when evaluating whether the peer-based loss rate requires adjustment.
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Accounts Receivable, Net
Accounts receivable are stated at the amount management expects to collect from balances outstanding as of each reporting date. Accounts receivable are generally due 15 days after the invoice is issued and considered delinquent if not paid by that date. Amounts determined to be uncollectible are written off against the allowance for credit losses in the period in which that determination is made. See Financial Instruments — Credit Losses above for further discussion of the Company's allowance for credit losses methodology under ASC 326, Financial Instruments – Credit Losses. Under ASC 326, the Company determines its allowance by applying a peer-based loss rate method to the Company’s trade receivables.
The following table represents the impact of the CECL allowance on accounts receivable:
| Nine Months Ended September 30, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Balance, beginning of period | $ | $ | |||||||||||||||
| Provision for credit losses | |||||||||||||||||
| Recoveries collected | ( | ||||||||||||||||
| Balance, end of period | $ | $ | |||||||||||||||
Property and Equipment, Net
Property and equipment are recorded at cost, less accumulated depreciation. Expenditures for additions, improvements, betterments, if material, and individual purchases are generally capitalized. Minor replacements, maintenance, and repairs that do not improve or extend the lives of the assets are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
The useful life of the Company’s high performance compute equipment, consisting of servers and networking equipment, range from 3 to 7 years. The useful life of the Company's mining related equipment, consisting of pods and transformers, is 5 years. Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed.
Management reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of property and equipment may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of property and equipment. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property and equipment are used, and the effects of obsolescence, demand, competition, and other economic factors. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods, generally, Modified Accelerated Cost Recovery System, for income tax purposes. These differences in depreciation methods result in related deferred taxes.
Digital Asset Machines
Management assesses and adjusts the estimated useful lives of its digital asset machines (miners) when there are indicators that productivity of the mining assets is higher or lower than the assigned estimated useful life. The rate at which the Company generates digital assets and, therefore, consumes the economic benefits of its transaction verification servers, is influenced by a number of factors including the following:
•The complexity of the transaction verification process which is driven by the algorithms contained within the Bitcoin open source software;
•The general availability of appropriate computer processing capacity on a global basis (commonly referred to in the industry as hashing capacity which is measured in petahash units); and
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•Technological obsolescence reflecting rapid development in the transaction verification server industry such that more recently developed hardware is more economically efficient to run in terms of digital assets generated as a function of operating costs, primarily power costs, i.e., the speed of hardware evolution in the industry is such that later hardware models generally have faster processing capacity combined with lower operating costs and a lower cost of purchase. The Company operates in an emerging industry for which limited data is available to make estimates of the useful economic lives of specialized equipment. To the extent that any of the assumptions underlying management’s estimate of useful life of its transaction verification servers are subject to revision in a future reporting period, either as a result of changes in circumstances or through the availability of greater quantities of data, then the estimated useful life could change and have a prospective impact on depreciation expense and the carrying amounts of these assets.
Deposits on Equipment
The Company makes deposits, representing prepayments to suppliers and manufacturers, to secure pricing and delivery of compute power and related power infrastructure equipment. These deposits are recorded at cost and are classified as current or noncurrent assets on the Company's condensed consolidated balance sheets based on the timing of expected receipt from vendor. Upon receipt of the related equipment, the deposit is applied against the purchase price and the equipment is capitalized as property and equipment.
The Company periodically evaluates its deposits for recoverability, considering factors such as the financial condition of the supplier, the supplier's performance history, and any indicators that the supplier may be unable or unwilling to fulfill its contractual obligations. If the Company determines that a deposit is not recoverable, an impairment loss is recorded in the period such determination is made. See Concentration of Credit Risk above for further discussion of the counterparty risk associated with these deposits, and Note 11 - Deposits on Power Equipment, for the Company's outstanding deposit balances.
Equity Method Investments
Prior to February 13, 2026, the Company held certain investments accounted for under the equity method. Under the equity method, investments are carried at cost and increased or decreased by the Company’s pro rata share of the investee earnings or losses. The carrying cost of this investment is also increased or decreased to reflect additional contributions or distributions of capital. Any difference in book equity and the Company’s pro rata share of the net assets of the investment will be reported as gain or loss at the time of the sale, deconsolidation, or other disposition of the investment. It is the Company’s policy to record losses in excess of the investment if the Company is committed to provide financial support to the investee.
Investments in Equity Securities
Investments in which the Company does not have the ability to exercise significant influence over operating and financial matters are accounted for in accordance with ASC 321, Investments - Equity Securities. Investments without readily determinable fair values are accounted for using the measurement alternative which is at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company qualitatively assesses its equity investments for impairment indicators as of each reporting date. If this assessment indicates it is more likely than not that an investment is impaired, the Company estimates the investment's fair value and records an impairment loss in the accompanying condensed consolidated statements of operations for any excess of carrying value over the estimated fair value.
On May 1, 2026, the Company invested $1,000,000 in a Simple Agreement for Future Equity (“SAFE”) that converts into equity securities upon specified events, including an equity financing, at a 20 % discount to the price paid by new investors. On July 16, 2026, the Company received a second SAFE from a customer, with a deemed value of $82,500 as payment for compute power services. The second SAFE converts into preferred stock upon the customer’s next qualified equity financing at the lower of the price paid by new investors and a price based on a $50 million pre-money valuation cap. The SAFEs do not accrue interest, have no maturity date, and terminate upon conversion or settlement. The carrying
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amount of the SAFEs as of September 30, 2026 was $1,082,500 . The Company did not
Business Combinations
The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with ASC 805, Business Combinations, under which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed. Acquisition-related costs are expensed as incurred.
The Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed, as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates. The Company may record adjustments to provisional amounts recognized at the acquisition date, with a corresponding adjustment to goodwill, during the measurement period, which shall not exceed one year from the acquisition date. Adjustments to the fair value of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.
Long-Lived Assets, Including Definite-Lived Intangible Assets
Definite-lived intangible assets, which primarily consist of customer relationships and trade names, are recorded at cost, less accumulated amortization and any impairment losses, and are amortized on a straight-line basis over their estimated useful lives.
Goodwill
Revenue and Cost Recognition
Overview
The Company generates revenue from the following sources: (1) cryptocurrency mining, (2) mining hosting services and (3) compute power.
In accordance with ASC 606, Revenue Recognition, the Company recognizes revenue from contracts with customers using a five-step model, which is described as follows:
•identify the customer contract;
•identify performance obligations that are distinct;
•determine the transaction price;
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•allocate the transaction price to the distinct performance obligations; and
•recognize revenue as the performance obligations are satisfied.
Revenue from Cryptocurrency Mining
The Company participates in a third-party operated mining pool. As of April 2025, the pool operator is Luxor Technology Corporation ("Luxor"). Prior to April 2025, the pool operator was Foundry (now Foundry Digital) ("Foundry"). As a result of the change in pool operator, the Company's contract period end changed from 16:00:00 UTC to 23:59:59 UTC. As a participant in the third-party operated mining pool, the Company provides computing power to the third-party operated mining pool. The Company’s enforceable right to compensation begins when, and lasts as long as, the Company provides computing power to the mining pool operator.
Step 1: The Company has identified the third-party mining pool operator as its customer. The Company enters into a contract with the customer to provide its computing power to the customer's mining pool. The contracts are terminable without penalty at any time by either party, and thus the contract term is shorter than a 24-hour period and the contracts are continuously renewed.
Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides computing power to the customer's mining pool, which is considered contract inception, because customer consumption is in tandem with delivery of the computing power.
Step 2: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
•The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
•The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified a single performance obligation of providing computing power to the mining pool operator. The continuous renewal options do not represent material rights because they do not provide the customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no upfront or incremental fees in the initial contract.
Step 3: The Company receives non-cash consideration in the form of bitcoin, the fair value of which the Company measures at 23:59:59 UTC and 16:00:00 UTC on the date of contract inception using the Company's principal market for bitcoin, Bitcoin Reference Rate, when the pool operator is Luxor and Foundry, respectively. The contract renews continuously throughout the day, and thus the value of the consideration should be assessed continuously throughout the day, and the Company has concluded to use the 23:59:59 UTC and 16:00:00 UTC bitcoin price each day when the pool operator is Luxor and Foundry, respectively. Revenue is recognized on the same day that control of the services transfers to the customer, which is the same day as contract inception. According to the customer contract, daily settlements are made to the Company by the customer based on the computing power provided over the contract periods occurring over a 24-hour period and the payout is made the following day. There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
The Company earns non-cash consideration based on the Full-Pay-Per-Share (“FPPS”) payout method set forth by the customer in the form of bitcoin. The amount of bitcoin the Company is entitled to for providing hash calculations to the customer's mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:
•The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning 0:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC when the pool operator is Luxor and Foundry, respectively, in accordance with the following formula: the computing power that the Company
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provides to the customer as a percent of the Bitcoin Network’s total computing power, multiplied by the total Bitcoin Network block rewards expected to be generated for the same period.
•The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning 0:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC when the pool operator is Luxor and Foundry, respectively, in accordance with the following formula: total actual transaction fees generated on the Bitcoin Network during the contract period as a percent of total block rewards the Bitcoin Network actually generated during the same period, multiplied by the block rewards the Company earned for the same period noted above.
•The sum of the block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the customer for operating the mining pool based on a rate schedule per the mining pool contract. The Company was not charged mining pool fees during the nine months ended September 30, 2026 as Luxor does not charge any fees as a pool operator. The fee charged by Foundry during the three and nine months ended September 30, 2025 was 0.05 % and 2.50 %, respectively. The mining pool fee is only incurred to the extent the Company provides computing power and generates revenue in accordance with the customer’s payout formula during the continuously renewed contract periods beginning 0:00:00 UTC and 16:00:01 UTC and ending 23:59:59 UTC and 16:00:00 UTC daily, when the pool operator is Luxor and Foundry, respectively.
Step 4: There is a single performance obligation (i.e., to provide computing power to the customer) for the contract; therefore, all consideration from the customer is allocated to this single performance obligation.
Step 5: The Company’s performance is completed over time as the customer obtains control of the computing power. The performance obligation of computing power is fulfilled over time, as opposed to a point in time, because the Company provides the computing power throughout the contract period and the customer simultaneously obtains control of the service and uses it to produce bitcoin.
Revenue from Mining Hosting Services
The Company has also entered into hosting contracts where it operates mining equipment owned by third parties within its facilities in exchange for a fee or reimbursement of electricity cost at a markup.
Step 1: The Company has identified the third-party mining equipment owners as its customer. The Company enters into a contract with the customer to host its miners on the Company’s network. The contracts are terminable without penalty at any time if the termination is agreed upon by both parties, and thus the contract term is the stated term.
Step 2: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
•The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
•The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified one performance obligation of hosting the mining equipment. The service the Company provides also includes monitoring, active troubleshooting, and various maintenance levels for the mining equipment.
Step 3: The Company receives non-cash consideration in the form of USD Coin (“USDC”). The Company uses a spot rate on the date of payment from the customer to convert USDC to USD.
The Company’s hosting contracts can contain service level agreement clauses, which guarantee a certain percentage of time the power will be available to its customer. In the rare case that the Company may incur penalties under these clauses, the Company recognizes the payment as variable consideration and a reduction of the transaction price and, therefore, of revenue, when not in exchange for a good or service from the customer.
Customer contracts can include advance payment terms in the form of monthly cash prepayments and/or upfront cash payments at contract inception. Advance payments are recorded as deferred revenue and recognized over time
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(generally, the month of hosting service to which they relate) as the customer simultaneously receives and consumes the benefits of the Company’s performance. There is no significant financing component in these transactions due to the short-term nature of the payments.
Step 4: No allocation of transaction price is required as there is only one performance obligation in each contract.
Step 5: The Company recognizes variable hosting revenue each month as the uncertainty related to the consideration is resolved, hosting services are provided to its customer, and its customer utilizes the hosting service (the customer simultaneously receives and consumes the benefits of the Company's performance). The Company's performance obligation related to these services is satisfied over time.
Revenue from Compute Power
The Company generates revenue from providing compute power both to marketplace customers, such as RunPod, Inc. ("RunPod"), and directly to customers. For marketplace customers, the compute power is maintained by the Company and made available to RunPod’s customers for large-scale cloud processing. For direct customers, the compute power is provided directly to the customer for their use.
Step 1: For marketplace sales, the Company has entered into a Services Agreement with RunPod, which acts as the customer. The agreement is structured around ongoing service delivery, with compute power provided on a usage basis. The contract is enforceable and includes defined terms for service levels, pricing, and revenue sharing. The contract is continuously active and renewed, with no penalties for termination, and services are delivered daily based on actual usage. Applying the criteria per ASC 606-10-25-1, the contract between the Company and RunPod arises at the point the Company begins providing compute power through its bare metal servers. This marks contract inception, as the customer’s consumption of compute power is simultaneous with the Company’s delivery of the service. The contract supports continuous usage-based billing, and the Company’s enforceable right to compensation begins and continues as long as compute power hours are delivered and consumed by RunPod’s customers.
For direct sales, the Company enters into contracts directly with customers. The agreement is structured around ongoing service delivery, with compute power provided over the term of the contract. The contract is enforceable and includes defined terms for service levels and pricing. The contract is continuously active and renewed, with no penalties for termination, and services are delivered daily. Applying the criteria per ASC 606-10-25-1, the contract between the Company and its customers arises at the point the Company begins providing compute power through its bare metal servers. This marks contract inception, as the customer’s consumption of compute power is simultaneous with the Company’s delivery of the service. The contract supports monthly billing, and the Company’s enforceable right to compensation begins and continues as long as compute power is delivered to the customer.
Step 2: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
•The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and
•The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).
Based on these criteria, the Company has identified a single performance obligation to provide compute power for both its marketplace and direct customers. The continuous renewal options do not represent material rights because they do not provide the customer with the right to purchase additional goods or services at a discount. Specifically, the contract is renewed at the same terms, conditions, and rate as the current contract which is consistent with market rates, and there are no upfront or incremental fees in the initial contract.
Step 3: For marketplace sales, the transaction price is based on Net Revenue received by RunPod from its customers for compute power. The Company receives 80 % of Net Revenue as its revenue share. There is no non-cash consideration involved, and all payments are made in U.S. dollars. The contract does not include other forms of variable consideration such as rebates, penalties, or bonuses, except for service credits tied to uptime performance, which are treated as variable consideration and reduce the transaction price when applicable.
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For direct sales, the transaction price is based on a fixed price per hour of compute power provided per unit. There is no non-cash consideration involved, and all payments are made in U.S. dollars. The contract does not include other forms of variable consideration such as rebates, penalties, or bonuses, except for service credits tied to uptime performance, which are treated as variable consideration and reduce the transaction price when applicable.
Step 4: For both marketplace and direct sales, there is a single performance obligation (i.e., to provide compute power) for the contract; therefore, all consideration from the customer is allocated to this single performance obligation.
Step 5: For both marketplace and direct sales, the Company’s performance is completed over time as compute power is delivered and consumed. The performance obligation of computing power is fulfilled over time, as opposed to a point in time, because the Company provides the compute power throughout the contract period and the customer simultaneously obtains control of the service and integrates it into its platform offerings.
For any deposits the Company receives in advance of providing services, those payments are initially recognized as deferred revenue and recognized as revenue when the related performance obligation has been met. The Company reassesses variable consideration (e.g., service credits) and pricing adjustments at each reporting period to ensure accurate revenue recognition.
Cost of Revenue (exclusive of depreciation and amortization)
Cost of revenues, exclusive of depreciation and amortization, reflect direct costs associated with the delivery of the Company’s services to its customers. These costs include electricity and infrastructure expenses associated with operating the Company’s mining facilities. Cost of revenues, exclusive of depreciation and amortization, also includes colocation and hosting costs related to GPU-based high-performance computing data centers including payments to contractors who help prepare the Company's data center locations, and subscriptions to technology products that the Company uses to manage and monitor GPU servers.
Income Taxes
The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and income tax basis of assets and liabilities, and for operating losses and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the years in which those items are expected to be realized. Tax law and rate changes are recorded in the period such changes are enacted. The Company establishes a valuation allowance when it is more likely than not that certain deferred tax assets will not be realized. See Note 18 - Income Taxes for discussion of the Company's methodology for estimating its interim tax provision and effective tax rate.
The Company recognizes a tax benefit from any uncertain tax positions only if they are more likely than not to be sustained upon examination based on the technical merits of the position. The amount of the accrual for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. Interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense.
The “One Big Beautiful Bill Act” (“OBBBA”) was signed into law in the United States on July 4, 2025. Key tax provisions under OBBBA include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to the interest limitations in Section 163(j) of the U.S. Internal Revenue Code (the “Code”), updates to the international tax rules governing Net CFC Tested Income ("NCTI", formerly Global Intangible Low-Taxed Income) and Foreign-Derived Deduction Eligible Income ("FDDEI", formerly Foreign-Derived Intangible Income), and expanded aggregation requirements under Section 162(m) of the Code. The application of the OBBBA to the Company did not have a material impact on its condensed consolidated financial statements.
Leases
The Company accounts for leases in accordance with ASC 842, Leases. The Company determines if an arrangement is a lease at inception and classifies its leases at commencement. Operating and finance leases are presented as right-of-use (“ROU”) assets and the corresponding lease liabilities are included in operating or finance lease liabilities, current and operating or finance lease liabilities on the Company’s condensed consolidated balance sheets. ROU assets represent the Company's right to use an underlying asset, and lease liabilities represent the Company's obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.
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ROU assets and lease liabilities are recognized at commencement date and determined using the present value of the future minimum lease payments over the lease term. For leases in which the rate is not implicit in the lease, the Company uses a discount rate based on a benchmark approach to derive an appropriate incremental borrowing rate to discount remaining lease payments. The Company benchmarked itself against other companies of similar credit ratings and comparable quality and derived imputed rates for a lease term length of 10 years. Some leases include multiple year renewal options. The Company’s decision to exercise these renewal options is based on an assessment of its current business needs and market factors at the time of the renewal. Currently, the Company has certain leases for which the option to renew is reasonably certain, and therefore, options to renew were factored into the calculation of its right-of-use asset and lease liability as of September 30, 2026 and December 31, 2025. In addition, the Company does not recognize short-term leases that have a term of twelve months or less as ROU assets or lease liabilities for all asset classes. The Company recognizes operating lease expense on a straight-line basis over the lease term. For finance leases, the Company recognizes amortization expense on the ROU asset on a straight-line basis over the lease term, and interest expense on the lease liability using the effective interest method.
The Company has lease agreements which contain both lease and non-lease components, which it has elected to account for as a single lease component for all asset classes when the payments are fixed. As such, variable lease payments, including those not dependent on an index or rate, such as real estate taxes, common area maintenance, and other costs that are subject to fluctuation from period to period are not included in lease measurement. ROU assets are reviewed for impairment consistent with the Company's policy for long-lived assets. See Long-Lived Assets, Including Definite-Lived Intangible Assets above.
Segment Reporting
The Company accounts for segment reporting in accordance with ASC 280, Segment Reporting, as amended by ASU 2023-07, Improvements to Reportable Segment Disclosures. The Company determines its operating segments based on the components of the business for which discrete financial information is regularly reviewed by the chief operating decision maker ("CODM") in assessing performance and deciding how to allocate resources. The Company's CODM is its Chief Executive Officer.
The Company has determined it operates as two
Net Income (Loss) per Share
Basic net income (loss) per share attributable to common shareholders is computed by dividing net income (loss) attributable to common shareholders of QumulusAI by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share attributable to common shareholders reflects the potential dilution that would occur if dilutive common stock equivalents were exercised or converted into common stock, unless their effect would be antidilutive. Convertible notes, employee stock options, unvested restricted stock units ("RSUs"), and warrants are treated as potential common shares in computing diluted earnings per share. Diluted shares outstanding are calculated using the if-converted method for convertible notes and the treasury stock method for other potentially dilutive securities. Under the if-converted method, the dilutive impact of securities is calculated as if conversion occurred at the beginning of the reporting period. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized and the amount of benefits that would be recorded in common shares when the award becomes deductible for tax purposes are assumed to be used to repurchase shares. For periods in which the Company reports a net loss, all potentially dilutive securities are excluded from the calculation of diluted net loss per share because their effect would be antidilutive; accordingly, basic and diluted net loss per share are the same for such periods.
Loan Origination Costs
Costs incurred in connection with securing loans payable have been capitalized and are being amortized as a component of interest expense over the term of the respective debt using the effective interest method. The unamortized balance of loan origination costs is reflected on the condensed consolidated balance sheets as a direct deduction of the outstanding balance owed on the long-term debt.
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Stock Issuance Costs
Stock issuance costs represent incremental costs incurred that are directly attributable to the sale of securities. The costs are charged against the gross proceeds of the respective sale and recorded as a reduction to equity.
Convertible Notes
The Company elected to account for its convertible notes payable at fair value at inception and at each subsequent reporting date. Subsequent changes in fair value are recorded as a component of non-operating (loss) income in the condensed consolidated statements of operations. As a result of electing the fair value option, direct costs and fees related to the convertible notes are expensed as incurred.
The Company’s option to issue additional convertible notes is a freestanding financial instrument that is recorded as a liability at fair value, with changes in fair value recorded as a component of non-operating (loss) income. When a note is issued, the amount by which the initial fair value of the note and the related option exceeds the net cash proceeds is recognized as a loss on issuance of convertible note.
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by ASC 480, Distinguishing Liabilities from Equity, and ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, if the financial instrument embodies an obligation to repurchase the Company's own equity shares by transferring assets, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
For freestanding equity-linked instruments such as warrants, the Company also evaluates whether the instrument is indexed to the Company's own stock and otherwise meets the criteria for equity classification under ASC 815-40. An instrument is not considered indexed to the Company's own stock if its exercise or settlement is contingent on variables unrelated to the fair value of the Company's equity shares, which precludes application of the fixed-for-fixed option pricing model. An instrument that fails this test is classified as a liability, initially and subsequently measured at fair value, with changes in fair value recognized in earnings each reporting period.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“mezzanine equity”). The Company will determine mezzanine equity classification if the redemption of the financial instrument is outside the control of the Company (i.e., at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Stock-Based Compensation
The Company measures the cost of employee and non-employee services in exchange for awards of equity instruments based on the grant-date fair value of the award. The fair value is determined using an option pricing model. The fair value of restricted stock units ("RSUs") is determined based on the closing price of the Company's common stock on the date prior to grant. The cost of awards of equity instruments is recognized on a straight-line basis over the vesting period, which is the requisite service period, and is recorded as stock-based compensation expense together with a corresponding increase in paid-in capital. The Company has elected to account for forfeitures of awards as they occur.
Variable Interest Entities ("VIEs")
The Company evaluates its interests in VIEs and will consolidate any VIE in which the Company has a controlling financial interest and is deemed to be the primary beneficiary. A controlling financial interest has both of the following characteristics: (1) the power to direct the activities of the VIE that most significantly impact its economic performance; and (2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could be significant to the VIE. If both of the characteristics are met, the Company is considered to be the primary beneficiary and therefore will consolidate that VIE into its condensed consolidated financial statements. See Note 9 - Equity Method Investments and Note 10 - Joint Ventures for additional disclosures.
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Recently Issued Accounting Pronouncements - Adopted
In November 2024, the FASB issued ASU 2024-04, Debt - Debt with Conversion and Other Options (Topic 470). This guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The Company adopted this standard effective January 1, 2026. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). This guidance clarifies the requirements for share-based consideration payable to a customer. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company early adopted this standard effective April 1, 2026. The adoption of this standard is reflected in the Company's condensed consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient for estimating expected credit losses on current accounts receivable and current contract assets. The Company adopted this standard effective January 1, 2026. See Financial Instruments — Credit Losses above for further discussion of the Company's application of this standard.
Recently Issued Accounting Pronouncements - Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses. This guidance requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently evaluating the impact of ASU 2024-03 on its condensed consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40). This guidance updates the capitalization guidance for internal-use software development costs by removing all references to software project development stages and provides further guidance on when an entity is required to start capitalizing eligible costs. This ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods. The Company is currently evaluating the impact of ASU 2025-06 on its condensed consolidated financial statements and related disclosures.
Other recent accounting pronouncements did not or are not believed by management to have a material impact on the Company’s present or future condensed consolidated financial statements.
Note 3. Business Combination
On April 1, 2025 (the “Effective Date”), the Company entered into Contribution and Exchange Agreements, as amended (together, the “Acquisition Agreement”), with shareholders of TCM, pursuant to which each TCM shareholder contributed all outstanding equity securities in TCM to the Company in exchange for equity securities of the Company. As a result, TCM became a wholly owned subsidiary of the Company, with 75 % of the Company’s capital stock held by Company shareholders and 25 % of the Company’s capital stock held by former TCM shareholders (the “Acquisition”). The Acquisition formally closed on the Effective Date. TCM’s operations diversified the Company’s revenue base through the addition of GPU-based infrastructure, which has generated more stable, recurring revenue streams aligned with demand for high-performance computing ("HPC") resources across AI, machine learning, and data analytics sectors.
Prior to the Acquisition, the Company held a noncontrolling equity interest in TCM, acquired in October 2023. In connection with the Acquisition, the Company remeasured its previously-held equity interest to its acquisition-date fair value of $17,216,604 , resulting in a gain of $14,549,536 , which is presented as Gain on remeasurement of investment in TCM in the condensed consolidated statement of operations for the nine months ended September 30, 2025.
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| Common | Series D | ||||||||||
| Total Number of TCM Shares Exchanged | |||||||||||
| Conversion Ratio | |||||||||||
| Fair Value per Share (Controlling Interest) | $ | $ | |||||||||
| Fair Value | $ | $ | |||||||||
| Total Fair Value Shares Exchanged | $ | ||||||||||
| Total Number of TCM Shares Held By the Company | |||||||||||
| Company Fair Value per Share (Non-Controlling) | $ | ||||||||||
| Fair Value Company's Investment in TCM | $ | ||||||||||
| Fair Value Replacement Options | $ | ||||||||||
| Total Purchase Price | $ | ||||||||||
The following table summarizes the fair value of the consideration and the fair value of assets acquired and liabilities assumed associated with the Acquisition:
| Description | Fair Value | |||||||
| Total purchase price | $ | |||||||
| Estimated fair value of assets acquired: | ||||||||
| Cash | $ | |||||||
| Prepaid expenses | ||||||||
| Property and equipment | ||||||||
| Customer relationships | ||||||||
| Trade name | ||||||||
| In-process research & development ("IPR&D") | ||||||||
| Finance right-of-use assets, net | ||||||||
| Total assets acquired | $ | |||||||
| Estimated fair value of liabilities assumed: | ||||||||
| Accounts payable | ||||||||
| Current portion of convertible note payable | ||||||||
| Current portion of notes payable - related party | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Finance lease liabilities | ||||||||
| Long-term notes payable, net of current portion | ||||||||
| Total liabilities assumed | ||||||||
| Goodwill | $ | |||||||
| Intangible Assets | Estimated Fair Value | Estimated Useful Life | |||||||||
| Customer relationships | $ | ||||||||||
| Trade name | |||||||||||
| IPR&D | N/A | ||||||||||
| $ | |||||||||||
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The Company has applied the acquisition method of accounting in accordance with ASC 805 and recognized assets acquired and liabilities assumed of TCM at their fair value as of the date of acquisition, with the excess purchase consideration recorded to goodwill. The Company recorded $23,542 of acquisition related costs within general and administrative expenses.
Pro Forma Financial Information
The following table represents the revenue, net loss and net loss per share effect of the acquired company, as reported on a pro forma basis as if the acquisition occurred on January 1, 2025. These pro forma results are not necessarily indicative of the results that would have occurred if the acquisition had occurred on the first day of the period presented, nor does the pro forma financial information purport to represent the results of operations for future periods.
| Nine months ended September 30, 2025 | |||||
| Revenues | $ | ||||
| Net loss | ( | ||||
| Net loss attributable to common stockholders | ( | ||||
| Basic net income (loss) per share – on a pro forma basis (unaudited) | $ | ( | |||
| Diluted net income (loss) per share – on a pro forma basis (unaudited) | $ | ( | |||
Note 4. Revenue
Revenue Disaggregation
The following table provides the Company’s revenue disaggregated by revenue stream:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Revenue from cryptocurrency mining | $ | $ | $ | $ | |||||||||||||||||||
| Revenue from mining hosting services | |||||||||||||||||||||||
| Revenue from compute power | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
Deferred Revenue
Deferred revenue consists primarily of upfront cash deposits and prepayments received from compute power and mining hosting customers in advance of the Company satisfying the related performance obligations, and is recognized as revenue as the Company delivers the underlying services over the applicable contract term. See Note 2 - Summary of Significant Accounting Policies for further discussion of the Company's revenue recognition policies for each revenue stream, including the timing of recognition and the treatment of customer deposits and prepayments.
Revenue recognized from amounts included in deferred revenue as of the beginning of the period was $2,436,527 and $0 for the three months ended September 30, 2026 and 2025, respectively, and $0
Deferred Contract Costs
The Company capitalizes incremental costs of obtaining a contract with a customer, which consist of sales commissions, when it expects to recover them. Capitalized costs are amortized on a straight-line basis over the duration of the contract. The portion of deferred compensation expected to be recognized within one year of the balance sheet date is included in prepaid expenses and other current assets, and the remaining portion is recorded as other assets on the condensed consolidated balance sheets.
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During the three and nine months ended September 30, 2026, the Company capitalized $3,443,520 and $3,744,242 of deferred contract costs and recognized amortization of $615,284 and $772,582 , respectively. No 1,503,774 and $1,467,885 , respectively, as of September 30, 2026. The Company had no deferred contract costs as of December 31, 2025.
Deferred contract costs are periodically analyzed for impairment. There were no
Remaining Performance Obligations
In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. The majority of the Company's direct to customer compute power contracts have an expected duration of greater than one year. As of September 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations for the Company's direct to customer compute power contracts was $515,026,820 , which represents the amount of backlog related to these contracts. $29,051,771 of the remaining performance obligations will be completed and recognized as revenue during 2026, with the remainder recognized between 2027 and 2030.
Note 5. Fair Value of Financial Instruments
The Company accounts for certain assets and liabilities at fair value and classifies these assets and liabilities within the fair value hierarchy (Level 1, Level 2, or Level 3). The Company's other current liabilities have fair values that approximate their carrying values.
The following tables present the fair value hierarchy for the Company’s liabilities measured at fair value on a recurring basis:
| As of September 30, 2026 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
| Convertible note payable | |||||||||||||||||||||||
| Additional convertible notes option liability | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| As of December 31, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Warrant liability. The warrant liability consists of warrants with a nominal exercise price (“penny warrants”; see Note 20 - Warrants). It is valued at intrinsic value, which is the quoted market price of the Company’s common stock less the exercise price. Because the warrants themselves are not quoted, the liability is classified within Level 2.
Convertible notes payable. The convertible notes are valued using a scenario-based analysis that estimates the probability-weighted present value of the settlement outcomes available to the noteholder. The significant unobservable inputs are the discount rates, the timing of payments, and the probability of each settlement scenario.
Additional convertible notes option liability. The option to issue additional notes under each facility is valued based on the fair value of the additional notes as if issued on the measurement date, multiplied by the estimated probability that the additional notes will be issued.
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Level 3 Reconciliation
The following table presents a reconciliation of the beginning and ending balances of the Company's Level 3 liabilities for the nine months ended September 30, 2026:
| Warrant Liability | Convertible Note Payable | Additional Convertible Notes Option Liability | |||||||||||||||
| Balance as of January 1, 2026 | $ | $ | $ | ||||||||||||||
| Issuances | |||||||||||||||||
| Change in fair value included in earnings | ( | ( | |||||||||||||||
| Conversions into common stock | ( | ||||||||||||||||
| Transfer out of Level 3 | ( | ||||||||||||||||
| Balance as of September 30, 2026 | $ | $ | $ | ||||||||||||||
The warrant liability was transferred out of Level 3 to Level 2 on July 16, 2026, when the Company’s common stock began trading publicly and its quoted price became observable. There were no other transfers between levels of the fair value hierarchy during the periods presented.
Note 6. Property and Equipment, Net
The major classifications of property and equipment, including their estimated useful lives, are summarized as follows at the balance sheet dates:
Estimated Useful Life (Years) | September 30, 2026 | December 31, 2025 | |||||||||||||||
| Buildings and improvements | $ | $ | |||||||||||||||
| Miners | |||||||||||||||||
| Mining related equipment | |||||||||||||||||
| Server equipment | |||||||||||||||||
| Other equipment and furniture | |||||||||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||||||||
Construction in progress | |||||||||||||||||
Total property and equipment, net | $ | $ | |||||||||||||||
Depreciation expense relating to property and equipment was $5,573,875 and $972,722 for the three months ended September 30, 2026 and 2025, respectively, and $10,453,147 and $2,466,429 for the nine months ended September 30, 2026 and 2025, respectively.
During the nine months ended September 30, 2026, the Company recorded a gain on disposal of property and equipment of $36,298 relating to the sale of equipment. No gain or loss was recorded on sales of property and equipment during the three months ended September 30, 2026.
There were no
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Note 7. Digital Assets, Net
The following table presents changes in the Company's digital assets for the nine months ended September 30, 2026 and 2025:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Balance as of January 1 | $ | $ | |||||||||
| Additions of digital assets | |||||||||||
| Sales of digital assets | ( | ( | |||||||||
| Change in fair value of digital assets | |||||||||||
| Ending balance | $ | $ | |||||||||
Note 8. Intangible Assets, Net
As of September 30, 2026 and December 31, 2025, intangible assets, net were comprised of the following:
Estimated Useful Life (Years) | September 30, 2026 | December 31, 2025 | |||||||||||||||
| Customer relationships | $ | $ | |||||||||||||||
| Trade name | |||||||||||||||||
| IPR&D | N/A | ||||||||||||||||
| Capitalized software | N/A | ||||||||||||||||
| Total intangible assets | |||||||||||||||||
| Less: accumulated amortization | ( | ( | |||||||||||||||
| Total intangible assets, net | $ | $ | |||||||||||||||
IPR&D and capitalized software are not amortized until the related research and development is completed or the software is placed in service.
Amortization expense was $44,241 132,723 and $88,482 for the nine months ended September 30, 2026 and 2025, respectively.
The estimated future amortization expense is as follows:
| Future Amortization Expense | |||||
| 2026 (Remaining) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Total | $ | ||||
The weighted average remaining amortization period for the Company’s intangible assets as of September 30, 2026 was 2.25 years.
There were no
Note 9. Equity Method Investments
T20 Mining Group, LLC
In March 2023, the Company entered into a Limited Liability Company Interest Purchase Agreement with Turn Key Mountain, LLC and 913 Hero, LLC ("T20 Purchase Agreement") to acquire a 50.01 % ownership interest in T20 Mining Group, LLC (“T20”). Under the terms of the T20 Purchase Agreement, the Company leased certain equipment to
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T20 and promised to contribute $450,090 to T20 for the development of its digital asset mining operations. The Company determined that T20 was a VIE as the Company had a variable interest in T20 and T20 relied on funding from the Company, Turn Key Mountain, LLC, and 913 Hero, LLC to sustain its operations. The Company determined that it was not the primary beneficiary of T20 as power to direct or control its significant activities related to the bitcoin mining hosting was shared with Turn Key Mountain, LLC and 913 Hero, LLC. Accordingly, the Company did not consolidate T20’s results of operations and financial position. As the entity was not consolidated, it was accounted for as an equity method investment. The initial investment in T20 amounted to $1,677,197 . The Company was initially entitled to 50.01 % of the profits and losses of T20.
In April 2024, the Company entered into a subsequent Limited Liability Company Interest Purchase Agreement with Bishops Bowl Capital, LLC ("Bishops Bowl Purchase Agreement"), whereby the Company sold 10.01 % of its ownership interest in T20 to Bishops Bowl for consideration of $1,000,000 . As the Company retained significant influence in T20 following its execution of the Bishops Bowl Purchase Agreement, the Company reduced the carrying amount of its equity method investment for the proportion sold in the amount of $164,954 and also recognized a gain of $835,046 related to the difference between the proceeds received and the carrying amount of the equity method investment sold. During the second half of the year ended December 31, 2024, the Company and Bishops Bowl contributed equipment to T20 for the expansion of its digital asset mining operations. The Company increased the carrying amount of its equity method investment for the fair value of the assets contributed in the amount of $926,240 and also recognized a loss of $2,094,030 on the contribution of the assets. In February 2025, the Company contributed additional assets in the amount of $115,210 . The additional contributions were made such that each partner’s ownership percentages remained the same, with the Company and Bishops Bowl continuing to own 40 % and 60 %, respectively, of T20. The Company continued to account for its retained ownership interest of 40 % under the equity method until the sale of its interest in T20 in February 2026, as discussed below.
On January 12, 2026, the Company entered into a Limited Liability Company Interest Purchase Agreement to sell its 40 % interest in the T20 joint venture to a third party. The transaction closed on February 13, 2026 and the Company received approximately $16,500,000 for the sale. The Company recognized a gain of $12,732,446 on the sale, which is included in gain on sale of equity method investments in the condensed consolidated statements of operations for the nine months ended September 30, 2026.
During the nine months ended September 30, 2026 and 2025, the Company received distributions of $259,163 and $2,422,000 from T20, respectively. During the three months ended September 30, 2026 and 2025, the Company's share of net income in T20 amounted to zero and $179,617 , respectively, and $21,994 and $1,606,080 for the nine months ended September 30, 2026 and 2025, respectively, which is included within income from equity method investments in the Company's condensed consolidated statements of operations. As of September 30, 2026 and December 31, 2025, the Company’s investment in T20 amounted to zero and $4,227,130 , respectively, and is included in the balance of equity method investments in the accompanying condensed consolidated balance sheets.
Summarized financial information for T20 as of December 31, 2025 is as follows:
| December 31, 2025 | |||||
| Total assets | $ | ||||
| Total liabilities | $ | ||||
From January 1, 2026 to the sale of T20 on February 13, 2026, T20 had net income of $54,985 . For the three and nine months ended September 30, 2025, T20 had a net loss of $563,407 and net income of $3,002,750 , respectively.
The Cloud Minders LLC
On November 1, 2023, the Company acquired an interest in TCM, a partnership that is involved in GPU cloud hosting services. The Company was initially entitled to 43 % of the profit and losses from the investee. The acquisition cost totaled $4,300,000 and consisted of the issuance of the Company's common stock via a convertible note payable with TCM for $3,300,000 (see Note 17 - Convertible Note Payable) and a payable to TCM totaling $1,000,000 to be repaid over 12 months at no interest. Payments commenced on January 1, 2024, and continued on the first of each subsequent month, in exchange for an additional 19,608 (approximately 6 %) membership interest to the Company over the twelve months. TCM specializes in HPC and AI infrastructure within the cloud computing industry and offers graphics processing unit server hosting, equipped with the latest hardware for deep learning, data science, graphics rendering, and scientific research applications. Its services include configuration, reliability assurance, testing and validation, security measures, installation,
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and hardware rental for monetization. Prior to the Acquisition, the Company did not consolidate TCM's results of operations and financial position, as it held significant influence but not control, and accordingly accounted for its investment under the equity method.
During the three and nine months ended September 30, 2025, the Company’s share of net loss in TCM amounted to $0 and $562,143 , which is included within income from equity method investments in the Company’s condensed consolidated statements of operations.
On April 1, 2025, the Company acquired 100 % of TCM. Therefore, as of April 1, 2025, the Company does not account for TCM as an equity method investment as the entity is consolidated. See Note 3 - Business Combinations for additional details on the acquisition. On April 1, 2025, the Company marked the value of its investment in TCM to its fair value of $17,216,604 immediately prior to the acquisition and recognized a gain of $14,549,536 .
From January 1, 2025 to the acquisition on April 1, 2025, TCM had a net loss of $1,307,308 .
Note 10. Joint Ventures
In October 2025, the Company entered into a joint venture agreement with ME Luna Qumulus LLC (“Moonshot”) to form QAI Moon, which serves as the manager for two additional joint ventures: SPRE Brooklyn and SPRE NKC (collectively, the “QAI Moon JVs”).
Under the QAI Moon Operating Agreement, the Company holds a 51 % interest and Moonshot holds a 49 % interest. The Company appoints three of the five managers on the Board of Managers, giving it majority governance rights over significant decisions such as approving budgets, financing arrangements, and strategic initiatives.
For its ownership interests in QAI Moon, the Company contributed $213,000 , funded through a share exchange rather than a direct cash payment. Under this arrangement, the Company issued 19,723 common shares valued at $10.80 per share for a total value of $213,000 . The Company received distributions from QAI Moon of $111,180 and $264,180 during the three and nine months ended September 30, 2026, respectively.
For SPRE Brooklyn, QAI Moon contributed $900 and holds 900 Common Units, which comprises 100 % of the entity’s ownership interests. The Company received distributions from SPRE Brooklyn of $10,000
For SPRE NKC, the Operating Agreement is between QAI Moon, LLC, DAF Compute LLC, and TCM. QAI Moon contributed $300 and holds 300 Common Units which represents 100 % of the voting rights while DAF Compute LLC contributed $3,000,000 and holds 350 Preferred Units and TCM contributed $3,000,000 and holds 350 Preferred Units, for a total of 700 Preferred Units. Preferred Units provide economic rights only and do not carry any voting rights. The Company received distributions from SPRE NKC of $364,000
The QAI Moon JVs were formed to provide HPC infrastructure and services. Based on the governance structure and capital requirements, QAI Moon, SPRE Brooklyn and SPRE NKC are VIEs, as they rely on the Company's capital to sustain future operating expenses. The Company is the primary beneficiary of the QAI Moon JVs, as it has the power to direct their most significant activities and has the obligation to absorb losses or the right to receive benefits that could be significant through its equity interests held. Accordingly, the Company consolidates the assets, liabilities, and results of operations of the QAI Moon JVs.
As of September 30, 2026, the Company’s condensed consolidated balance sheets included $25,405,658 of assets and $20,143,036 of liabilities of the QAI Moon JVs, which are consolidated. Upon consolidating the QAI Moon JVs, no gain or loss was recognized. The Company's total risk of loss is the total $3,214,200 contributed into the QAI Moon JVs, as noted above.
Note 11. Deposits on Power Equipment
The Company makes deposits that represent prepayments made to premier suppliers and manufacturers to purchase compute power and related equipment at a preset price. The prepayments are applied to the purchase price when the vendor ships the equipment. As of September 30, 2026, the Company had outstanding deposits for power equipment totaling $6,423,857 , of which $2,137,972 was classified as current and $4,285,885 as non-current on the condensed consolidated balance sheets, based on the expected timing of delivery of the related equipment. As of December 31, 2025,
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the Company had outstanding deposits for power equipment totaling $13,622,641 , of which $7,238,383 was classified as current and $6,384,258 as non-current on the condensed consolidated balance sheets, based on the expected timing of delivery of the related equipment.
Note 12. Transactions with Related Parties
As of and for the three and nine months ended September 30, 2026 and 2025, the Company had the following related party transactions:
•As of September 30, 2026 and December 31, 2025, the Company had an outstanding loan payable due to a related affiliate of one zero and $1,849,888 , respectively. See Note 16 - Notes Payable, for additional information regarding the terms of this related party loan.
•As of September 30, 2026 and December 31, 2025, the Company had an outstanding loan payable due to one 2,000,000
•The Company had a line of credit with an affiliate of one of the shareholders, which was repaid and terminated in March 2025. See Note 13 - Line of Credit.
•During the nine months ended September 30, 2026, the Company recognized bitcoin mining operating expenses of $17,660 from T20, representing activity prior to the sale of the Company's interest in T20 in February 2026, upon which T20 ceased to be a related party. During the three and nine months ended September 30, 2025, the Company recognized bitcoin mining operating expenses of $255,111 and $531,438 from T20, respectively. As of September 30, 2026 and December 31, 2025, amounts payable to T20 totaled $0 and $42,118 , respectively, and are included in accounts payable on the Company’s condensed consolidated balance sheets.
•During the nine months ended September 30, 2026, the Company recognized equipment rental income of $26,256 from T20, representing activity prior to the sale of the Company's interest in T20 in February 2026, upon which T20 ceased to be a related party. During the three and nine months ended September 30, 2025, the Company recognized equipment rental income of $15,803 and $23,705 from T20, respectively. As of September 30, 2026 and December 31, 2025, amounts receivable from these entities totaled $0 and $26,786 and are included in accounts receivable on the Company’s condensed consolidated balance sheets.
•An executive officer of the Company guaranteed, jointly and severally with certain other third parties, TCM’s obligations under its January 2025 credit agreement with a bank. In consideration for the guaranty, TCM agreed to pay the director monthly payments anticipated to total approximately $50,000 over five years and to grant 80,625 non-qualified stock options. During the nine months ended September 30, 2026, the Company paid $7,588 under this arrangement.
•The Company is party to finance lease agreements with four entities in which a shareholder holds a capital interest. Additional details related to these lease agreements are provided in Note 25 - Leases.
Note 13. Line of Credit
In September 2023, the Company secured a line of credit with Trailhead Growth, LP, a related party, with a maximum principal amount of $300,000 at an interest rate of 12 %. The line of credit was collateralized by a blanket lien on certain assets and was guaranteed by certain of the Company's shareholders. The line of credit had a maturity date of October 1, 2024, which was amended in April 2024 to increase the maximum principal amount to $700,000 and reduce the interest rate to 6 %. The Company made its first and only advance under the line of credit in May 2024, in the amount of $648,262 , which included $6,418 of origination fees. The Company repaid the line of credit in full on March 31, 2025, and the line of credit was terminated upon repayment. There was no 0 and $9,955 , respectively.
Note 14. USD.AI Protocol Loans
On September 19, 2025, the Company entered into a $500,000,000 USD.AI protocol. The facility allows the Company to borrow stablecoins against up to 70 % of its approved GPU deployments. The Company is under no obligation to draw financing under the USD.AI protocol. On February 13, 2026, the Company made its first draw for approximately
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$4,282,000 , which bears interest at 12 % and is scheduled to mature and be repaid in February 2029. On April 17, 2026, the Company completed its second draw for approximately $16,400,000 , which bears interest at 12 % and is scheduled to mature and be repaid in April 2029. On August 6, 2026, the Company completed its third draw for approximately $15,332,000 , which bears interest at 15 % and is scheduled to be repaid in September 2029. At September 30, 2026, the Company had an outstanding balance of $32,534,266 . Interest expense for the three and nine months ended September 30, 2026 was $914,825 and $1,447,052 , respectively.
Note 15. Accrued Expenses
Accrued expenses were comprised of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||
| Accrued interest | $ | $ | |||||||||
| Sales tax payable | |||||||||||
| Accrued hosting fees | |||||||||||
| Accrued payroll and benefits | |||||||||||
| Accrued bonus | |||||||||||
| Accrued commissions | |||||||||||
| Other accrued expenses | |||||||||||
| Accrued expenses | $ | $ | |||||||||
Note 16. Notes Payable
On March 19, 2021, the Company entered into a $2,000,000 convertible balloon note with Trailhead Income, LP, a related party. The note bears interest at 12 % and originally matured on September 1, 2025. On June 19, 2025, the Company extended the note to October 1, 2026. The note is secured by certain mining equipment. Interest-only payments are due on a quarterly basis through the maturity date. As of September 30, 2026 and December 31, 2025, the outstanding principal balance on the note was $2,000,000
On February 15, 2022, the Company entered into a $1,849,888 balloon note with GC Opportunities 2 Private Fund, a related party. The note bore interest at 12 % and had a stated maturity of February 15, 2026. The note was secured by certain mining equipment. The note was amended on October 4, 2022 to provide a onetime waiver of payment default for unpaid monthly interest due for July 15, 2022, August 15, 2022 and September 2022, and to defer interest due for six months from July 2022 to December 2022, until maturity. The Company repaid the loan in full in January 2026. As of September 30, 2026 and December 31, 2025, the outstanding principal balance was zero and $1,849,888 , respectively.
On April 11, 2022, the Company entered into two notes with Caterpillar Financial Services Corporation for an aggregate of $228,314 . The notes bear interest at 1.49 % and mature on April 11, 2027. The notes are secured by track loaders. Payments of principal and interest are due on a monthly basis through maturity. As of September 30, 2026 and December 31, 2025, the outstanding principal balance was $13,758 and $62,549 , respectively.
In January 2025, TCM purchased previously leased equipment for $6,454,466 , financed through a loan payable to a commercial bank in the amount of $6,450,000 at prime, subject to a 5 % floor. The loan calls for principal and interest payments totaling $129,552 beginning in March 2025, and matures in January 2030. As part of the April 1, 2025 acquisition of TCM, the Company acquired this loan. As of September 30, 2026 and December 31, 2025, the outstanding principal balance was $4,550,569 and $5,437,993 , respectively.
On October 17, 2025, the Company entered into a $2,500,000 loan with a third party. The interest rate is variable based on the secured overnight financing rate ("SOFR") plus 3.0 %. The loan matures on April 20, 2028 with payments of principal and interest due on a monthly basis through maturity. As of September 30, 2026 and December 31, 2025, the outstanding principal balance was $2,097,048 and $2,430,979 , respectively.
On August 12, 2026, the Company entered into a $51,517,440 loan with a third party. The note bears interest at 13.0 %. The loan matures on September 1, 2029 with payments of principal and interest due on a monthly basis through maturity, with an end of term payment of 9.5 % of the initial loan balance. The note is secured by server assets. As of September 30, 2026 and December 31, 2025, the outstanding principal balance was $50,264,626 and $0 , respectively.
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On September 25, 2026, the Company entered into a $3,500,000 interest-only loan with a commercial bank. The interest rate is variable based on SOFR plus 2.25 %. The loan matures on October 5, 2027 with interest payments due on a monthly basis through maturity. As of September 30, 2026 and December 31, 2025, the outstanding principal balance was $3,500,000 and $0 , respectively.
Notes payable at September 30, 2026 and December 31, 2025 consisted of the following:
| September 30, 2026 | December 31, 2025 | ||||||||||
Note payable with interest at current prime rate, subject to | $ | $ | |||||||||
Balloon notes payable with monthly interest payments of | |||||||||||
Notes payable with interest ranging from | |||||||||||
Note payable with variable interest, maturing in April 2028 | |||||||||||
Notes payable with interest of | |||||||||||
Note payable with variable interest, maturing in October 2027 | |||||||||||
| Unamortized loan origination costs | ( | ( | |||||||||
| Total notes payable | |||||||||||
| Less: Current maturities | ( | ( | |||||||||
| Notes payable, net of current maturities | $ | $ | |||||||||
Maturities of notes payable are as follows:
| 2026 (remaining) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Total | $ | ||||
Note 17. Convertible Notes Payable
TCM Convertible Note
On November 1, 2023, the Company entered into a Convertible Promissory Note Agreement (the "Note") with TCM at a face value of $3,900,000 and an initial fair value of $3,300,000 , issued as consideration in the Company's acquisition of an equity method investment in TCM (see Note 9). The Company recognized $135,334 of interest expense related to the Note for the nine months ended September 30, 2025. Immediately prior to the acquisition of TCM, the Company repaid the Note in full on March 31, 2025 and recognized a loss on extinguishment of $153,834 in the condensed consolidated statements of operations.
March 2026 Convertible Note
On March 26, 2026, the Company entered into a securities purchase agreement (the "March Securities Purchase Agreement") with a third party (the "Investor"), pursuant to which the Company agreed to issue and sell to the Investor senior secured convertible notes (the "March 2026 Note") in an aggregate principal amount of up to $45,000,000 (the "Facility").
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The Facility consists of an initial tranche in the principal amount of $15,000,000 , which was funded on March 26, 2026, and subsequent tranches in an aggregate principal amount of up to $30,000,000 . The March 2026 Note bears interest at 7 % per annum and the initial tranche matures on July 16, 2028. The March 2026 Note is convertible into shares of the Company's common stock at $11.50 per share. The Company incurred $1,174,000 in debt issuance costs related to the March 2026 Note.
Due to certain embedded features within the convertible note, the Company elected the fair value option to account for this note, including the embedded features. The initial fair value of the note was determined to be $36,875,000 . The fair value of the convertible note was determined based on Level 3 inputs using a scenario-based analysis that estimated the fair value of the convertible notes based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholder. The significant unobservable input assumptions that can significantly change the fair value included (i) the discount rates, (ii) the timing of payments, and (iii) the probability of certain settlement scenarios. The Company recorded a change in fair value on the convertible note of $13,684,169 for the nine months ended September 30, 2026.
The option for the Company to issue additional notes up to $30 million was determined to be a freestanding instrument that was recognized at fair value as of the date of the March Securities Purchase Agreement. The fair value of this option was determined to be $30,991,850 and was determined based upon the fair value of the additional notes as if it were issued today multiplied by the probability of issuance. As the aggregate fair value of the note and the option was in excess of the proceeds received, the Company recorded a loss on issuance of convertible note of $54,640,850 , which includes the $1,174,000 in debt issuance costs. The Company recorded a change in fair value on the option of $19,437,950 for the nine months ended September 30, 2026.
June 2026 Convertible Note
On June 3, 2026, the Company entered into a securities purchase agreement (the "June Securities Purchase Agreement") with the Investor, pursuant to which the Company agreed to issue and sell to the Investor senior secured convertible notes (the "June 2026 Note") in an aggregate principal amount of up to $45,000,000 (the "Second Facility").
The Second Facility consists of an initial tranche in the principal amount of $15,000,000 , which was funded on June 3, 2026, and subsequent tranches in an aggregate principal amount of up to $30,000,000 . The June 2026 Note bears interest at 7 % per annum and the initial tranche matures on July 16, 2028. The June 2026 Note is convertible into shares of the Company's common stock at $24.25 per share. The Company incurred $1,075,000 in debt issuance costs related to the June 2026 Note.
Due to certain embedded features within the convertible note, the Company elected the fair value option to account for this note, including the embedded features. The initial fair value of the note was determined to be $20,986,000 . The fair value of the convertible note was determined based on Level 3 inputs using a scenario-based analysis that estimated the fair value of the convertible notes based on the probability-weighted present value of expected future investment returns, considering each of the possible outcomes available to the noteholder. The significant unobservable input assumptions that can significantly change the fair value included (i) the discount rates, (ii) the timing of payments, and (iii) the probability of certain settlement scenarios. The Company recorded a change in fair value on the convertible note of $2,345,889 for the nine months ended September 30, 2026.
The option for the Company to issue additional notes up to $30 million was determined to be a freestanding instrument that was recognized at fair value as of the date of the June Securities Purchase Agreement. The fair value of this option was determined to be $11,580,000 and was determined based upon the fair value of the additional notes as if it were issued today multiplied by the probability of issuance. As the aggregate fair value of the note and the option was in excess of the proceeds received, the Company recorded a loss on issuance of convertible note of $19,241,000 , which includes the $1,075,000 in debt issuance costs. The Company recorded a change in fair value on the option of $950,450 for the nine months ended September 30, 2026.
Note 18. Income Taxes
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly tax provision, and estimate of the Company’s annual effective tax rate, are subject to variation due to several factors, including variability in pre-tax income or loss, changes in how the Company conducts business, changes in forecast, and tax law developments.
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The Company’s effective tax rate was (0.3 )% and 0.2 % for the three and nine months ended September 30, 2026, primarily due to the partial valuation allowance recorded as a result of the TCM acquisition in April 2025. The effective tax rate for the three and nine months ended September 30, 2025, was 0.0 % and 25.5 %, respectively, caused by recording a deferred tax liability for identified intangibles acquired in the TCM acquisition.
Note 19. Shareholders' Equity
Preferred Stock
On September 30, 2025, the Company effected the conversion of all shares of Preferred Stock into Common Stock, as agreed to by all holders of Preferred Stock. Accordingly, there were no no
The conversion did not occur in accordance with the original terms of the Preferred Stock as the Company provided the holders of the Preferred Stock with one share of Common Stock for every share of Preferred Stock outstanding, plus an additional share of Common Stock for every $10.80 of unpaid liquidation preference prior to the conversion transaction. As such, the transaction was accounted for as an extinguishment of preferred stock.
Prior to September 30, 2025, the Company had designated Series A, Series B, Series C and Series D Preferred Stock, all of which converted into Common Stock on September 30, 2025.
On July 14, 2026, the Company’s Second Amended and Restated Articles of Incorporation became effective, authorizing 100,000,000 shares of Preferred Stock, no par value. No shares of Preferred Stock were authorized as of December 31, 2025.
Common Stock
As of September 30, 2026 and December 31, 2025, the Company was authorized to issue up to 1,000,000,000 and 500,000,000 shares of common stock, respectively, with no par value. The increase took effect on July 14, 2026, when the Company’s Second Amended and Restated Articles of Incorporation became effective. Each holder of common stock is entitled to one 34,699,038 shares of common stock outstanding.
On July 14, 2026, the Company issued 1,140,930 shares of common stock to Chardan Capital Markets LLC as compensation for financial advisory services provided in connection with the Company’s direct listing. The shares were valued at $26,412,529 , based on the fair value of the Company’s common stock on the issuance date. The Company recorded the amount as professional fees within general and administrative expenses.
Note 20. Warrants
Type 1 Warrants
The warrants to purchase common stock were issued during the year ended December 31, 2022 in conjunction with Series A Preferred Stock in satisfaction of outstanding debt. The warrants were not considered indexed to the issuer’s stock pursuant to ASC 815, as the warrants are subject to vesting upon the thirty-six (36 ) mensiversaries of the issuance date, at a rate of one thirty-sixth (1/36th) per month. At the option of the Company, the Company can return to the holder any cash it previously received from the holder. Upon the occurrence of such return of capital, the vesting schedule recasts based on amount returned and remaining time period to vest. As this contingency is based on the underlying capital account of the warrant holder it violates the fixed-for-fixed option pricing model. As such, the Company recorded the warrants as liabilities initially measured at fair value with subsequent changes in fair value recognized in earnings each reporting period. 961,256 of the warrants are pre-funded warrants.
The Type 1 warrants are "penny warrants", meaning they have an exercise price of $0.01 ($0.03 after the Reverse Stock Split). The fair value of these penny warrants was calculated as the Company's stock price less the exercise price of $0.01 ($0.03 after the Reverse Stock Split) (i.e., intrinsic value). The grant date fair value of the Type 1 Warrants was $692,103 . The fair value of the warrants as of September 30, 2026 and December 31, 2025 was $828,232 and $1,382,955 , respectively.
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Type 2 Warrants
During the nine months ended September 30, 2026, third parties performed professional services for the Company and were issued 91,454 warrants to purchase common stock as payment for the services. The measurement of fair value of the warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments.
On May 1, 2026 the Company issued 86,393 warrants to purchase common stock to a commercial partner as consideration for entering into a contract. Fifty percent (50 %) of the warrant interests provided for herein vest in six equal monthly installments beginning on May 1, 2026. The remaining fifty percent (50 %) of the warrant interests vest in eighteen equal monthly installments beginning on November 1, 2026. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance. The warrants issued are not redeemable in cash at the choice of the holder, are not mandatorily redeemable into common stock, and are classified as equity instruments. The Company recognizes the fair value of the warrants within equity over the vesting period of the warrants.
On July 1, 2026 the Company issued 35,498 warrants to consultants in exchange for a software platform they developed. The Company has elected an accounting policy to account for equity interests issued in an asset acquisition, such as this software purchase, as a share-based payment under ASC 718, Compensation – Stock Compensation. The warrants vest in full six months after issuance and are classified as equity instruments as they are not redeemable in cash at the holder’s option and are not mandatorily redeemable. The Company measured the fair value of the warrants at the issuance date using a Black-Scholes model, and it recognizes that fair value within equity over the vesting period.
The summary of stock warrant activity is as follows:
| Number of Warrants | Weighted Average Exercise price ($) | Weighted Average Grant-Date Fair Value ($) | Weighted Average Remaining Contractual Life (in Years) | ||||||||||||||||||||
| Warrants outstanding as of January 1, 2025 | |||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Warrants outstanding as of December 31, 2025 | |||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Warrants outstanding as of September 30, 2026 | |||||||||||||||||||||||
| Warrants exercisable as of September 30, 2026 | |||||||||||||||||||||||
The total fair value of warrants granted during three and nine months ended September 30, 2026 amounted to $1,797,048 and $3,026,781 , respectively. The total fair value of warrants granted during three and nine months ended September 30, 2025 amounted to $697,620 The Black-Scholes model utilized the following inputs to value the warrants granted:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Warrant Valuation Assumptions: | |||||||||||
| Risk-free interest rate | |||||||||||
| Expected term (years) | |||||||||||
| Expected volatility | |||||||||||
| Expected dividend yield | |||||||||||
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Note 21. Stock-Based Compensation
The Company grants equity awards under the QumulusAI, Inc. 2026 Equity Incentive Plan (the “2026 Plan”), which became effective on July 14, 2026 and replaced the Global Digital Holdings, Inc. 2022 Option Plan, as amended (the “2022 Plan”). All options outstanding as of September 30, 2026 were granted under the 2022 Plan, and all restricted stock units (“RSUs”) were granted under the 2026 Plan.
2026 Equity Incentive Plan
The Company’s Board of Directors approved the 2026 Plan on May 7, 2026, and the Company’s shareholders approved it on June 16, 2026. The 2026 Plan became effective on July 14, 2026, upon the effectiveness of the Company’s Registration Statement on Form S-1, and terminates on July 13, 2036. The 2026 Plan permits the grant of stock options, stock appreciation rights, restricted stock awards, RSUs, deferred stock units, performance awards, non-employee director awards, and other stock-based awards to employees, non-employee directors, and consultants. The Compensation Committee administers the 2026 Plan and determines the terms of each award, including vesting. Stock options and stock appreciation rights must have an exercise or grant price of at least 100 % of the fair market value of a share on the grant date and may not be exercisable more than ten years after the grant date.
A maximum of 4,770,000 shares of common stock was initially available for issuance under the 2026 Plan, of which no more than 1,770,000 may be issued upon exercise of incentive stock options. The share reserve increases automatically on January 1 of each year from 2027 through 2036 by the lesser of 5 % of the shares of common stock outstanding on the preceding December 31 and an amount determined by the Board. Shares withheld to pay an exercise price or taxes, or not issued on a net exercise, are not available for future grant. Shares subject to awards that expire, are forfeited, or are settled in cash become available again. As of September 30, 2026, 1,682,303 shares remained available for grant under the 2026 Plan. In August 2026, the Company registered the shares issuable under the 2026 Plan on a Registration Statement on Form S-8.
2022 Option Plan
The 2022 Plan was originally sponsored by WAHA and SPRE. In connection with the December 2022 roll-up into the Company, the shares authorized and the options outstanding under the plan were converted at the Company’s conversion ratio. All share and option amounts in this note reflect that conversion and the September 30, 2025 reverse stock split.
The 2022 Plan permitted the grant of incentive stock options and non-qualified stock options to employees, consultants and directors of the Company and its affiliates. Options were granted at an exercise price not less than the fair market value on the grant date and are exercisable for up to ten years from the grant date (five years for incentive stock options granted to holders of more than 10 % of the Company’s voting power). The option vesting schedule is determined at the time of the grant. The 2022 Plan provides for accelerated vesting of unvested options in the event of a change in control. As of the effective date of the 2026 Plan, no further awards may be granted under the 2022 Plan. Awards outstanding under the 2022 Plan remain outstanding in accordance with their terms, and shares from forfeited or expired 2022 Plan awards are not added to the 2026 Plan reserve.
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Stock Options
The following is a summary of stock option activity during the nine months ended September 30, 2026 and for the year ended December 31, 2025:
| Number of Options | Weighted Average Exercise price ($) | Weighted Average Grant-Date Fair Value ($) | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value | |||||||||||||||||||||||||
| Options outstanding as of January 1, 2025 | $ | ||||||||||||||||||||||||||||
| Granted | |||||||||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||||||||
| Canceled | ( | ||||||||||||||||||||||||||||
| Options outstanding as of December 31, 2025 | $ | ||||||||||||||||||||||||||||
| Options outstanding as of September 30, 2026 | $ | ||||||||||||||||||||||||||||
| Options exercisable as of September 30, 2026 | |||||||||||||||||||||||||||||
For the three and nine months ended September 30, 2026, there were no 221,600 and $3,489,371 , respectively. The Black-Scholes model utilized the following inputs to value the options granted during the nine months ended September 30, 2025:
| Nine Months Ended September 30, 2025 | |||||
| Option Valuation Assumptions: | |||||
| Risk-free interest rate | |||||
| Expected term (years) | |||||
| Fair value of underlying common stock | $ | ||||
| Exercise price | $ | ||||
| Expected volatility | |||||
| Expected dividend yield | |||||
The Company recognized $116,078 and $549,271 of stock-based compensation expense related to stock options during the three months ended September 30, 2026 and 2025, respectively, and $357,887 and $799,823 during the nine months ended September 30, 2026 and 2025, respectively. Stock-based compensation is recorded in general and administrative expenses in the Company’s condensed consolidated statements of operations. As of September 30, 2026, unamortized stock-based compensation expense related to unvested stock options was $177,623 , which is expected to be recognized over a weighted-average period of 1.3 years.
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Restricted Stock Units ("RSUs")
RSUs were first granted in the third quarter of 2026 under the 2026 Plan and generally vest over four years based on continued service. The fair value of an RSU is based on the closing price of the Company’s common stock on the grant date. The Company accounts for forfeitures as they occur.
The following is a summary of RSU activity during the nine months ended September 30, 2026.
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
Unvested balance as of January 1, 2026 | |||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
Unvested balance as of September 30, 2026 | |||||||||||
The Company recognized $3,812,821 3,478,282 334,539 14,324,953 , which is expected to be recognized over a weighted-average period of 3.37 years. As of September 30, 2026, 456,817 restricted stock units are vested without shares of Common Stock being issued, with all of these shares due as of September 30, 2026.
Note 22. Earnings (Net Loss) per Share
The following table sets forth the computation of the basic and diluted net loss per share:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net loss attributable to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share attributable to common shareholders, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted-average common stock outstanding, basic and diluted | |||||||||||||||||||||||
The table below sets forth all outstanding potentially dilutive securities which were not included in the calculation of diluted earnings per share because their impact would have been antidilutive.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Potentially dilutive securities: | |||||||||||||||||||||||
| Warrants | |||||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| Convertible note | |||||||||||||||||||||||
| Total | |||||||||||||||||||||||
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Note 23. Segment Reporting
As part of the acquisition of TCM on April 1, 2025, (See Note 3 - Business Combination), the Company acquired a new revenue stream, “Revenue from compute power” (See Note 2). Accordingly, as of April 1, 2025, the Company operates as two
The HPC segment was not a part of the Company until the segment was acquired on April 1, 2025. The Bitcoin segment’s operations have remained consistent for all periods presented, however, the Company only had one
The Company's Chief Operating Decision Maker ("CODM") is its Chief Executive Officer. The CODM uses segment operating income (loss), segment gross profit and segment net income (loss) before income tax to assess segment performance. Segment operating income (loss) is used by the Company’s CODM to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into specific service offerings within the segment, such as for entering into significant contracts, hiring of key management or executive personnel, or making significant capital investment decisions. The CODM also reviews segment gross profit to assess operating efficiency and cost structure within each segment, which helps inform short‑term operational decisions and identify trends affecting segment performance. In addition, the CODM reviews segment net income (loss) before income tax to evaluate overall segment profitability after considering all revenues and expenses attributable to the segment, and to inform broader, longer‑term resource allocation and strategic planning decisions.
As of September 30, 2026, the Bitcoin and HPC segments had total assets of $25,189,674 and $368,872,677 , respectively. As of December 31, 2025, the Bitcoin and HPC segments had total assets of $14,419,727 and $77,314,766 , respectively. The entire goodwill balance of $31,416,827
Revenue and costs are directly attributed to the Company's segments, and the revenues recognized as well as the costs incurred in generating those revenues within each segment are distinguishable based on the information systems in which each segment’s financial information gets recorded. There are no intersegment revenues or other transactions between the two
Summary information regarding the Company’s operating segments along with the reconciliation of the Company’s segment net income, segment operating loss and segment gross profit to the Company's consolidated net loss before income taxes is as follows for the three and nine months ended September 30, 2026 and 2025:
| Three Months Ended September 30, 2026 | ||||||||||||||||||||
Bitcoin | HPC | Total Reportable Segments | ||||||||||||||||||
| Revenue from cryptocurrency mining | $ | $ | $ | |||||||||||||||||
| Revenue from mining hosting services | ||||||||||||||||||||
| Revenue from compute power | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | ||||||||||||||||||||
| Segment gross profit | (3) | |||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Segment operating loss | (2) | ( | ( | ( | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Gain on sale of equity method investments | ||||||||||||||||||||
| Interest expense, net | ( | ( | ( | |||||||||||||||||
| Segment net income (loss) before income tax | (1) | $ | ( | $ | ( | $ | ( | |||||||||||||
(1) Reconciliation of segment net income (loss) before income taxes: | |||||
| Unallocated corporate overhead expenses: | |||||
| Wages and salaries | $ | ( | |||
| Professional fees | ( | ||||
| Other general and administrative expenses | ( | ||||
| Unallocated other income (expense): | |||||
| Change in fair value of warrant liability | |||||
| Change in fair value of convertible note | |||||
| Change in fair value of additional convertible note options | |||||
| Other income (expense), net | |||||
| Interest income | |||||
| Income (loss) before income taxes | $ | ( | |||
(2) Reconciliation of segment operating loss: | |||||
| Segment operating loss | $ | ( | |||
| Segment other income (expense), net | ( | ||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | |||||
| Income (loss) before income taxes | $ | ( | |||
(3) Reconciliation of segment gross profit: | |||||
| Segment gross profit | $ | ||||
| Segment operating expenses | ( | ||||
| Segment other income (expense), net | ( | ||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | |||||
| Income (loss) before income taxes | $ | ( | |||
| Three Months Ended September 30, 2025 | ||||||||||||||||||||
Bitcoin | HPC | Total Reportable Segments | ||||||||||||||||||
| Revenue from cryptocurrency mining | $ | $ | $ | |||||||||||||||||
| Revenue from mining hosting services | ||||||||||||||||||||
| Revenue from compute power | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | ||||||||||||||||||||
| Segment gross profit | (3) | |||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Segment operating loss | (2) | ( | ( | ( | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Income from equity method investments | ||||||||||||||||||||
| Gain on sale or disposal of property and equipment | ||||||||||||||||||||
| Loss on settlement of lease liability | ( | ( | ||||||||||||||||||
| Change in fair value of digital assets | ||||||||||||||||||||
| Interest expense, net | ( | ( | ( | |||||||||||||||||
| Segment net income (loss) before income tax | (1) | $ | ( | $ | ( | $ | ( | |||||||||||||
(1) Reconciliation of segment net income (loss) before income tax: | |||||
| Unallocated corporate overhead expenses: | |||||
| Wages and salaries | $ | ( | |||
| Professional fees | ( | ||||
| Unallocated other income (expense): | |||||
| Change in fair value of warrant liability | ( | ||||
| Loss on extinguishment of debt | ( | ||||
| Other income (expense), net | ( | ||||
| Interest expense, net | ( | ||||
| Income (loss) before income taxes | $ | ( | |||
(2) Reconciliation of segment operating loss: | |||||
| Segment operating loss | $ | ( | |||
| Segment other income (expense), net | ( | ||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | ( | ||||
| Income (loss) before income taxes | $ | ( | |||
(3) Reconciliation of segment gross profit: | |||||
| Segment gross profit | $ | ||||
| Segment operating expenses | ( | ||||
| Segment other income (expense), net | ( | ||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | ( | ||||
| Income (loss) before income taxes | $ | ( | |||
| Nine Months Ended September 30, 2026 | ||||||||||||||||||||
Bitcoin | HPC | Total Reportable Segments | ||||||||||||||||||
| Revenue from cryptocurrency mining | $ | $ | $ | |||||||||||||||||
| Revenue from mining hosting services | ||||||||||||||||||||
| Revenue from compute power | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | ||||||||||||||||||||
| Segment gross profit | (3) | |||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Segment operating loss | (2) | ( | ( | ( | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Income from equity method investments | ||||||||||||||||||||
| Gain on sale of equity method investments | ||||||||||||||||||||
| Gain on sale or disposal of property and equipment | ||||||||||||||||||||
| Interest expense, net | ( | ( | ( | |||||||||||||||||
| Segment net income (loss) before income tax | (1) | $ | $ | ( | $ | ( | ||||||||||||||
(1) Reconciliation of segment net income (loss) before income taxes: | |||||
| Unallocated corporate overhead expenses: | |||||
| Wages and salaries | $ | ( | |||
| Professional fees | ( | ||||
| Other general and administrative expenses | ( | ||||
| Unallocated other income (expense): | |||||
| Change in fair value of warrant liability | |||||
| Loss on issuance of convertible note | ( | ||||
| Change in fair value of convertible note | |||||
| Change in fair value of additional convertible note options | |||||
| Other income (expense), net | ( | ||||
| Interest expense, net | ( | ||||
| Income (loss) before income taxes | $ | ( | |||
(2) Reconciliation of segment operating loss: | |||||
| Segment operating loss | $ | ( | |||
| Segment other income (expense), net | |||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | ( | ||||
| Income (loss) before income taxes | $ | ( | |||
(3) Reconciliation of segment gross profit: | |||||
| Segment gross profit | $ | ||||
| Segment operating expenses | ( | ||||
| Segment other income (expense), net | |||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | ( | ||||
| Income (loss) before income taxes | $ | ( | |||
| Nine Months Ended September 30, 2025 | ||||||||||||||||||||
Bitcoin | HPC | Total Reportable Segments | ||||||||||||||||||
| Revenue from cryptocurrency mining | $ | $ | $ | |||||||||||||||||
| Revenue from mining hosting services | ||||||||||||||||||||
| Revenue from compute power | ||||||||||||||||||||
| Total revenue | ||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | ||||||||||||||||||||
| Segment gross profit | (3) | |||||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Segment operating loss | (2) | ( | ( | ( | ||||||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Income from equity method investments | ||||||||||||||||||||
| Gain on sale or disposal of property and equipment | ||||||||||||||||||||
| Loss on settlement of lease liability | ( | ( | ||||||||||||||||||
| Change in fair value of digital assets | ||||||||||||||||||||
| Gain on remeasurement of investment in TCM | ||||||||||||||||||||
| Interest expense, net | ( | ( | ( | |||||||||||||||||
| Segment net income (loss) before income tax | (1) | $ | ( | $ | $ | |||||||||||||||
(1) Reconciliation of segment net income (loss) before income tax: | |||||
| Unallocated corporate overhead expenses: | |||||
| Wages and salaries | $ | ( | |||
| Professional fees | ( | ||||
| Other general and administrative expenses | ( | ||||
| Unallocated other income (expense): | |||||
| Change in fair value of warrant liability | ( | ||||
| Loss on extinguishment of debt | ( | ||||
| Other income (expense), net | |||||
| Interest expense, net | ( | ||||
| Income (loss) before income taxes | $ | ||||
(2) Reconciliation of segment operating loss: | |||||
| Segment operating loss | $ | ( | |||
| Segment other income (expense), net | |||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | ( | ||||
| Income (loss) before income taxes | $ | ||||
(3) Reconciliation of segment gross profit: | |||||
| Segment gross profit | $ | ||||
| Segment operating expenses | ( | ||||
| Segment other income (expense), net | |||||
| Unallocated corporate overhead expenses | ( | ||||
| Unallocated other income (expense), net | ( | ||||
| Income (loss) before income taxes | $ | ||||
Summary information regarding the reportable segment depreciation and amortization expense for the three and nine months ended September 30, 2026 and 2025 are as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Bitcoin | $ | $ | $ | $ | |||||||||||||||||||
| HPC | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
Note 24. Commitments and Contingencies
In the normal course of business, the Company may become subject to legal actions, claims, and proceedings. The Company records a liability for claims, including settlements and judgments, when a loss is probable and the amount can be reasonably estimated. If the estimate of a probable loss is a range, the Company records the best estimate within the range, or the minimum amount if no amount within the range is a better estimate than any other. The Company discloses a contingent liability, even if the loss is not probable or the amount is not estimable, if there is a reasonable possibility that a material loss may have been incurred. As of September 30, 2026 and December 31, 2025, the Company had no outstanding litigation. In management’s opinion, any liability that may result from legal actions, claims, or proceedings that arise, individually or in the aggregate, would not be expected to have a material effect on the Company’s results of operations, financial position or cash flows.
The Company has various ground leases for bitcoin mining facilities in Oklahoma and Texas that expire on varying dates through 2034 and various equipment leases. For additional information see Note 25.
Note 25. Leases
Operating Leases
The Company entered into two lease agreements in Oklahoma and Texas for land during the year ended December 31, 2024. Both leases expire during 2034. Certain lease arrangements include renewal options and escalation clauses.
Maturities of operating lease liabilities as of September 30, 2026, were as follows:
| Operating Lease | |||||
| 2026 (Remaining) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total future lease payments | $ | ||||
| Less: Imputed interest | ( | ||||
| Present value of operating lease liabilities | $ | ||||
| Less: Current portion of operating lease liabilities | ( | ||||
| Operating lease liabilities, net of current portion | $ | ||||
Total operating lease expense was $68,639 and $69,415 for the three months ended September 30, 2026 and 2025, respectively; and $207,445 and $209,925 for the nine months ended September 30, 2026 and 2025, respectively. Operating lease expense is recorded in general and administrative expenses in the Company's condensed consolidated statements of operations. The weighted-average discount rate and remaining lease term in years as of September 30, 2026 was 10.25 % and 7.37 , respectively. Total amortization expense for the ROU asset was $29,285 and $25,595 for the three months ended September 30, 2026 and 2025, respectively; and $93,923 and $79,565 for the nine months ended September 30, 2026 and 2025, respectively.
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Finance Leases
The Company leases computer equipment under finance lease agreements with four related party entities. See Note 12 - Transactions with Related Parties for additional information. These leases were acquired through the TCM acquisition on April 1, 2025. The lease obligations mature on various dates from 2027 through 2030.
Maturities of finance lease liabilities as of September 30, 2026, were as follows:
| Finance Lease | |||||
| 2026 (Remaining) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Total future lease payments | $ | ||||
| Less: Imputed interest | ( | ||||
| Present value of finance lease liabilities | $ | ||||
| Less: Current portion of finance lease liabilities | ( | ||||
| Finance lease liabilities, net of current portion | $ | ||||
The components of finance lease expense for the three and nine months ended September 30, 2026 and 2025 are as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Finance lease cost: | ||||||||||||||||||||||||||
| Amortization of ROU assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest on lease liabilities | ||||||||||||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||||||||||||
The weighted-average discount rate and remaining lease term in years as of September 30, 2026 was 13.70 % and 2.79 , respectively.
Supplemental cash flow information and non-cash activity related to leases are as follows:
| For the Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating cash flows for operating leases | $ | ( | $ | ( | |||||||
| Amortization of right-of-use assets | $ | $ | |||||||||
| Financing cash flows from finance leases | $ | ( | $ | ( | |||||||
| Acquisition of right-of-use asset in exchange for lease obligations | $ | $ | |||||||||
| Supplemental non-cash amounts of lease liabilities arising from obtaining right-of-use assets | $ | $ | |||||||||
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Note 26. Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.
Sale of SPRE Denton TX, LLC
On November 5, 2026, the Company entered into an agreement to sell its Denton, Texas facility by selling all of the membership interests in its wholly owned subsidiary, SPRE Denton TX, LLC, to a third party for $2,022,017 , subject to certain third-party approvals. The Company received $50,000 in cash and two promissory notes from the third party totaling $1,972,017 , each bearing interest at 7 60 and 84 months, respectively). The notes are secured by a pledge of the membership interests. In addition, beginning January 1, 2027, the third party will pay 15 % of the facility’s net monthly revenue, which will be applied to reduce the principal of the notes.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes thereto included under the heading “Part I. Financial Information – Item 1. Condensed Consolidated Financial Statements.” References in this quarterly report on Form 10-Q (this “report”) to the “Company,”, “us” or “we” refer to QumulusAI, Inc. on a consolidated basis. References to our “management” or our “management team” refer to our officers and directors. This discussion and analysis provides material historical and prospective disclosures intended to enable investors and other users to assess the Company’s financial condition and results of operations. See “Cautionary Note Regarding Forward-Looking Statements.”
Overview
QumulusAI is a cloud infrastructure company specializing in rapid deployment of graphics processing unit (“GPU”)-powered solutions for artificial intelligence (“AI”) applications, serving a critical market that is often overlooked by large-scale cloud providers (“hyperscalers”), which operate massive, standardized computing infrastructures primarily serving the largest enterprises. Our platform delivers flexible, competitively priced, and customizable solutions for underserved small and mid-market customers—including machine learning teams, AI infrastructure startups, and research institutions—while also supporting the scale and complexity requirements of large enterprises, such as long-term deployments or supplemental on-demand compute capacity.
Originally established as a crypto-focused data center and power infrastructure company, we have evolved into a full-stack platform purpose-built for high-throughput, enterprise-grade compute. Leveraging our operational heritage in constructing and managing over 100 megawatts (“MW”) of high-density data center capacity, we are repurposing infrastructure previously used for cryptocurrency mining to meet accelerating AI demand while continuing to operate managed services for crypto mining infrastructure and blockchain asset management as complementary, revenue-generating load management capabilities during the transition toward high-performance computing (“HPC”) operations.
While we expect blockchain mining income to continue during 2026, revenue generated from third-party hosting clients is expected to continue to decline as existing hosting customer contracts expire and are not renewed. As hosting capacity becomes available, we plan to transition that capacity to HPC compute operations. During the nine months ended September 30, 2026, blockchain-related revenue accounted for approximately 12% of total revenue, while HPC compute revenue accounted for approximately 88% of total revenue. We expect this trend of HPC compute revenue becoming a higher percentage of total revenue to continue as we continue to deploy additional HPC infrastructure and allocate a greater portion of our active power capacity toward HPC compute workloads.
QumulusAI is headquartered in Atlanta, Georgia. We operate in multiple colocation data centers in Atlanta, Georgia, Kansas City, Missouri, Denver, Colorado, and Philadelphia, Pennsylvania, with combined active and contracted capacity of up to approximately 11.75 MW of power. We have secured letters of intent and rights of first refusal for 7 MW of information technology (“IT”) load capacity space for our GPU equipment.
Additionally, in the aggregate, we operate approximately 10 MW of grid power with immediate access to 7 MW of additional grid power in Watonga, Oklahoma where we manage blockchain assets. These sites serve as foundational assets for power-intensive compute deployments and provide strategic flexibility for future infrastructure repurposing. In November 2026, we entered into an agreement to sell our Denton, Texas facility. See Note 26 “Subsequent Events” in the notes to our condensed consolidated financial statements.
As we continue transitioning toward HPC compute operations, we expect the relationship between costs and revenues to evolve. HPC operations generally involve higher upfront capital expenditures and infrastructure-related costs, including GPU servers, networking equipment, colocation costs, power infrastructure, and data center buildout expenditures. We also expect depreciation expense and operating costs associated with HPC infrastructure to increase as additional HPC assets are deployed and future data center capacity is developed. However, we believe HPC compute operations will generate higher revenue as compared to traditional blockchain hosting operations.
The Company serves a broad range of customers, including enterprise machine learning teams, AI infrastructure startups, and research institutions. Use cases span training of foundation models, deployment of inference application programming interfaces (“APIs”), and long-horizon experimentation requiring predictable performance at scale.
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QumulusAI reaches customers through a dual-channel approach. Marketplace provider partners (for example, RunPod Inc. (“RunPod”)) manage orchestration and customer acquisition in exchange for a share of the total transaction value. When we sell through RunPod, we recognize 80% of the total transaction value as revenue and RunPod retains 20% under their standard service terms. Additionally, QumulusAI’s direct sales team engages enterprise clients through a self-service portal and technical onboarding support. This hybrid model optimizes utilization and enables both rapid scale and deep customer relationships.
Components of Results of Operations
The following discussion sets forth certain components of the Company’s statements of operations as well as factors that impact those items.
Revenues
Revenues are derived primarily from the provision of compute power, together with mining hosting services and bitcoin self-mining. The Company's compute power revenue is reported in its HPC segment, and its mining hosting and bitcoin self-mining revenue is reported in its Bitcoin segment. The Company provides compute power directly to end users, including under multi-year direct contracts, as well as to a marketplace. Marketplace revenue reflects the Company's contractual share of the marketplace's net revenue from its customers, 80% under the Company's agreement with RunPod, and direct contracts are priced on a fixed per-hour basis for each unit of compute power. The Company deploys and maintains its compute infrastructure primarily in colocation data center facilities, which provide the megawatt capacity supporting its high-performance computing operations, and makes that infrastructure available to customers for large-scale cloud processing. Compute power revenue is recognized over time as capacity is delivered, and payments received in advance are recorded as deferred revenue until the related services are provided.
The Company also hosts mining equipment owned by third parties across its operational sites, which generates recurring income by leveraging existing infrastructure in exchange for a fee or reimbursement of electricity costs at a markup.
The Company also mines bitcoin for its own account through participation in a third-party operated mining pool, earning revenue by providing computing power to the mining pool. Under the pool's full-pay-per-share ("FPPS") payout method, the Company is paid in bitcoin each day based on its share of the Bitcoin network's total computing power, applied to the block rewards expected to be generated for that period plus a share of the actual transaction fees, net of any pool fees. The Company records revenue at the fair value of the bitcoin received.
Key Definitions
Bitcoin Mining: The process by which new bitcoin are created and transactions are validated on the Bitcoin Network. Miners compete to solve complex cryptographic problems, and the first to solve each block earns a reward in bitcoin (the “block reward”) plus transaction fees. The probability of earning rewards depends on a miner’s computational power, or hashrate, relative to the total network hashrate.
Hashrate (TH/s): A measure of computational speed, representing the number of trillions of cryptographic calculations (“hashes”) performed per second. Higher hashrate increases the likelihood of earning bitcoin rewards.
Network Difficulty: A measure of how hard it is to find a valid block. Difficulty automatically adjusts roughly every two weeks to keep global block times near ten minutes. When difficulty rises, more hashrate is required to maintain the same level of bitcoin output.
Block Reward and Halving: The block reward is the amount of bitcoin awarded for successfully mining a block. Approximately every four years, this reward is cut in half in an event known as the halving, reducing the rate of new bitcoin entering circulation and directly impacting miner economics.
Cost of revenues (exclusive of depreciation and amortization)
Cost of revenues, exclusive of depreciation and amortization, reflect direct costs associated with the delivery of the Company’s products and services to its customers. These costs include electricity and infrastructure expenses associated with operating the Company’s mining facilities. Cost of revenues, exclusive of depreciation and amortization, also includes colocation and hosting costs related to GPU-based high-performance computing data centers, as well as fees paid to certain consultants. These costs exclude depreciation and amortization, which is presented as a separate line item
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and includes depreciation of servers, miners, and other equipment and amortization of finance lease right-of-use assets used to generate revenue.
General and administrative expenses
General and administrative expenses include salaries, benefits, and stock-based compensation expense, and other costs of departments serving administrative functions, such as executives, finance and accounting, and human resources. In addition, general and administrative expense includes non-personnel costs, such as professional fees, legal fees, accounting and finance advisory fees and other supporting corporate expenses not allocated to cost of revenues or sales and marketing. General and administrative expenses also include acquisition-related costs when incurred and costs associated with preparing to become and operating as a public company, such as audit, legal, and consulting fees, listing and exchange fees, directors' and officers' insurance, and investor relations. Costs incurred in connection with the Company's direct listing were expensed as incurred and are included in general and administrative expenses.
Sales and marketing expenses
Sales and marketing expenses include social media, advertising and marketing costs, marketing consultant costs, website costs and costs related to conferences and seminars. It also includes all expenses related to employee salaries, commissions, benefits, and other costs related to the sales and marketing functions such as productivity tools, and customer relationship management tools.
Depreciation and amortization expense
Depreciation and amortization relates to long-lived assets and intangible assets used in the Company’s business and is presented separately from cost of revenues. Depreciation expense relates primarily to buildings and improvements, server equipment, miners, and mining related equipment. Amortization expense relates primarily to finance lease right-of-use assets, vendor relationships and trade name. Operating lease cost is recognized on a straight-line basis and is not included in depreciation and amortization.
Other income (expense), net
Other income (expense), net consists of non-operating income and expenses not directly related to our core operations. This includes income (expense) from non-consolidating joint ventures, warrant liabilities, loss on issuance of convertible note, gain on sale of equity method investments, and gain on disposal of property and equipment. It also includes amortization of certain non-revenue-generating assets.
Joint Ventures
Joint ventures include infrastructure projects in which QumulusAI participates in the operational and financial results. These arrangements typically involve large-scale hosting or mining facilities that are jointly developed and operated with strategic partners. For joint ventures in which we hold non-controlling ownership, we account for these investments using the equity method of accounting and recognize our proportionate share of net income or loss within the consolidated financial statements. For joint ventures in which we hold a controlling ownership, we consolidate the entities for financial reporting purposes. Joint ventures allow QumulusAI to expand its infrastructure footprint while maintaining capital efficiency and operational flexibility.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability represents periodic non-cash gains or losses resulting from the remeasurement of outstanding warrant instruments classified as liabilities. Only the Company's penny warrants are classified as liabilities, because they are not considered indexed to the Company's own stock under ASC 815-40. The Company's other warrants are classified as equity and are not remeasured. The liability is measured at intrinsic value, which is the fair value of the Company's common stock less the exercise price, so changes in the liability primarily reflect changes in the fair value of the Company's common stock. When the value of the common stock increases, the liability increases and the Company records a loss, and when it decreases, the Company records a gain. Following the Company's direct listing on July 16, 2026, the fair value of the Company's common stock is based on its quoted market price. Adjustments are recorded in the condensed consolidated statements of operations and do not impact cash flow.
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Change in Fair Value of Digital Assets
Change in fair value of digital assets represents periodic adjustments to the carrying value of bitcoin and other digital assets held by the Company, based on changes in market price relative to the value recorded at the time of acquisition or mining. These unrealized gains or losses are recognized to reflect the fair value of digital assets as of the reporting date. This adjustment impacts reported earnings but does not result in realized gains or losses unless the assets are sold.
Change in Fair Value of Convertible Note
Change in fair value of convertible note reflects the remeasurement of the Company’s convertible note to its estimated fair value. The fair value of the convertible note is influenced by various factors, including changes in the Company’s equity valuation, volatility assumptions and remaining term of the note. As these assumptions change, the Company records non-cash gains or losses in its results of operations. Accordingly, fluctuations in the fair value of the convertible note may affect net income (loss) from period to period but do not impact the Company’s cash flows.
Change in Fair Value of Additional Convertible Notes Option
Change in fair value of additional convertible notes option reflects the remeasurement of the Company’s option related to the issuance of additional convertible notes. The fair value of the option is affected by various market-based and company-specific assumptions, including changes in the Company’s equity valuation, volatility assumptions, and risk-free interest rate. As these assumptions fluctuate, the Company records non-cash gains or losses in its results of operations. Accordingly, changes in the fair value of the additional convertible notes option may result in significant fluctuations in net income (loss) between reporting periods, although such adjustments do not impact the Company’s liquidity or cash flows.
Loss on Disposals and Loans
Loss on disposals and loans includes realized losses related to the sale, abandonment, or write-off of equipment or other long-lived assets, as well as losses associated with uncollectible loans and impairments of non-core investments. These items are recognized when it becomes evident that the carrying value of an asset or receivable is not recoverable and are reported outside of operating income due to their non-recurring and non-operational nature.
Gain on Sale of Equity Method Investments
Gain on sale of investments includes realized gains related to the sale of equity method investments. When the carrying value of the Company’s investment is less than the consideration received for the sale, the Company records a non-cash gain on sale of equity method investments in the consolidated statements of operations.
Gain on Remeasurement of Investment in TCM
Gain on remeasurement of investment in TCM represents the difference in the carrying value of TCM immediately prior to the acquisition date and TCM’s fair value as of that date.
Loss on Extinguishment of Debt
Loss on extinguishment of debt reflects the partial settlement of outstanding debt through the issuance of equity. When the fair value of the equity issued is more than the carrying amount of the debt, the Company records a non-cash loss in the consolidated statements of operations.
Interest Expense, Net
Interest expense, net includes interest incurred on finance leases, loans, and other debt arrangements, as well as the amortization of original issue discounts, debt issuance costs, and undrawn commitment fees. This amount is presented net of interest income and capitalized interest associated with qualifying assets under construction.
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Results of Operations for the Three Months Ended September 30, 2026 and 2025
The following table summarizes the results of operations for the periods indicated:
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Revenue | $ | 14,755,114 | $ | 3,100,785 | $ | 11,654,329 | 376 | % | |||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | 4,161,145 | 1,643,980 | 2,517,165 | 153 | % | ||||||||||||||||||
| General and administrative expenses | 35,671,537 | 2,638,965 | 33,032,572 | 1252 | % | ||||||||||||||||||
| Sales and marketing expenses | 1,605,602 | 147,471 | 1,458,131 | 989 | % | ||||||||||||||||||
| Depreciation and amortization expense | 14,872,738 | 1,425,735 | 13,447,003 | 943 | % | ||||||||||||||||||
| Total costs and expenses | 56,311,022 | 5,856,151 | 50,454,871 | 862 | % | ||||||||||||||||||
| Operating Loss | (41,555,908) | (2,755,366) | (38,800,542) | 1408 | % | ||||||||||||||||||
| Income from equity method investments | — | 179,617 | (179,617) | (100) | % | ||||||||||||||||||
| Gain on sale of equity method investments | 162,785 | — | 162,785 | 100 | % | ||||||||||||||||||
| Change in fair value of warrant liability | 2,140,561 | (4,844,713) | 6,985,274 | (144) | % | ||||||||||||||||||
| Change in fair value of digital assets | — | 43,935 | (43,935) | (100) | % | ||||||||||||||||||
| Change in fair value of convertible note | 13,650,058 | — | 13,650,058 | 100 | % | ||||||||||||||||||
| Change in fair value of additional convertible notes option | 16,537,550 | — | 16,537,550 | 100 | % | ||||||||||||||||||
| Gain on sale or disposal of property and equipment | — | 462 | (462) | (100) | % | ||||||||||||||||||
| Loss on settlement of lease liability | — | (692,837) | 692,837 | (100) | % | ||||||||||||||||||
| Loss on extinguishment of debt | — | (883,667) | 883,667 | (100) | % | ||||||||||||||||||
| Other income (expense), net | 27,704 | (2,183) | 29,887 | (1369) | % | ||||||||||||||||||
| Interest expense, net | (5,369,084) | (509,866) | (4,859,218) | 953 | % | ||||||||||||||||||
| Total other income (expenses), net | 27,149,574 | (6,709,252) | 33,858,826 | (505) | % | ||||||||||||||||||
| Income (loss) before income tax expense | (14,406,334) | (9,464,618) | (4,941,716) | (52) | % | ||||||||||||||||||
| Income tax expense (benefit) | 36,237 | (349) | 36,586 | (10483) | % | ||||||||||||||||||
| Net income (loss) | $ | (14,442,571) | $ | (9,464,269) | $ | (4,978,302) | (53) | % | |||||||||||||||
Comparison of the Three Months Ended September 30, 2026 and 2025
Revenue
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Revenue from cryptocurrency mining | $ | 262,995 | $ | 211,765 | $ | 51,230 | 24 | % | |||||||||||||||
| Revenue from mining hosting services | 365,854 | 1,445,669 | (1,079,815) | (75) | % | ||||||||||||||||||
| Revenue from compute power | 14,126,265 | 1,443,351 | 12,682,914 | 879 | % | ||||||||||||||||||
| Total revenue | $ | 14,755,114 | $ | 3,100,785 | $ | 11,654,329 | 376 | % | |||||||||||||||
Revenue for the three months ended September 30, 2026 was $14,755,114, representing an increase of $11,654,329, or 376%, as compared to $3,100,785 for the three months ended September 30, 2025. The increase was driven primarily by revenue from compute power, which grew to $14,126,265, or approximately 96% of revenue, from $1,443,351, or approximately 47% of revenue, in the prior-year period, due to the Company’s continued scaling of its HPC capacity, including additional megawatts of data center capacity, expanded server deployments, and the closing of multi-year direct contracts with compute customers. HPC is the Company’s primary strategic focus and principal source of revenue. Mining hosting services revenue declined to $365,854, or approximately 2% of revenue, from $1,445,669, or
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approximately 47% of revenue, in the prior-year period, reflecting both the Company’s strategic reallocation of capacity toward compute power services and the curtailment of operations by certain hosting clients amid lower bitcoin prices. Curtailed hosting capacity was redeployed to self-mining activities on an interim basis, increasing self-mining revenue to $262,995 for the three months ended September 30, 2026 from $211,765 for the three months ended September 30, 2025.
During the three months ended September 30, 2026, the Company’s bitcoin mining operations were influenced by changes in network difficulty, fleet utilization, and overall market pricing compared to the three months ended September 30, 2025. Average bitcoin mined per day increased from 0.02 bitcoin to 0.04 bitcoin, average terahash per miner (“TH/s”) increased from 71.01 TH/s to 80.16 TH/s, average daily miners increased from 580 to 913, and total bitcoin mined increased from 1.83 BTC to 3.85 BTC, while average bitcoin price decreased from $114,382 to $71,003 and network difficulty declined from 130.0 trillion to 128.4 trillion during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
Cost of Revenue (exclusive of depreciation and amortization)
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | |||||||||||||||||||||||
| Hosting expenses | $ | 1,000 | $ | 198,048 | $ | (197,048) | (99) | % | |||||||||||||||
| Colocation costs | 3,790,847 | 403,981 | 3,386,866 | 838 | % | ||||||||||||||||||
| Electricity | 286,923 | 951,083 | (664,160) | (70) | % | ||||||||||||||||||
| Contract labor | 82,375 | 90,868 | (8,493) | (9) | % | ||||||||||||||||||
| Total cost of revenue (exclusive of depreciation and amortization) | $ | 4,161,145 | $ | 1,643,980 | $ | 2,517,165 | 153 | % | |||||||||||||||
Cost of revenue, exclusive of depreciation and amortization, for the three months ended September 30, 2026 was $4,161,145, representing an increase of $2,517,165, or 153%, as compared to $1,643,980 for the three months ended September 30, 2025. For the three months ended September 30, 2026, the increase in colocation costs was driven by the continued growth and investment that the Company has made into the HPC business. This increase was partially offset by a decrease in hosting expenses due to the shift in operations from hosting to compute power and a decrease in electricity due to lower power usage and a lower average power rate at the Company's Oklahoma mining site.
General and Administrative Expenses
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Stock-based compensation | $ | 3,594,359 | $ | 549,271 | $ | 3,045,088 | 554 | % | |||||||||||||||
| Wages and salaries | 2,219,124 | 787,168 | 1,431,956 | 182 | % | ||||||||||||||||||
| Taxes and other expenses | 102,862 | 31,293 | 71,569 | 229 | % | ||||||||||||||||||
| Utilities | 55,068 | 17,722 | 37,346 | 211 | % | ||||||||||||||||||
| Rent and lease expense | 97,872 | 69,415 | 28,457 | 41 | % | ||||||||||||||||||
| Professional fees | 28,408,666 | 944,197 | 27,464,469 | 2909 | % | ||||||||||||||||||
| Insurance | 319,594 | 137,585 | 182,009 | 132 | % | ||||||||||||||||||
| Travel, meals, and entertainment | 97,808 | 11,335 | 86,473 | 763 | % | ||||||||||||||||||
| Supplies and software | 467,294 | 55,020 | 412,274 | 749 | % | ||||||||||||||||||
| Other general and administrative expenses | 308,890 | 35,959 | 272,931 | 759 | % | ||||||||||||||||||
| Total general and administrative expenses | $ | 35,671,537 | $ | 2,638,965 | $ | 33,032,572 | 1252 | % | |||||||||||||||
General and administrative expenses for the three months ended September 30, 2026 were $35,671,537, an increase of $33,032,572, or 1252%, as compared to $2,638,965 for the three months ended September 30, 2025. The increase was primarily due to a $3,045,088 increase in stock-based compensation, mainly from restricted stock units granted in September 2026, a $1,431,956 increase in wages and salaries from additional personnel to support the Company’s growth in HPC and compute services, and a $27,464,469 increase in professional fees for audit, legal, and consulting costs related to the Company’s public readiness, including $26,412,529 related to shares of common stock
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issued for professional services in connection with the Company's direct listing. The remaining increase is primarily due to higher expenses as the Company scaled its operations and began operating as a public company.
Sales and Marketing Expense
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Sales and marketing expenses | $ | 1,605,602 | $ | 147,471 | $ | 1,458,131 | 989 | % | |||||||||||||||
Sales and marketing expenses for the three months ended September 30, 2026 were $1,605,602, an increase of $1,458,131, or 989%, as compared to $147,471 for the three months ended September 30, 2025. The increase is due primarily to the hiring of additional sales and marketing personnel to help promote the Company’s shift in strategic focus to the HPC business as well as commissions paid to salespeople beginning in 2026 as the Company began selling directly to customers.
Depreciation and Amortization Expense
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Depreciation and amortization expense | $ | 14,872,738 | $ | 1,425,735 | $ | 13,447,003 | 943 | % | |||||||||||||||
Depreciation and amortization expense for the three months ended September 30, 2026 was $14,872,738, an increase of $13,447,003, or 943%, as compared to $1,425,735 for the three months ended September 30, 2025. The increase was primarily due to an increase in depreciation expense due to purchase of additional property and equipment to support the growth of the Company's HPC business and the amortization of finance right-of-use leased assets acquired during 2026.
Joint Ventures
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Other income: JV Investments | |||||||||||||||||||||||
| Income from equity method investments | $ | — | $ | 179,617 | $ | (179,617) | (100) | % | |||||||||||||||
| Gain on sale of equity method investments | 162,785 | — | 162,785 | 100 | % | ||||||||||||||||||
| Total other income: JV Investments | $ | 162,785 | $ | 179,617 | $ | (16,832) | (9) | % | |||||||||||||||
Other income from joint venture investments was $162,785 for the three months ended September 30, 2026, a decrease of $16,832, or 9%, as compared to $179,617 for the three months ended September 30, 2025. The prior-year amount was income from equity method investments, reflecting the Company’s equity interest in T20, which the Company accounted for as an equity method investment until it sold the interest in February 2026. There was no equity method income during the three months ended September 30, 2026. The $162,785 gain on sale of equity method investments recognized during the three months ended September 30, 2026 resulted from the completion of the accounting for the February 2026 sale of T20.
Change in Fair Value of Warrant Liability
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of warrant liability | $ | 2,140,561 | $ | (4,844,713) | $ | 6,985,274 | 144 | % | |||||||||||||||
Change in fair value of warrant liability for the three months ended September 30, 2026 was a $2,140,561 gain as compared to a $4,844,713 loss during the three months ended September 30, 2025. The gain during the three months ended September 30, 2026 reflects a decrease in the fair value of the Type 1 warrants as the price of the Company's common stock declined during the period. The loss during the three months ended September 30, 2025 reflects an increase in their fair value during that period.
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Change in Fair Value of Digital Assets
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of digital assets | $ | — | $ | 43,935 | $ | (43,935) | (100) | % | |||||||||||||||
Change in fair value of digital assets for the three months ended September 30, 2026 was $0, as compared to a $43,935 gain for the three months ended September 30, 2025. This change is due to the Company selling the bitcoin it mined immediately in 2026 and holding no digital assets, therefore there was no change in fair value for the three months ended September 30, 2026.
Change in Fair Value of Convertible Note
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of convertible note | $ | 13,650,058 | $ | — | $ | 13,650,058 | 100 | % | |||||||||||||||
Change in fair value of convertible notes for the three months ended September 30, 2026 was a gain of $13,650,058, as compared to $0 for the three months ended September 30, 2025, when the Company had no convertible notes measured at fair value. The gain reflects a decrease in the fair value of the notes as the price of the Company’s common stock declined during the three months ended September 30, 2026, which reduced the value of the conversion feature.
Change in Fair Value of Additional Convertible Notes Option
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of additional convertible notes option | $ | 16,537,550 | $ | — | $ | 16,537,550 | 100 | % | |||||||||||||||
Change in fair value of additional convertible notes option for the three months ended September 30, 2026 was a gain of $16,537,550, compared to $0 for the three months ended September 30, 2025, when the Company had no such option. The gain reflects a decrease in the fair value of the option as the price of the Company’s common stock declined during the three months ended September 30, 2026, which reduced the value of the additional convertible notes underlying the option and the estimated probability that they will be issued.
Loss on Settlement of Lease Liability
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Loss on settlement of lease liability | $ | — | $ | 692,837 | $ | (692,837) | (100) | % | |||||||||||||||
Loss on settlement of lease liability for the three months ended September 30, 2026 was $0, as compared to $692,837 for the three months ended September 30, 2025. During the three months ended September 30, 2025, the Company terminated certain finance leases and settled the lease liabilities by issuing common stock with a fair value in excess of the carrying amount of the liabilities resulting in a loss on settlement of lease liability. The Company did not settle any lease liabilities during the three months ended September 30, 2026.
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Loss on Extinguishment of Debt
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Loss on extinguishment of debt | $ | — | $ | 883,667 | $ | (883,667) | (100) | % | |||||||||||||||
Loss on extinguishment of debt for the three months ended September 30, 2026 was $0, as compared to a loss of $883,667 for the three months ended September 30, 2025. The expense was primarily driven by the issuance of preferred stock for the partial conversion of a TCM convertible note in September 2025.
Interest Expense, Net
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Interest expense, net | $ | 5,369,084 | $ | 509,866 | $ | 4,859,218 | 953 | % | |||||||||||||||
Interest expense, net for the three months ended September 30, 2026 was $5,369,084, an increase of $4,859,218 as compared to $509,866 for the three months ended September 30, 2025. The increase is driven by an increase in finance leases for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025.
Segment Results of Operations
We operate our business as two operating and reportable segments: Bitcoin and HPC. For additional information about our segments, see Note 23 “Segment Reporting” in the notes to our condensed consolidated financial statements.
The following tables summarize our segment results of operations for the three months ended September 30, 2026 and 2025:
Revenue
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 628,849 | $ | 1,657,434 | $ | (1,028,585) | (62) | % | |||||||||||||||
| HPC | 14,126,265 | 1,443,351 | 12,682,914 | 879 | % | ||||||||||||||||||
Bitcoin revenue for the three months ended September 30, 2026 was $628,849, a decrease of $1,028,585 as compared to $1,657,434 for the three months ended September 30, 2025. The decrease is driven by the pivot to focus on the HPC business.
HPC revenue for the three months ended September 30, 2026 was $14,126,265, an increase of $12,682,914 as compared to $1,443,351 for the three months ended September 30, 2025. The increase is driven by the pivot to focus on the HPC business and investment in additional infrastructure.
Cost of Revenue (exclusive of depreciation and amortization)
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 330,549 | $ | 1,190,220 | $ | (859,671) | (72) | % | |||||||||||||||
| HPC | 3,830,596 | 453,760 | 3,376,836 | 744 | % | ||||||||||||||||||
Bitcoin cost of revenue, exclusive of depreciation and amortization, for the three months ended September 30, 2026 was $330,549, a decrease of $859,671 as compared to $1,190,220 for the three months ended September 30, 2025. The decrease is driven by the pivot to focus on the HPC business.
HPC cost of revenue, exclusive of depreciation and amortization, for the three months ended September 30, 2026 was $3,830,596, an increase of $3,376,836 as compared to $453,760 for the three months ended September 30, 2025. The increase is driven by the pivot to focus on the HPC business.
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Gross Profit
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 298,300 | $ | 467,214 | $ | (168,914) | (36) | % | |||||||||||||||
| HPC | 10,295,669 | 989,591 | 9,306,078 | 940 | % | ||||||||||||||||||
Bitcoin gross profit for the three months ended September 30, 2026 was $298,300, a decrease of $168,914 as compared to $467,214 for the three months ended September 30, 2025. The decrease is due to significant decline in Bitcoin activities as we shift our focus towards HPC activities.
HPC gross profit for the three months ended September 30, 2026 was $10,295,669, an increase of $9,306,078 as compared to $989,591 for the three months ended September 30, 2025. The increase is primarily due to a shift from marketplace to direct sales.
Operating Expenses
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 1,036,578 | $ | 735,214 | $ | 301,364 | 41 | % | |||||||||||||||
| HPC | 20,145,993 | 2,247,046 | 17,898,947 | 797 | % | ||||||||||||||||||
Bitcoin operating expenses for the three months ended September 30, 2026 were $1,036,578, an increase of $301,364 as compared to $735,214 for the three months ended September 30, 2025. The increase is driven by an increase in compensation costs primarily due to merit increases and the issuance of restricted stock units in September 2026.
HPC operating expenses for the three months ended September 30, 2026 was $20,145,993, an increase of $17,898,947 as compared to $2,247,046 for the three months ended September 30, 2025. The increase is driven by the pivot to focus on the HPC business.
Net Income (Loss) before Income Taxes
| For the Three Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | (635,713) | $ | (180,761) | $ | (454,952) | 252 | % | |||||||||||||||
| HPC | (15,294,571) | (2,308,516) | (12,986,055) | 563 | % | ||||||||||||||||||
Bitcoin net loss before income taxes for the three months ended September 30, 2026 was $635,713, a decrease of $454,952 as compared to $180,761 for the three months ended September 30, 2025. The change is driven by the pivot to focus on the HPC business and increased costs associated with it.
HPC net loss before income taxes for the three months ended September 30, 2026 was $15,294,571, a decrease of $12,986,055 as compared to $2,308,516 for the three months ended September 30, 2025. The decrease is primarily due to the gain on remeasurement of investment in TCM of $14,549,536 that was recognized in April 2025.
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Results of Operations for the Nine Months Ended September 30, 2026 and 2025
The following table summarizes the results of operations for the periods indicated:
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Revenue | $ | 24,887,837 | $ | 8,057,476 | $ | 16,830,361 | 209 | % | |||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | 8,539,344 | 4,245,448 | 4,293,896 | 101 | % | ||||||||||||||||||
| General and administrative expenses | 43,921,812 | 6,081,954 | 37,839,858 | 622 | % | ||||||||||||||||||
| Sales and marketing expenses | 2,758,174 | 238,055 | 2,520,119 | 1059 | % | ||||||||||||||||||
| Depreciation and amortization expense | 24,421,737 | 3,358,079 | 21,063,658 | 627 | % | ||||||||||||||||||
| Total costs and expenses | 79,641,067 | 13,923,536 | 65,717,531 | 472 | % | ||||||||||||||||||
| Operating Loss | (54,753,230) | (5,866,060) | (48,887,170) | 833 | % | ||||||||||||||||||
| Income from equity method investments | 21,994 | 1,043,937 | (1,021,943) | (98) | % | ||||||||||||||||||
| Gain on sale of equity method investments | 12,732,446 | — | 12,732,446 | — | % | ||||||||||||||||||
| Gain on remeasurement of investment in TCM | — | 14,549,536 | (14,549,536) | (100) | % | ||||||||||||||||||
| Change in fair value of warrant liability | 554,723 | (5,536,816) | 6,091,539 | (110) | % | ||||||||||||||||||
| Change in fair value of digital assets | — | 81,919 | (81,919) | (100) | % | ||||||||||||||||||
| Change in fair value of convertible note | 16,030,058 | — | 16,030,058 | — | % | ||||||||||||||||||
| Change in fair value of additional convertible notes option | 20,388,400 | — | 20,388,400 | — | % | ||||||||||||||||||
| Gain on sale or disposal of property and equipment | 36,298 | 462 | 35,836 | 7757 | % | ||||||||||||||||||
| Gain on disposal of property and equipment | — | — | — | — | % | ||||||||||||||||||
| Loss on settlement of lease liability | — | (692,837) | 692,837 | (100) | % | ||||||||||||||||||
| Loss on issuance of convertible note | (73,881,850) | — | (73,881,850) | — | % | ||||||||||||||||||
| Loss on extinguishment of debt | — | (1,037,501) | 1,037,501 | (100) | % | ||||||||||||||||||
| Other income (expense), net | (160,046) | 24,771 | (184,817) | (746) | % | ||||||||||||||||||
| Interest expense, net | (7,953,108) | (1,450,812) | (6,502,296) | 448 | % | ||||||||||||||||||
| Total other income (expenses), net | (32,231,085) | 6,982,659 | (39,213,744) | (562) | % | ||||||||||||||||||
| Income (loss) before income tax expense | (86,984,315) | 1,116,599 | (88,100,914) | 7890 | % | ||||||||||||||||||
| Income tax expense (benefit) | (148,827) | 284,771 | (433,598) | (152) | % | ||||||||||||||||||
| Net income (loss) | $ | (86,835,488) | $ | 831,828 | $ | (87,667,316) | (10539) | % | |||||||||||||||
Comparison of the Nine Months Ended September 30, 2026 and 2025
Revenue
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Revenue from cryptocurrency mining | $ | 1,042,055 | $ | 507,604 | $ | 534,451 | 105 | % | |||||||||||||||
| Revenue from mining hosting services | 2,008,059 | 4,794,821 | (2,786,762) | (58) | % | ||||||||||||||||||
| Revenue from compute power | 21,837,723 | 2,755,051 | 19,082,672 | 693 | % | ||||||||||||||||||
| Total revenue | $ | 24,887,837 | $ | 8,057,476 | $ | 16,830,361 | 209 | % | |||||||||||||||
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Revenue for the nine months ended September 30, 2026 was $24,887,837, representing an increase of $16,830,361, or 209%, as compared to $8,057,476 for the nine months ended September 30, 2025. The increase was driven primarily by revenue from compute power, which grew to $21,837,723, or approximately 88% of revenue, from $2,755,051, or approximately 34% of revenue, in the prior-year period, due to the Company’s continued scaling of its HPC capacity, including additional megawatts of data center capacity, expanded server deployments, and the closing of multi-year direct contracts with compute customers. HPC is the Company’s primary strategic focus and principal source of revenue. Mining hosting services revenue declined to $2,008,059, or approximately 8% of revenue, from $4,794,821, or approximately 60% of revenue, in the prior-year period, reflecting both the Company’s strategic reallocation of capacity toward compute power services and the curtailment of operations by certain hosting clients amid lower bitcoin prices. The Company redeployed curtailed hosting capacity to self-mining activities on an interim basis, and self-mining revenue increased to $1,042,055 for the nine months ended September 30, 2026 from $507,604 for the nine months ended September 30, 2025.
During the nine months ended September 30, 2026, the Company’s bitcoin mining operations were influenced by changes in network difficulty, fleet utilization, and overall market pricing compared to the nine months ended September 30, 2025. Average bitcoin mined per day increased from 0.02 bitcoin to 0.05 bitcoin, average terahash per miner increased from 71.26 TH/s to 81.38 TH/s, average daily miners increased from 487 to 1,024, and total bitcoin mined increased from 4.93 BTC to 14.64 BTC, while average bitcoin price decreased from $102,115 to $73,054 and network difficulty rose from 121.3 trillion to 134.6 trillion during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025.
Cost of Revenue (exclusive of depreciation and amortization)
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Cost of revenue (exclusive of depreciation and amortization) | |||||||||||||||||||||||
| Hosting expenses | $ | 61,370 | $ | 553,532 | $ | (492,162) | (89) | % | |||||||||||||||
| Colocation costs | 6,346,824 | 662,055 | 5,684,769 | 859 | % | ||||||||||||||||||
| Electricity | 1,850,436 | 2,819,191 | (968,755) | (34) | % | ||||||||||||||||||
| Contract labor | 280,714 | 210,670 | 70,044 | 33 | % | ||||||||||||||||||
| Total cost of revenue (exclusive of depreciation and amortization) | $ | 8,539,344 | $ | 4,245,448 | $ | 4,293,896 | 101 | % | |||||||||||||||
Cost of revenue, exclusive of depreciation and amortization, for the nine months ended September 30, 2026 was $8,539,344, representing an increase of $4,293,896, or 101%, as compared to $4,245,448 for the nine months ended September 30, 2025. For the nine months ended September 30, 2026, the increase in colocation costs was driven by the continued growth and investment that the Company has made in the HPC business. This increase was partially offset by a decrease in hosting expenses due to the shift in operations from hosting to compute power and a decrease in electricity due to lower power usage and a lower average power rate at the Company's Oklahoma mining site.
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General and Administrative Expenses
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Stock-based compensation | $ | 3,836,168 | $ | 799,823 | $ | 3,036,345 | 380 | % | |||||||||||||||
| Wages and salaries | 5,444,697 | 1,811,841 | 3,632,856 | 201 | % | ||||||||||||||||||
| Taxes and other expenses | 317,329 | 101,220 | 216,109 | 214 | % | ||||||||||||||||||
| Utilities | 109,778 | 35,170 | 74,608 | 212 | % | ||||||||||||||||||
| Rent and lease expense | 265,170 | 213,225 | 51,945 | 24 | % | ||||||||||||||||||
| Professional fees | 31,137,639 | 2,331,949 | 28,805,690 | 1235 | % | ||||||||||||||||||
| Insurance | 576,722 | 316,248 | 260,474 | 82 | % | ||||||||||||||||||
| Travel, meals, and entertainment | 438,339 | 53,193 | 385,146 | 724 | % | ||||||||||||||||||
| Supplies and software | 1,092,419 | 131,941 | 960,478 | 728 | % | ||||||||||||||||||
| Other general and administrative expenses | 703,551 | 287,344 | 416,207 | 145 | % | ||||||||||||||||||
| Total general and administrative expenses | $ | 43,921,812 | $ | 6,081,954 | $ | 37,839,858 | 622 | % | |||||||||||||||
General and administrative expenses for the nine months ended September 30, 2026 were $43,921,812, an increase of $37,839,858, or 622%, as compared to $6,081,954 for the nine months ended September 30, 2025. The increase was primarily due to a $3,632,856 increase in wages and salaries from additional personnel to support the Company’s growth in HPC and compute services, a $3,036,345 increase in stock-based compensation, mainly from restricted stock units granted in September 2026, and a $28,805,690 increase in professional fees for audit, legal, and consulting costs related to the Company’s public readiness, including $26,412,529 related to shares of common stock issued for professional services in connection with the Company's direct listing. The remaining increase is primarily due to higher expenses as the Company scaled its operations and began operating as a public company.
Sales and Marketing Expense
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Sales and marketing expenses | $ | 2,758,174 | $ | 238,055 | $ | 2,520,119 | 1059 | % | |||||||||||||||
Sales and marketing expenses for the nine months ended September 30, 2026 were $2,758,174, an increase of $2,520,119, or 1059%, as compared to $238,055 for the nine months ended September 30, 2025. The increase is due primarily to the hiring of additional sales and marketing personnel to help promote the Company’s shift in strategic focus to the HPC business as well as commissions paid to salespeople beginning in 2026 as we began selling directly to customers.
Depreciation and Amortization Expense
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Depreciation and amortization expense | $ | 24,421,737 | $ | 3,358,079 | $ | 21,063,658 | 627 | % | |||||||||||||||
Depreciation and amortization expense for the nine months ended September 30, 2026 was $24,421,737, an increase of $21,063,658, or 627%, as compared to $3,358,079 for the nine months ended September 30, 2025. The increase was primarily due to an increase in depreciation expense due to purchase of additional property and equipment to support the growth of the Company's HPC business and the amortization of finance right-of-use leased assets acquired during 2026.
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Joint Ventures
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Other income: JV Investments | |||||||||||||||||||||||
| Income from equity method investments | $ | 21,994 | $ | 1,043,937 | $ | (1,021,943) | (98) | % | |||||||||||||||
| Gain on sale of equity method investments | 12,732,446 | — | 12,732,446 | 100 | % | ||||||||||||||||||
| Total other income: JV Investments | $ | 12,754,440 | $ | 1,043,937 | $ | 11,710,503 | 1122 | % | |||||||||||||||
Other income from joint venture investments consists of the Company’s equity method investments in TCM (prior to April 1, 2025) and T20 (prior to February 13, 2026). Other income from joint venture investments for the nine months ended September 30, 2026 was $12,754,440, an increase of $11,710,503, or 1122%, as compared to $1,043,937 for the nine months ended September 30, 2025. The increase was due to a $12,732,446 gain on the February 2026 sale of the Company’s equity method investment in T20, which includes $162,785 recognized in the third quarter upon finalization of the accounting for the sale. This increase was partially offset by a $1,021,943 decrease in income from equity method investments, as the Company’s interest in TCM ended with its April 2025 acquisition and its interest in T20 ended with the sale in February 2026.
Gain on Remeasurement of Investment in TCM
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Gain on remeasurement of investment in TCM | $ | — | $ | 14,549,536 | $ | (14,549,536) | (100) | % | |||||||||||||||
Gain on remeasurement of investment in TCM for the nine months ended September 30, 2026 was $0, as compared to $14,549,536 for the nine months ended September 30, 2025. The gain during the nine months ended September 30, 2025 resulted from the Company’s April 2025 acquisition of the remaining interests in TCM, which required the Company to remeasure its previously held equity method investment in TCM to its acquisition-date fair value, which exceeded the carrying value of TCM immediately prior to the acquisition date. The Company did not have a similar transaction during the nine months ended September 30, 2026.
Change in Fair Value of Warrant Liability
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of warrant liability | $ | 554,723 | $ | (5,536,816) | $ | 6,091,539 | (110) | % | |||||||||||||||
Change in fair value of warrant liability for the nine months ended September 30, 2026 was $554,723 gain as compared to a $5,536,816 loss during the nine months ended September 30, 2025. The gain during the nine months ended September 30, 2026 reflects a decrease in the fair value of the Type 2 warrants as the price of the Company's common stock declined during the period. The loss during the nine months ended September 30, 2025 reflects an increase in their fair value during that period.
Change in Fair Value of Digital Assets
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of digital assets | $ | — | $ | 81,919 | $ | (81,919) | (100) | % | |||||||||||||||
Change in fair value of digital assets for the nine months ended September 30, 2026 was $0, as compared to a $81,919 gain for the nine months ended September 30, 2025. This change is due to the Company selling the bitcoin it mined immediately in 2026 and holding no digital assets, therefore there was no change in fair value for the nine months ended September 30, 2026.
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Change in Fair Value of Convertible Note
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of convertible note | $ | 16,030,058 | $ | — | $ | 16,030,058 | 100 | % | |||||||||||||||
Change in fair value of convertible notes for the nine months ended September 30, 2026 was a gain of $16,030,058, as compared to $0 for the nine months ended September 30, 2025, when the Company had no convertible notes measured at fair value. The gain reflects a decrease in the fair value of the notes as the price of the Company’s common stock declined during the nine months ended September 30, 2026, which reduced the value of the conversion feature.
Change in Fair Value of Additional Convertible Notes Option
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Change in fair value of additional convertible notes option | $ | 20,388,400 | $ | — | $ | 20,388,400 | 100 | % | |||||||||||||||
Change in fair value of additional convertible notes option for the nine months ended September 30, 2026 was a gain of $20,388,400, compared to $0 for the nine months ended September 30, 2025, when the Company had no such option. The gain reflects a decrease in the fair value of the option as the price of the Company’s common stock declined during the nine months ended September 30, 2026, which reduced the value of the additional convertible notes underlying the option and the estimated probability that they will be issued.
Loss on Settlement of Lease Liability
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Loss on settlement of lease liability | $ | — | $ | 692,837 | $ | (692,837) | (100) | % | |||||||||||||||
Loss on settlement of lease liability for the nine months ended September 30, 2026 was $0, as compared to $692,837 for the nine months ended September 30, 2025. During the nine months ended September 30, 2025, the Company terminated certain finance leases and settled the lease liabilities by issuing common stock with a fair value in excess of the carrying amount of the liabilities resulting in a loss on settlement of lease liability. The Company did not settle any lease liabilities during the nine months ended September 30, 2026.
Loss on Issuance of Convertible Note
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Loss on issuance of convertible note | $ | 73,881,850 | $ | — | $ | 73,881,850 | 100 | % | |||||||||||||||
Loss on issuance of convertible note for the nine months ended September 30, 2026 was $73,881,850, as compared to $0 for the nine months ended September 30, 2025. The loss for the nine months ended September 30, 2026 is due to the initial fair value of the notes issued in March and June 2026, and the related option to issue additional notes, exceeding the net proceeds received. The Company did not issue convertible notes in 2025.
Loss on Extinguishment of Debt
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Loss on extinguishment of debt | $ | — | $ | 1,037,501 | $ | (1,037,501) | (100) | % | |||||||||||||||
Loss on extinguishment of debt for the nine months ended September 30, 2026 was $0, as compared to a loss of $1,037,501 for the nine months ended September 30, 2025. The expense was primarily driven by the retirement of a
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convertible note immediately prior to the TCM acquisition and the issuance of preferred stock for the partial conversion of a TCM convertible note in May and September 2025.
Interest Expense, Net
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Interest expense, net | $ | 7,953,108 | $ | 1,450,812 | $ | 6,502,296 | 448 | % | |||||||||||||||
Interest expense, net for the nine months ended September 30, 2026 was $7,953,108, an increase of $6,502,296 as compared to $1,450,812 for the nine months ended September 30, 2025. The increase is driven by an increase in finance leases for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025.
Segment Results of Operations
We operate our business as two operating and reportable segments: Bitcoin and HPC. For additional information about our segments, see Note 23 “Segment Reporting” in the notes to our condensed consolidated financial statements.
The following tables summarize our segment results of operations for the nine months ended September 30, 2026 and 2025:
Revenue
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 3,050,114 | $ | 5,302,425 | $ | (2,252,311) | (42) | % | |||||||||||||||
| HPC | 21,837,723 | 2,755,051 | 19,082,672 | 693 | % | ||||||||||||||||||
Bitcoin revenue for the nine months ended September 30, 2026 was $3,050,114, a decrease of $2,252,311 as compared to $5,302,425 for the nine months ended September 30, 2025. The decrease is driven by the pivot to focus on the HPC business.
HPC revenue for the nine months ended September 30, 2026 was $21,837,723, an increase of $19,082,672 as compared to $2,755,051 for the nine months ended September 30, 2025. The increase is driven by the pivot to focus on the HPC business.
Cost of Revenue (exclusive of depreciation and amortization)
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 2,051,872 | $ | 3,495,713 | $ | (1,443,841) | (41) | % | |||||||||||||||
| HPC | 6,487,472 | 749,735 | 5,737,737 | 765 | % | ||||||||||||||||||
Bitcoin cost of revenue, exclusive of depreciation and amortization, for the nine months ended September 30, 2026 was $2,051,872, a decrease of $1,443,841 as compared to $3,495,713 for the nine months ended September 30, 2025. The decrease is driven by the pivot to focus on the HPC business.
HPC cost of revenue, exclusive of depreciation and amortization, for the nine months ended September 30, 2026 was $6,487,472, an increase of $5,737,737 as compared to $749,735 for the nine months ended September 30, 2025. The increase is driven by the pivot to focus on the HPC business.
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Gross Profit
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 998,242 | $ | 1,806,712 | $ | (808,470) | (45) | % | |||||||||||||||
| HPC | 15,350,251 | 2,005,316 | 13,344,935 | 665 | % | ||||||||||||||||||
Bitcoin gross profit for the nine months ended September 30, 2026 was $998,242, a decrease of $808,470 as compared to $1,806,712 for the nine months ended September 30, 2025. The decrease is driven by the pivot to focus on the HPC business.
HPC gross profit for the nine months ended September 30, 2026 was $15,350,251, an increase of $13,344,935 as compared to $2,005,316 for the nine months ended September 30, 2025. The increase is primarily due to a shift from marketplace to direct sales for HPC, partially offset by a decrease in Bitcoin activities as we shift our focus towards HPC activities.
Operating Expenses
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 3,697,607 | $ | 2,845,904 | $ | 851,703 | 30 | % | |||||||||||||||
| HPC | 31,717,560 | 4,220,610 | 27,496,950 | 651 | % | ||||||||||||||||||
Bitcoin operating expenses for the nine months ended September 30, 2026 were $3,697,607, an increase of $851,703 as compared to $2,845,904 for the nine months ended September 30, 2025. The increase is driven by an increase in compensation costs primarily due to merit increases and the issuance of restricted stock units in September 2026.
HPC operating expenses for the nine months ended September 30, 2026 was $31,717,560, an increase of $27,496,950 as compared to $4,220,610 for the nine months ended September 30, 2025. The increase is primarily due to a shift from marketplace to direct sales.
Net Income (Loss) before Income Taxes
| For the Nine Months Ended September 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| Bitcoin | $ | 9,994,855 | $ | (49,649) | $ | 10,044,504 | (20231) | % | |||||||||||||||
| HPC | (21,775,258) | 11,283,181 | (33,058,439) | (293) | % | ||||||||||||||||||
Bitcoin net income before income taxes for the nine months ended September 30, 2026 was $9,994,855, an increase of $10,044,504 as compared to a net loss of $49,649 for the nine months ended September 30, 2025. The increase is primarily due to the gain on sale of T20 during January 2026.
HPC net loss before income taxes for the nine months ended September 30, 2026 was $21,775,258, a decrease of $33,058,439 as compared to net income before income taxes of $11,283,181 for the nine months ended September 30, 2025. The decrease is driven by the gain on remeasurement of investment in TCM of $14,549,536 that was recognized in April 2025.
Non-GAAP Financial Measures
In this quarterly report on Form 10-Q, we have provided a non-GAAP measure, which we define as financial information that has not been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The non-GAAP financial measure provided herein is Adjusted EBITDA, which we define as net income (loss) adjusted to exclude depreciation and amortization (including amortization of finance lease right-of-use assets), interest expense, net, income tax expense (benefit), stock-based compensation, common stock issued for professional services in connection with the direct listing, changes in the fair value of the warrant liability, digital assets, convertible notes, and the option to issue additional convertible notes, gains and losses on sales of equity method investments and on the sale or disposal of property and equipment, loss on settlement of lease liability, the loss on issuance
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of convertible notes, losses on extinguishment of debt, and the gain on remeasurement of our investment in TCM (“Adjusted EBITDA”). Net income (loss) margin represents net income (loss) as a percentage of revenue and Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue. Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, net income or loss calculated in accordance with U.S. GAAP.
We believe Adjusted EBITDA helps investors compare our operating performance across periods by excluding items we believe are not indicative of ongoing operations, such as changes in fair value and gains and losses on financing, acquisition, and disposition transactions. However, Adjusted EBITDA is not intended as a substitute for comparisons based on net loss. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measures and the corresponding U.S. GAAP measures provided by each company under applicable SEC rules.
Limitations on the use of non-GAAP financial measures
There are limitations to using non-GAAP financial measures because non-GAAP financial measures are not prepared in accordance with U.S. GAAP and may be different from non-GAAP financial measures provided by other companies.
The non-GAAP financial measures are limited in value because they exclude certain items that may have a material impact upon our reported financial results. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which items are adjusted to calculate our non-GAAP financial measures. We compensate for these limitations by analyzing current and future results on a U.S. GAAP basis as well as a non-GAAP basis and also by providing U.S. GAAP measures in our public disclosures.
Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure to evaluate our business and to view our non-GAAP financial measures in conjunction with the most directly comparable U.S. GAAP financial measures.
The following table reconciles the specific items excluded from U.S. GAAP metrics in the calculation of non-GAAP metrics for the periods shown below:
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| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income (loss) | $ | (14,442,571) | $ | (9,464,269) | $ | (86,835,488) | $ | 831,828 | |||||||||||||||
| Depreciation and amortization (inclusive of ROU amortization) | 14,872,738 | 1,425,735 | 24,421,737 | 3,358,079 | |||||||||||||||||||
| Interest expense, net | 5,369,084 | 509,866 | 7,953,108 | 1,450,812 | |||||||||||||||||||
| Income tax expense (benefit) | 36,237 | (349) | (148,827) | 284,771 | |||||||||||||||||||
| Stock-based compensation | 3,928,899 | 549,271 | 4,170,708 | 799,823 | |||||||||||||||||||
| Common stock issued for professional services in connection with the direct listing | 26,412,529 | — | 26,412,529 | — | |||||||||||||||||||
| Change in fair value of warrant liability | (2,140,561) | 4,844,713 | (554,723) | 5,536,816 | |||||||||||||||||||
| Change in fair value of digital assets | — | (43,935) | — | (81,919) | |||||||||||||||||||
| Change in fair value of convertible note | (13,650,058) | — | (16,030,058) | — | |||||||||||||||||||
| Change in fair value of additional convertible notes option | (16,537,550) | — | (20,388,400) | — | |||||||||||||||||||
| Loss on settlement of lease liability | — | 692,837 | — | 692,837 | |||||||||||||||||||
| Gain on sale of equity method investments | (162,785) | — | (12,732,446) | — | |||||||||||||||||||
| Gain on sale or disposal of property and equipment | — | (462) | (36,298) | (462) | |||||||||||||||||||
| Loss on issuance of convertible note | — | — | 73,881,850 | — | |||||||||||||||||||
| Loss on extinguishment of debt | — | 883,667 | — | 1,037,501 | |||||||||||||||||||
| Gain on remeasurement of investment in TCM | — | — | — | (14,549,536) | |||||||||||||||||||
| Adjusted EBITDA | $ | 3,685,962 | $ | (602,926) | $ | 113,692 | $ | (639,450) | |||||||||||||||
| Revenue | $ | 14,755,114 | $ | 3,100,785 | $ | 24,887,837 | $ | 8,057,476 | |||||||||||||||
| Net income (loss) margin | (98) | % | (305) | % | (349) | % | 10 | % | |||||||||||||||
| Adjusted EBITDA margin | 25 | % | (19) | % | — | % | (8) | % | |||||||||||||||
Going Concern, Liquidity and Capital Resources
The Company has incurred recurring operating losses since inception resulting in an accumulated deficit of $124,247,844 as of September 30, 2026. For the nine months ended September 30, 2026, the Company had an operating loss of $54,753,230. The Company’s operations have been funded partially through the issuance of debt and equity instruments. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these condensed consolidated financial statements.
In assessing the Company’s ability to continue as a going concern, the Company monitors and analyzes its cash and its ability to generate sufficient cash flow in the future to support its operating and capital expenditure commitments. At September 30, 2026, the Company had cash of $21,909,713 and restricted cash of $9,225,679, which is restricted for servicing debt. The Company’s plans to alleviate the substantial doubt include completing additional approved draws under the USD.AI protocol and utilizing new and existing lending partners. The Company also entered into a significant revenue contract in September 2026 for approximately $211,900,000 in future revenue, under which the Company received approximately $21,200,000 in cash prepayments in October 2026. The Company continues to see increased revenue and cash inflows from operations as it has invested in additional HPC infrastructure. Accordingly, management concluded these plans will alleviate the substantial doubt about the Company’s ability to continue as a going concern for the one-year period extending from the date of issuance of these condensed consolidated financial statements.
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Cash Flows for the Nine Months Ended September 30, 2026 and 2025
The following table sets forth a summary of cash flows for the periods presented:
| For the Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash provided by (used in) operating activities | $ | 54,276,127 | $ | (2,526,814) | |||||||
| Net cash (used in) provided by investing activities | (121,693,350) | 2,808,437 | |||||||||
| Net cash provided by financing activities | 86,840,122 | 13,985,705 | |||||||||
| Net change in cash and restricted cash | $ | 19,422,899 | $ | 14,267,328 | |||||||
Net Cash Provided By (Used In) Operating Activities
Net cash provided by operating activities of $54,276,127 increased by $56,802,941 for the nine months ended September 30, 2026 as compared to net cash used in operating activities of $2,526,814 for the nine months ended September 30, 2025. The increase was primarily driven by the increase in deferred revenue of $78,997,422 from up-front deposits received upon execution of new HPC revenue contracts and increases in accounts payable and accrued expenses, partially offset by an increase in accounts receivable of $30,908,614. The net loss of $86,835,488 for the nine months ended September 30, 2026 included significant non-cash items, primarily the loss on issuance of convertible notes, issuance of common stock for services, and depreciation and amortization, partially offset by non-cash fair value gains on the convertible notes.
Net Cash (Used In) Provided By Investing Activities
Net cash used in investing activities of $121,693,350 increased by $124,501,787 for the nine months ended September 30, 2026 as compared to net cash provided by investing activities of $2,808,437 for the nine months ended September 30, 2025. The increase was primarily driven by purchases of property and equipment of $137,021,298, compared to $1,226,323 in the prior year, to support the Company's buildout of its HPC infrastructure, and data center set up costs of $5,999,851, partially offset by proceeds of $16,722,407 from the sale of equity method investments. The prior year also included cash acquired in a business acquisition and distributions from equity method investments that did not recur in the current period.
Net Cash Provided By Financing Activities
Net cash provided by financing activities of $86,840,122 increased by $72,854,417 for the nine months ended September 30, 2026 as compared to net cash provided by financing activities of $13,985,705 for the nine months ended September 30, 2025. The increase was primarily driven by proceeds from notes payable of $51,378,460, borrowings under the USD.AI protocol of $34,996,018, and proceeds from the issuance of convertible notes of $28,800,000, partially offset by repayments of finance lease obligations of $27,399,088 and a decrease in proceeds from the sale of common stock to $5,980,834 from $21,355,080 in the prior year period.
Critical Accounting Estimates
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s Condensed Consolidated Financial Statements that have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
On an on-going basis, the Company evaluates its estimates, including those related to business combinations, the fair value of convertible notes and the additional convertible notes option, stock-based compensation, income taxes, contingencies, and litigation, as applicable.
The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
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The Company believes the following critical accounting estimates used in the preparation of its Condensed Consolidated Financial Statements affect its more significant judgments and estimates. See Note 2 for the Company's significant accounting policies.
Business Combinations
The Company accounts for business acquisitions using the acquisition method of accounting, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, under which assets acquired and liabilities assumed are recorded at their respective fair values at the acquisition date. The fair value of the consideration paid is assigned to the assets acquired and liabilities assumed based on their respective fair values. Goodwill represents the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed.
The Company’s management exercises significant judgments in determining the fair value of assets acquired and liabilities assumed, as well as intangibles and their estimated useful lives. Fair value and useful life determinations are based on, among other factors, estimates of future expected cash flows and appropriate discount rates used in computing present values. These judgments may materially impact the estimates used in allocating acquisition date fair values to assets acquired and liabilities assumed, as well as the Company’s current and future operating results. Actual results may vary from these estimates which may result in adjustments to goodwill and acquisition date fair values of assets and liabilities during a measurement period or upon a final determination of asset and liability fair values, whichever occurs first. Adjustments to the fair value of assets and liabilities made after the end of the measurement period are recorded within the Company’s operating results.
Fair Value of Convertible Notes and Additional Convertible Notes Option
The Company records its convertible notes at fair value and records its right to call additional convertible notes as a liability at fair value. Both are remeasured each period, with changes recognized in earnings. Fair value is estimated by a third-party valuation specialist using a Monte Carlo simulation of the Company’s share price, which requires significant judgment because it depends on unobservable inputs.
The most significant inputs are the Company’s share price, expected volatility, and a discount rate based on the Company’s credit risk. Because the Company’s stock only began trading in July 2026, expected volatility is based on the Company’s limited trading history and comparable public companies. Small changes in these inputs can significantly change fair value and reported results.
Stock-Based Compensation
The Company grants stock options and restricted stock units (“RSUs”). Compensation cost is measured at the grant date and recognized over the requisite service period, so the estimates that most affect expense are made when an award is granted and are not remeasured afterward unless the award is modified. The Company expects stock-based compensation to increase as it grants additional RSUs and options.
The Company values stock options using the Black-Scholes option pricing model, which requires estimates of the fair value of the underlying common stock, expected volatility, expected term, the risk-free interest rate, and expected dividends. For options granted before the Company’s common stock was publicly traded, significant judgment was involved in determining the fair value of the Company’s common stock and the expected stock price volatility. The Company considered numerous objective and subjective factors to determine the fair value of the Company’s common stock such as, but not limited to, (i) contemporaneous third-party valuations of common stock; (ii) the rights and preferences of the Company’s preferred stock relative to common stock; (iii) the lack of marketability of common stock; (iv) developments in the business; and (v) the likelihood of achieving a liquidity event, such as an IPO or sale of the Company, given prevailing market conditions. The expected volatility was determined using the historical volatilities of several publicly listed peer companies over a period equivalent to the expected term of the awards.
Compensation expense for RSUs is recognized on a straight-line basis over the requisite service period, which is generally the same as the vesting period. A higher stock price at grant increases the expense recognized over the service period, and the Company’s stock price may be volatile. The Company accounts for forfeitures as they occur. Judgment is also required to determine the grant date and the service inception date, particularly for awards approved before their key terms are communicated or made in connection with significant events.
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Income Taxes
The Company utilizes judgment and estimates in assessing the need for the valuation allowance related to deferred tax assets, including net operating loss carry-forwards. In the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.
Recently Issued Accounting Pronouncements
See Note 2 - Summary of Significant Accounting Policies of the condensed consolidated financial statement included this Form 10-Q for information about recently adopted and not yet adopted accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, the Company is not required to provide the information called for by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the Company’s 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 judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of its principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2026. Based upon that evaluation, and as a result of the material weaknesses in the Company’s internal control over financial reporting discussed below, the Company’s principal executive officer and principal financial officer concluded that as of September 30, 2026, the Company’s disclosure controls and procedures were not effective.
Previously Reported Material Weaknesses in Internal Control over Financial Reporting
As previously disclosed, in connection with the audit of the Company’s consolidated financial statements for the fiscal years ended December 31, 2025 and December 31, 2024, the Company identified certain control deficiencies in the design and implementation of its internal control over financial reporting that constituted material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company additionally identified significant deficiencies that did not amount to material weaknesses.
The material weaknesses identified were (1) a lack of a formalized control environment and oversight of controls over financial reporting; (2) a lack of proper accounting for significant or non-recurring transactions, including in particular warrant evaluation and equity-related transactions; and (3) a lack of appropriate segregation of duties to permit appropriate review of accounting transactions and/or accounting treatment by multiple qualified individuals and to prevent one individual from being able to override the internal control environment by initiating, authorizing, and completing transactions. These material weaknesses, if not remediated, could result in a material misstatement of one or more disclosures in the Company’s annual or interim financial statements that would not be prevented or detected in a timely manner. In addition to the foregoing material weaknesses, the Company identified significant deficiencies in the Company’s accounting treatment of stock-based compensation expense and its lack of an enterprise resource planning system (“ERP”).
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The Company’s management is implementing measures designed to improve its internal control over financial reporting to remediate the identified material weaknesses. The remediation actions the Company is taking, and expects to take, to correct the lack of a formalized control environment and oversight of controls over financial reporting include the following: (1) the Company hired Michael Maniscalco as its Chief Executive Officer, Ryan DiRocco as its Chief Technology Officer, and Stephen Hunton as its Chief Marketing Officer, and appointed Homaira Akbari, Stacy Kenworthy, Michael Mulica, David Rench and Barry Schwartz as independent directors of the Board of Directors (the “Board”) to provide a foundation for a formal approval and control process; and (2) the Company implemented an ERP and an accounts payable payment platform effective February 2026. To correct the lack of proper accounting for significant or non-recurring transactions, the Company implemented Board approval on all warrant issuances and monthly recording of awards based on the latest 409(a) valuation, which policy was updated upon completion of the Company’s direct listing to instead be based on the Company’s stock price as reported by Nasdaq. The remediation actions the Company is taking, and expects to take, to correct the lack of appropriate segregation of duties include the following: (1) in September 2025, the Company hired Andrew Glickler as its SVP, Finance; (2) the Company implemented an ERP and an accounts payable platform effective February 2026; (3) the Company engaged outside consultants to review business process analysis and flow of data to the accounting software platform and financial reporting; and (4) the Company hired a corporate controller in January 2026 to oversee the Company and its subsidiaries. To resolve the significant deficiencies, in addition to the implementation of an ERP and an accounts payable platform, the Chief Financial Officer and SVP, Finance are reviewing option and RSU grants and stock-based compensation with the monthly close.
As management continues to evaluate and work to remediate the material weaknesses and to resolve the significant deficiencies, the Company may determine to take additional measures to address the material weaknesses and significant deficiencies. However, the Company cannot provide assurance that the measures it has taken to date, or that it may take in the future, will be sufficient to remediate the material weaknesses or resolve the significant deficiencies or avoid potential future material weaknesses or significant deficiencies.
Changes in Internal Control over Financial Reporting
Other than the remediation steps described above, there were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2026 that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
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PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 24 - Commitments and Contingencies to the Company’s condensed consolidated financial statements in “Part I. Financial Information – Item 1. Condensed Consolidated Financial Statements” of this report.
ITEM 1A. RISK FACTORS
As a smaller reporting company, the Company is not required to provide the information called for by this Item. However, the Company hereby discloses the following new and updated risk factors:
Growth in our GPU-as-a-service business is dependent on the availability of data center capacity, and failure to secure suitable facilities could adversely affect our business and results of operations.
Growth in our GPU-as-a-service business is dependent on the availability of data center capacity to house the GPU compute and on the timelines to develop, enhance, or expand that capacity. Constraints or delays in either our or our partners’ ability to secure, construct, power, or commission suitable facilities could limit our ability to deploy GPUs, meet customer demand, and grow revenue, which could adversely affect our business and results of operations.
Many of the leases we have entered into for data centers have multi-year terms and fixed capacity. If we do not accurately anticipate the data center capacity required by our customers, including if they use less or more of our infrastructure than expected, we would incur additional costs due to leasing more capacity than is used and paid for by our customers or, alternatively, in seeking additional data center capacity to fulfill unexpected demand on terms that may not be economically reasonable or acceptable to us, if we are able to lease additional capacity at all. We may also need to seek additional data center capacity in the event any leases with third parties are terminated or not renewed, which we may be unable to do on reasonable terms or at all.
We may not realize the aggregate contracted fees of the customer contracts we have entered into, including as a result of termination or amendment, which could have a material adverse impact on our business, financial condition and results of operations.
The aggregate contracted fees of our customer contracts reflect paid and unpaid amounts. We may not realize all of the revenue that may be generated pursuant to the terms of our customer contracts. In addition, there can be no assurance that the aggregate contracted fees of our customer contracts will result in actual revenue in any particular period. The actual receipt of revenue from our customer contracts may never occur or may be delayed for a variety of reasons including, but not limited to, early termination of the customer contract or amendment of the customer contract to reduce, modify, or delay the scope of the arrangement. Our inability to replace canceled or reduced arrangements could have a material adverse impact on our business, financial condition and results of operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
The following sets forth information regarding all securities sold during the three months ended September 30, 2026 that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). Each issuance was exempt from registration under Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. The recipients were accredited investors, the securities were issued without general solicitation, and no commissions were paid.
On July 1, 2026, the Company issued warrants to purchase 35,498 shares of common stock to sellers, each of whom qualifies as an accredited investor, pursuant to a purchase agreement as consideration for software and certain intellectual property and associated rights. The warrants have an exercise price of $23.15 and vest in full on January 1, 2027 subject to continued performance of all obligations under the purchase agreement.
On July 17, 2026, the Company issued a warrant to purchase 69,491 shares of common stock to a commercial partner that qualifies as an accredited investor in connection with the parties’ entry into a lease facility. The warrants have an exercise price of $23.15 and vest in 24 equal monthly installments.
On August 4, 2026, the Company issued 5,000 shares of common stock upon the exercise of the warrant issued to an accredited investor in October 2024, at an exercise price of $3.00 per share and aggregate consideration of $15,000.
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On August 5, 2026, the Company issued a warrant to purchase 16,668 shares of common stock to a consultant that qualifies as an accredited investor pursuant to an amended and restated engagement letter between the parties. The warrants have an exercise price of $10.80, and half of the underlying shares vest on September 1, 2026, with the remaining shares vesting in six equal monthly installments beginning on October 1, 2026.
Issuer Purchases of Equity Securities
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Plan and Non-Rule 10b5-1 Trading Arrangement Adoptions, Terminations, and Modifications
During the three months ended September 30, 2026, none of the Company’s directors or “officers” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted terminated
Entry into a Material Definitive Agreement
On November 5, 2026, SPRE Commercial Group, Inc. (“SPRE Commercial”), a wholly owned subsidiary of QumulusAI, Inc., entered into a Membership Interest Purchase Agreement (the “MIPA”) with AM Denton Holdings LLC (“AM Denton”), pursuant to which SPRE Commercial agreed to sell, assign, transfer, convey and deliver to AM Denton, and pursuant to which AM Denton agreed to purchase and acquire from SPRE Commercial, all of SPRE Commercial’s right, title and interest in and to the issued and outstanding membership interests in SPRE Denton TX, LLC (“SPRE Denton”), a wholly owned subsidiary of SPRE Commercial, subject to certain third-party approvals. The membership interests will be transferred to AM Denton free and clear of all liens, pledges, security interests, claims, charges, options, rights of first refusal, rights of first offer, purchase rights and other encumbrances of any kind or nature.
The aggregate purchase price for the membership interests is $2,022,017 (the “Purchase Price”). Of the Purchase Price, $50,000 was paid by AM Denton to SPRE Commercial in cash; $972,017 will be paid pursuant to a promissory note bearing interest at a rate of 7% per annum, payable in monthly installments over a 60 month period beginning April 1, 2027; and $1,000,000 will be paid pursuant to a promissory note bearing interest at a rate of 7% per annum, payable in monthly installments over an 84 month period beginning April 1, 2027. The obligations of AM Denton under the foregoing notes will be secured solely by a pledge to SPRE Commercial of AM Denton’s right, title and interest in and to the membership interests of SPRE Denton.
In addition to regularly scheduled payments under such notes, AM Denton will make revenue share payments equal to 15% of the net monthly revenue of SPRE Denton each calendar month beginning January 1, 2027 (the “Revenue Share Payments”). The Revenue Share Payments will constitute an additional payment of principal under the notes and will immediately reduce the outstanding principal balance thereof on a dollar-for-dollar basis. Upon payment in full of all outstanding principal and accrued and unpaid interest under both notes, AM Denton’s obligation to make Revenue Share Payments will automatically and permanently terminate, and SPRE Commercial will have no further right to receive any Revenue Share Payments under the MIPA.
The foregoing description of the MIPA is not complete and is qualified in its entirety by reference to the full text of the MIPA, which is filed as Exhibit 10.10 to this Quarterly Report on Form 10-Q and incorporated herein by reference.
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ITEM 6. EXHIBITS
The following exhibits are being filed or furnished with this quarterly report on Form 10-Q:
| Incorporated by Reference | ||||||||||||||||||||||||||||||||
| Exhibit No. | Description | Form | File No. | Exhibit | Filing Date | |||||||||||||||||||||||||||
| 3.1 | Second Amended and Restated Articles of Incorporation of QumulusAI, Inc. | 8-K | 001-43398 | 3.1 | July 16, 2026 | |||||||||||||||||||||||||||
| 3.2 | Second Amended and Restated Bylaws of QumulusAI, Inc. | S-1/A | 333-292514 | 3.2 | June 10, 2026 | |||||||||||||||||||||||||||
| 10.1 | QumulusAI, Inc. 2026 Equity Incentive Plan. | 8-K | 001-43398 | 10.1 | July 16, 2026 | |||||||||||||||||||||||||||
| 10.2 | Form of Non-Employee Director Restricted Stock Unit Award Agreement under the QumulusAI, Inc. 2026 Equity Incentive Plan. | S-1/A | 333-292514 | 10.45 | May 1, 2026 | |||||||||||||||||||||||||||
| 10.3 | Form of Employee Restricted Stock Unit Award Agreement under the QumulusAI, Inc. 2026 Equity Incentive Plan. | S-1/A | 333-292514 | 10.46 | May 1, 2026 | |||||||||||||||||||||||||||
| 10.4 | Form of Employee Performance Share Unit Award Agreement under the QumulusAI, Inc. 2026 Equity Incentive Plan. | S-1/A | 333-292514 | 10.47 | May 1, 2026 | |||||||||||||||||||||||||||
| 10.5 | Form of Employee Incentive Stock Option Award Agreement under the QumulusAI, Inc. 2026 Equity Incentive Plan. | S-1/A | 333-292514 | 10.48 | May 1, 2026 | |||||||||||||||||||||||||||
| 10.6 | Form of Employee Non-Qualified Stock Option Award Agreement under the QumulusAI, Inc. 2026 Equity Incentive Plan. | S-1/A | 333-292514 | 10.49 | May 1, 2026 | |||||||||||||||||||||||||||
| 10.7 | Form of Lock-Up Agreement. | S-1/A | 333-292514 | 10.39 | February 13, 2026 | |||||||||||||||||||||||||||
| 10.8 | Form of Director and Officer Indemnification Agreement. | S-1/A | 333-292514 | 10.57 | June 29, 2026 | |||||||||||||||||||||||||||
| 10.9 | First Amendment to Surface Lease Agreement, dated July 17, 2026, by and between TOM-STACK, LLC and SPRE WATONGA OK, LLC. | 10-Q | 001-43398 | 10.13 | August 25, 2026 | |||||||||||||||||||||||||||
| 10.10 | Membership Interest Purchase Agreement, dated November 5, 2026, between SPRE Commercial Group, Inc. and AM Denton Holdings LLC.* | Filed herewith | ||||||||||||||||||||||||||||||
| 31.1 | Certification of President and Chief Executive Officer pursuant to SEC Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||||||||||||||||||||||||||||||
| 31.2 | Certification of Chief Financial Officer pursuant to SEC Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | Filed herewith | ||||||||||||||||||||||||||||||
| 32.1 | Certification of President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Furnished herewith | ||||||||||||||||||||||||||||||
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | Furnished herewith | ||||||||||||||||||||||||||||||
| 101 | The following materials from QumulusAI, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2026, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Shareholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements. | Filed herewith | ||||||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | Filed herewith | ||||||||||||||||||||||||||||||
____________
*Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K.
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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.
| QUMULUSAI, INC. | ||||||||
Date: November 10, 2026 | /s/ Michael Maniscalco | |||||||
| Michael Maniscalco | ||||||||
| Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Date: November 10, 2026 | /s/ Scott Krosnowski | |||||||
| Scott Krosnowski | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
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