Ionic Digital Inc.

Item 1. Unaudited Financial Statements

See Accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of US $, except per share data)

See Accompanying Notes to Condensed Consolidated Financial Statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE AND STOCKHOLDERS’ EQUITY

(in thousands of US $, except share data)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN MEZZANINE AND STOCKHOLDERS’ EQUITY

(in thousands of US $, except share data)

See Accompanying Notes to Condensed Consolidated Financial Statements for further detail.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of US $)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

Nature of operations and corporate information

Ionic Digital Inc. (together with its consolidated subsidiaries, “Ionic Digital,” or the “Company”) was formed on January 5, 2024 to acquire substantially all of the assets and assume certain liabilities of Celsius Mining, LLC (“Celsius Mining”) pursuant to the Chapter 11 bankruptcy plan of reorganization (the “Plan”), which was confirmed by the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) on November 9, 2023. Pursuant to the Plan, at the close of business on January 31, 2024 (the “Plan Effective Date”), the Company, through its wholly owned subsidiary Ionic Digital Treasury Inc., entered into a Master Conveyance Agreement with Celsius Mining and acquired substantially all the assets and assumed certain liabilities from Celsius Mining (the “Business Combination”). As a result of the Business Combination, the Company initiated its cryptocurrency mining operations, generating revenue through the mining of bitcoin, a digital asset operating on a decentralized, open-source blockchain network.

Subsequent to the Business Combination, the Company solely operated a fleet of application-specific integrated circuit (“ASIC”) mining machines (“miners”) at both hosted and owned or leased facilities. However, on October 14, 2025, the Company entered into a lease arrangement for its Ward County facility (previously referred to as “Cedarvale” in Company communications), resulting in a new operating segment which provides digital infrastructure solutions (refer to Note 8 – Leases for additional information). The Company’s cryptocurrency mining segment continues to operate four facilities located in Midland, Texas.

On July 28, 2026, the Company completed the direct listing of the Company’s Class A common stock, upon which all outstanding shares of its Series A Preferred Stock automatically converted into shares of Class A common stock. See further information in Note 13.

NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, these unaudited condensed consolidated financial statements reflect all adjustments, including those of a normal and recurring nature, which are necessary for a fair presentation of the results for the interim periods presented. The Company’s interim financial statements are condensed and should be read in conjunction with the Company’s latest audited annual consolidated financial statements included in the final prospectus filed on July 28, 2026. The results of operations for the three and nine months ended September 30, 2026, are not necessarily indicative of the results to be expected for the year ending December 31, 2026.

Immaterial Out-of-Period Corrections

During the three months ended September 30, 2026, the Company identified and corrected a cumulative overstatement of stock-based compensation expense of approximately $3.5 million, comprising $3.0 million attributable to the six months ended June 30, 2026 and $0.5 million attributable to the three months ended December 31, 2025. The Company concluded that the error was qualitatively and quantitatively immaterial to each respective period and that the correction was immaterial to expected results of operations for the year ended December 31, 2026.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned and controlled subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with US GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include estimates used to review the Company’s goodwill allocation and impairment, impairment of long-lived assets, allowance for credit losses, income taxes, warrant liability valuation, and stock-based compensation.

Management bases its estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumptions that it believes to be reasonable under the circumstances when these carrying values are not readily available from other sources. Making estimates requires management to exercise significant judgment and it is at least reasonably possible that the estimate of the effect of a condition, situation, or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, actual results may differ materially from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with original maturities of three months or less. These investments may include money market funds, certificates of deposit, and other short-term instruments.

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. At times throughout the year, the Company has maintained cash balances in several bank accounts in excess of FDIC limits. The cash balance in excess of the FDIC limits was immaterial as of September 30, 2026 and December 31, 2025. The Company's cash equivalents include investments in money market funds, primarily the Fidelity Investments Money Market Government Portfolio - Institutional Class (FRGXX), which invests at least 99.5% of its assets in cash, U.S. government securities, and repurchase agreements collateralized by such securities. At September 30, 2026 and December 31, 2025, the fair value of these investments was $376.9 million and $42.1 million, respectively. These funds are not insured by the FDIC, but maintain a stable net asset value of $1.00 per share and are subject to Securities and Exchange Commission (“SEC”) diversification and liquidity requirements under Rule 2a-7. The Company has no significant concentrations of credit risk from these holdings beyond U.S. sovereign credit exposure. As of September 30, 2026, the Company’s bitcoin was held with a single third-party custodian. The accounts offered by the custodian of the Company’s bitcoin are not insured by the FDIC. The uninsured fair value of the Company’s bitcoin holdings totaled $246.9 million and $237.9 million as of September 30, 2026 and December 31, 2025, respectively. The Company has not experienced any losses in such accounts.

The Company has certain customers and vendors who individually represent 10% or more of the Company’s revenue or capital expenditures.

Prepaid Expenses

The Company records a prepaid expense for costs paid, but not yet incurred. Those expected to be incurred within one year are recognized and shown within Current assets on the Company’s Condensed Consolidated Balance Sheet. Any costs expected to be incurred outside of one year would be included within Deposits and other non-current assets on the Company’s Condensed Consolidated Balance Sheet.

Allowance for Credit Losses

Management estimates an allowance for credit losses using relevant available information from both internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Changes in the allowance for credit losses are recorded within General and administrative expenses, in the Condensed Consolidated Statements of Operations.

Fair value measurements

The Company accounts for financial assets and liabilities in accordance with ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs when measuring fair value and classifies those inputs into three levels:

•Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

•Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily available pricing sources for comparable instruments.

•Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

Cryptocurrency assets

Cryptocurrency assets held by the Company as of September 30, 2026 and December 31, 2025, consisted entirely of bitcoin. All cryptocurrency asset holdings are classified as current assets in the accompanying balance sheets due to the Company’s ability to sell the cryptocurrency assets in a highly liquid marketplace and its intent to liquidate its cryptocurrency assets to support operations, capital expenditures, or for treasury management as needed.

Bitcoin received by the Company through its mining activities is accounted for in connection with the Company’s revenue recognition policy disclosed below.

Cryptocurrency assets are recorded at fair value. The Company determines the fair value of cryptocurrency assets in accordance with ASC 820. The fair value of bitcoin is measured using the period-end closing bitcoin price from its principal market, Coinbase Global, Inc. (“Coinbase”). The Company utilizes the bitcoin spot price as of 23:59:59 UTC. For the three and nine months ended September 30, 2026 and 2025, the changes in fair value are recognized as Gain (loss) on fair value of cryptocurrency within Operating expenses on the Condensed Consolidated Statements of Operations.

The proceeds from sales of cryptocurrency assets are included within investing activities in the accompanying Condensed Consolidated Statements of Cash Flows, as the Company intends to liquidate its cryptocurrency assets only as needed to cover operating costs and expenses within its operating cycle. In accordance with ASC 350-60, the Company discloses realized gains and losses from the sale of cryptocurrency assets and such gains and losses are measured as the difference between the cash proceeds and the cost basis of the asset as determined on a First In-First Out basis.

Property and equipment, net

Property and equipment is stated at cost less depreciation accumulated using the straight-line method over the estimated useful lives of the assets. Construction-in-progress is the construction or development of assets that have not yet been placed in service for their intended use, and therefore, are not depreciated until the work is completed and the assets are placed in service. Depreciation of mining equipment, machinery and facilities equipment, buildings, and leasehold improvements also commences once assets are placed in service. Land is not depreciated.

Costs of maintenance, repairs, and minor parts replacements are expensed when incurred. Upon the sale or retirement of property and equipment, the cost and accumulated depreciation and amortization are removed from the Company’s balance sheets with the resulting gain or loss, if any, reflected in the Company’s Condensed Consolidated Statements of Operations.

The estimated useful lives of the assets are as follows:

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such asset groups may not be fully recoverable. The asset groups to be held and used that are subject to impairment review represent the lowest level of identifiable cash flows that are largely independent of other groups of assets and liabilities.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If such assets are considered unrecoverable, the impairment loss to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Assets Held for Sale

The Company classifies long-lived assets to be sold as held for sale in the period in which all of the following criteria are met:

1. Management, having the authority to approve the action, commits to a plan to sell the asset;

2. The asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;

3. An active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated;

4. The sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond the Company’s control extend the period of time required to sell the asset beyond one year;

5. The asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and

6. Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures long-lived assets that are classified as held for sale at the lower of their carrying amount or fair value less any costs to sell. Any loss resulting from remeasurement is recognized in the period in which the held-for-sale criteria are met. Conversely, potential gains are not recognized on long-lived assets until the date of sale. The Company assesses the fair value of a long-lived asset, less any costs to sell, in each reporting period it remains classified as held for sale, and reports any subsequent changes as an adjustment to the carrying value of the asset, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale. Refer to Note 6 – Assets Held for Sale for further information.

Recognition of Cryptocurrency Mining Revenue

Ionic Digital participates in a third-party operated mining pool to which the Company provides the service of performing hash calculations, an output of the Company’s ordinary activities. Through July 29, 2026, the Company’s mining pool operator was Foundry Digital LLC (“Foundry”). On July 29, 2026, the Company entered into a Mining Pool Hashrate Purchase Agreement with Luxor Technology Corporation (“Luxor”) and began directing its hashrate to the Luxor mining pool on July 30, 2026. The change in mining pool operator did not change the Company’s revenue recognition policy. Differences in the terms of the two arrangements are described below.

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of this standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Step 1: Identify the contract with the customer

Step 2: Identify the performance obligations in the contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract

Step 5: Recognize revenue when the Company satisfies a performance obligation

Step 1: The Company has identified the third-party mining pool operator as its customer (the "Customer"). The Company enters into a contract with the Customer to provide its hash calculations to the Customer's mining pool. The Company may terminate its contract with the Customer at any time upon notice without penalty, while the Customer may suspend or terminate the Company’s access to the pool only for noncompliance with the pool’s terms of service or upon a force majeure event. Because the Company’s enforceable right to consideration arises only as it provides hash calculations, 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 hash calculations to the Customer's mining pool, which is considered contract inception, because Customer consumption is in tandem with delivery of the hash calculations.

Step 2: 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).

The Company has identified a single performance obligation of providing hash calculations for 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, each renewed contract is priced at the pool fee rate then in effect, which is consistent with market rates. The pool fee rate is set by tier based on the Company’s average hashrate and may be changed by the Customer upon 30 days’ notice; accordingly, renewed contracts may not carry the same rate, and there are no upfront or incremental fees in the initial contract. The Company has full control of the mining equipment used in the mining pool, and if the Company determines it will increase or decrease the hashrate (the speed at which mining equipment can perform hash calculations) of its machines and/or fleet (i.e., for repairs or when power costs are excessive), the hashrate provided to the Customer will correspondingly increase or decrease.

Step 3: The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all the following:

●Variable consideration

●Constraining estimates of variable consideration

●The existence of a significant financing component in the contract

●Noncash consideration

●Consideration payable to a customer

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Other than potential compensation under the Customer’s uptime commitment described below, there are no other forms of variable consideration such as discounts, rebates, credits, price concessions, incentives, performance bonuses, penalties, or other similar items. Under the Luxor agreement, the Customer commits to 98% monthly pool uptime, and compensation for any shortfall is constrained until the monthly result is determinable; no material uptime compensation was earned during the three months ended September 30, 2026.

In exchange for providing hash calculations the Company is entitled to receive noncash consideration, payable in bitcoin, from the mining pool operator. Bitcoin earned and recognized is variable from day to day based on the payout model. Under the Luxor agreement, the Customer purchases the Company’s hashrate at a discount to the Customer’s spot Full Pay Per Share (“FPPS”) rate, with the discount representing the pool fee. Under the Foundry agreement, compensation was determined using Foundry’s FPPS payout model. Under both arrangements, FPPS is based on two components, (1) a fractional share of the fixed crypto asset award from the mining pool operator (referred to as a “network block subsidies”) and (2) network transaction fees generated from (paid by) blockchain users to execute transactions and distributed (paid out) to individual miners by the mining pool. The Company’s total compensation is calculated as the sum of the Company’s share of (1) Network Block Subsidies and (2) Network Transaction Fees, less Pool Operating Fees.

“Network Block Subsidies” means the total amount of block subsidies that are expected to be generated on the Bitcoin network during the 24-hour period beginning at 00:00:00 UTC daily (i.e., the measurement period) and ending at 23:59:59 UTC the same day, regardless of whether the mining pool operator successfully records a block to the blockchain.

The Company’s share of Network Block Subsidies earned for each measurement period is determined by dividing (a) the total amount of hashrate Ionic Digital provides to the mining pool operator, by (b) the total Bitcoin network’s implied hashrate (as determined by the Bitcoin network difficulty), multiplied by (c) the Network Block Subsidies.

“Network Transaction Fees” means the total amount of transaction fees that are generated on the Bitcoin network during the measurement period.

The Company’s share of Network Transaction Fees earned for each measurement period is determined by dividing (a) the total amount of Network Transaction Fees, by (b) the total amount of Network Block Subsidies that are generated on the Bitcoin network, multiplied by (c) Ionic Digital’s share of Network Block Subsidies.

“Pool Operating Fees” means the discount to the FPPS rate at which the mining pool operator purchases the Company’s hashrate (Luxor) or the fee charged by the mining pool operator (Foundry), in each case as set forth in the fee schedule to the applicable mining pool contract. The Pool Operating Fees reduce the total amount of compensation the Company receives and are only incurred to the extent that it has generated mining revenue during the measurement period.

The Customer provides services solely for bitcoin mining and the pool fee rate during the three months ended September 30, 2026 was 0.9%. The Pool Operating Fees are part of the contractual price for the Company’s hash calculations rather than consideration payable to a customer; accordingly, revenue is recognized net of the Pool Operating Fees.

For each contract, the Company measures the consideration at fair value based on the quoted price of bitcoin in its principal market at 00:00:00 UTC on the day the hash calculations are provided, as reported by Coin Metrics. The Company has determined that this daily pricing convention does not produce results materially different from measuring consideration at the inception of each contract. The Company recognizes this noncash consideration on the same day that control of the contract service transfers to the mining pool operator, which is the same day as contract inception.

Daily settlements are made to the Company by the Customer based on the hash calculations provided over the contract periods over a 24-hour period and the payout is made the following day.

There is no significant financing component, deferred revenue, or other obligations in these transactions since there are no payments in advance of the performance, and there are no remaining performance obligations after providing hash calculations.

Step 4: The transaction price is allocated to the single performance obligation of providing hash calculations to the customer.

Step 5: The Company’s performance is completed over time as the customer obtains control of the contributed hashrate. The performance obligation of hash calculations is fulfilled over time, as opposed to a point in time, because the Company provides the hash calculations throughout the contract period and the customer simultaneously obtains control of the service and uses it to produce bitcoin.

Recognition of leasing revenue

The Company generates revenue from an agreement to provide digital infrastructure solutions at its Ward County facility. The arrangement has both lease and non-lease components, and the arrangement will primarily be accounted for in accordance with ASC 842, Leases (“ASC 842”), while certain non-lease components will be accounted for in accordance with ASC 606.

See further discussion in– Leases herein, as well as in Note 8 – Leases.

Stock-based Compensation

The Company recognizes stock-based compensation expense for all stock-based awards made to employees, directors, consultants, and service providers, if any, based upon the estimated grant-date fair value of the awards.

The grant date fair value of stock-based compensation awards is amortized over the vesting period, which is defined as the period during which a recipient is required to provide service in exchange for an award. The Company generally uses the accelerated attribution method for all awards with graded vesting. Awards with graded vesting subject only to a service condition are expensed over the vesting period on a straight-line basis for each separately vesting tranche. The Company accounts for forfeitures of stock-based awards as they occur.

For more complex performance awards, including awards with market conditions, the fair value is estimated using Monte-Carlo simulations, which take into account the exercise price, the term of the option or the restricted stock units (“RSUs”), the impact of dilution, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Company receives the services that entitle the employees to receive payment.

In accordance with ASC 718, Stock Compensation (“ASC 718”), stock-based compensation for awards with market conditions is recognized over the requisite service period for each tranche of awards regardless of whether the market condition is ultimately achieved and will only be adjusted to the extent the service condition is not met. The requisite service period is the service period derived from the Monte Carlo simulation model plus an additional six-month required service period. The requisite service period will be revised if the market conditions are met prior to the derived service period.

If stock-based awards are modified, as a minimum, an expense is recognized as if the modification has not been made. An additional expense is recognized, over the remaining vesting period, for any modification that increases the total fair value of the stock-based compensation benefit as of the date of modification.

If stock-based awards are cancelled or settled during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied), this is treated as an acceleration of vesting and the amount that otherwise would have been recognized for services received over the remainder of the vesting period will be recognized immediately through stock-based compensation expense in earnings.

The Company classifies its stock-based compensation within “General and administrative expenses” on the Condensed Consolidated Statements of Operations. Refer to Note 11 – Stock-based Compensation.

Leases

Leases are accounted for in accordance with ASC 842, Leases (“ASC 842”). The Company has lease arrangements both as a lessor and a lessee. At the inception of an arrangement, the Company determines whether the contract is or contains a lease based on specific facts and circumstances, the existence of an identified asset, if any, and the Company’s control over the use of the identified asset, if applicable.

Lessor

The Company determines whether an arrangement is, or contains, a lease at inception. An arrangement contains a lease when it conveys to the customer the right to control the use of an identified asset for a period of time in exchange for consideration. The Company classifies each lease at commencement as a sales-type, direct financing, or operating lease in accordance with ASC 842, Leases. Leases that do not meet the criteria for sales-type or direct financing classification are accounted for as operating leases. For operating leases, fixed lease payments are recognized as revenue on a straight-line basis over the lease term, and variable lease payments are recognized as revenue in the period in which they are earned. The underlying assets remain on the Company’s balance sheet within property and equipment and continue to be depreciated over their estimated useful lives.

On October 14, 2025, the Company entered into an arrangement to provide digital infrastructure solutions to a customer at its Ward County facility. The arrangement includes both lease and non-lease components, certain of which are directly related to the lease components and the Company has elected to combine those related lease and non-lease components. The Company accounts for the combined lease and non-lease components as Digital infrastructure leasing revenue in the Condensed Consolidated Statements of Operations. See further discussion in Note 8 – Leases.

Lessee

The Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that allow the Company to substantially utilize or pay for the entire asset over its estimated life. All other leases are categorized as operating leases and related expenses are recognized on a straight-line basis over the term of the related contract within General and administrative expenses in the Condensed Consolidated Statements of Operations.

The Company records right-of-use (“ROU”) assets and lease obligations for its finance and operating leases, which are initially recognized based on the present value of future minimum lease payments over the term of the lease. As the rate implicit in the Company’s leases is not easily determinable, in determining the present value of the lease payments the Company uses an incremental borrowing rate based on the estimated rate of interest for collateralized borrowings over a similar term of the lease payments. Lease expenses are recognized on a straight-line basis over the lease term.

The lease term is defined as the non-cancellable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option. The Company has elected not to recognize ROU asset and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less. 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.

As a lessee, for all classes of underlying assets, the Company has elected to separate lease and non-lease components.

Goodwill

Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. In accordance with ASC 350, Intangibles-Goodwill and Other(“ASC 350”), the Company reviews its goodwill for impairment annually or whenever events or circumstances indicate fair value of a reporting unit may be less than its carrying value. Triggering events that may indicate a potential impairment include but are not limited to significant adverse changes in bitcoin prices or business climate and related competitive considerations. The Company may first perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount but also has the option to bypass the qualitative assessment in any period and proceed directly to performing the quantitative analysis. If the Company performs a qualitative test and determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs a quantitative goodwill impairment test to compare the estimated fair value of the reporting unit to its carrying amount. Impairment is indicated if the estimated fair value of the reporting unit is less than the carrying amount of the reporting unit, and an impairment charge is recognized for the difference, not to exceed the carrying value of goodwill.

See further discussion of the goodwill impairment testing performed in Note 10 – Goodwill.

Income taxes

The Company complies with the accounting and reporting requirements of ASC 740, Income Taxes (“ASC 740”), which requires use of the asset and liability method wherein deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be in effect for the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is required to the extent any deferred tax assets may not be realizable.

The Company also follows US GAAP in accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s policy is to record interest and penalties associated with uncertain tax positions through income tax expense.

Segment reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is regularly reviewed by the chief operating decision maker (“CODM”). The CODM of the Company is the Chief Executive Officer. The CODM reviews financial performance at a segment level. Accordingly, the Company hastwo operating segments, and the Company discloses both segments in its condensed consolidated financial statements.

Recent accounting pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change on its consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public business entities to provide more detailed disclosures in the notes to their financial statements, both for interim and annual reporting periods, about certain expenses such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently assessing the potential impact of this standard’s adoption.

In May 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. This ASU introduces simplifications for estimating credit losses on current accounts receivable and contract assets arising from Topic 606 (Revenue from Contracts with Customers). It provides one key relief for the Company: a practical expedient allowing entities to assume that current economic conditions remain unchanged over the life of these assets. These changes aim to reduce the cost and complexity of applying the credit loss model, especially for assets acquired in business combinations or through consolidation of variable interest entities. The Company adopted the practical expedient in estimating allowance for credit losses as of January 1, 2026, which had an immaterial impact.

NOTE 3. CRYPTOCURRENCY ASSETS

The Company’s cryptocurrency assets are exclusively bitcoin. The following table presents information about cryptocurrency assets activity of the Company(in thousands):

The following table represents the Company’s crypto asset holdings. The cost basis of bitcoin represents the valuation at the time the Company earns bitcoin through mining activities (in thousands, except for bitcoin):

Sales of Bitcoin

Subsequent to September 30, 2026, the Company sold approximately 737 bitcoin for cash proceeds of approximately $61.6 million, or an average of $83,600 per bitcoin, net of trading costs. These sales reduced the Company’s bitcoin holding by approximately 25% from the balance at September 30, 2026. The Company intends to use the proceeds to fund the development of its existing data center sites.

NOTE 4. FAIR VALUE

The following table presents the Company’s financial instruments that are measured and recorded at fair value on a recurring basis, and their level within the fair value hierarchy (in thousands):

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value due to the short-term nature of these instruments. There were no transfers in or out of levels during the nine months ended September 30, 2026 and 2025.

Gains and losses for such assets and liabilities categorized within the Level 3 table set forth may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).

Changes in the estimated fair value of Level 3 financial assets and liabilities that are measured on a recurring basis are as follows(in thousands):

The fair value of the Warrants was determined using a Black-Scholes model based on the following assumptions:

As of September 30, 2026, the warrant liability was remeasured at $100.0 million and the Company recognized a loss on the change in fair value of warrant liability of $65.9 million in the Condensed Consolidated Statement of Operations during the three and nine months ended September 30, 2026.

For further information on the Warrants refer to Note 13 – Stockholders' Equity.

Assets and liabilities measured and recorded at fair value on a non-recurring basis

The Company’s non-financial assets, such as goodwill, intangible assets, and property and equipment, are adjusted to fair value when an impairment charge is recognized. In measuring impairment of long-lived assets in accordance with the provisions of ASC 360, Property, Plant, and Equipment, the Company estimates the fair value of long-lived assets on a non-recurring basis using Level 3 inputs for similar assets in active markets, including market data regarding the value of our ASIC miners, a limited ability to repurpose certain buildings and related materials, and the marketability (or lack thereof) of certain machinery and facilities equipment considering the condition and customized nature of the assets in accordance with the provisions of ASC 820.

In evaluating the fair value of its reporting unit or units when testing goodwill for impairment, the Company considers a combination of the income and market valuation approaches. The income valuation approach uses unobservable inputs including projections of internal cash flows, future bitcoin prices, and the future global hashrate, as well as derived discount and long-term growth rates. The market valuation approach utilizes observable inputs for similar assets and liabilities to estimate valuation multiples. Refer to Note 10 – Goodwill for further information.

NOTE 5. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following (in thousands):

Depreciation of property and equipment during the three and nine months ended September 30, 2026, was $4.5 million and $15.0 million, respectively, and for the three and nine months ended September 30, 2025, was $17.2 million and $50.6 million, respectively.

Due to sustained decreases in the price of bitcoin during the six months ended June 30, 2026, the Company performed an impairment review on its mining equipment as of June 30, 2026. As a result of the impairment testing the Company determined that no impairment was needed. There were no triggering events indicating potential impairment identified during the three months ended September 30, 2026.

NOTE 6. ASSETS HELD FOR SALE

The Company determined it will not have the capacity at its owned and leased sites to relocate and operate all of the miners it previously operated at its Ward County and hosted facilities. As such, the Company reviewed its population of mining equipment to determine which units would be decommissioned and disposed. In addition, the conversion of the Ward County facility to accommodate the leasing arrangement necessitated the sale of certain building materials and machinery and facilities equipment previously in service at that location. As of February 19, 2026, the Company approved a formal plan of sale and is pursuing liquidation of various property and equipment that is not expected to be placed back into service. Gains and losses on the sale of assets classified as held for sale are recorded in (Gain) loss on sale of property and equipment in the condensed consolidated statements of operations.

Assets held for sale consisted of the following (in thousands):

NOTE 7. OTHER RECEIVABLES

The Company contracted with data center operators for hosting its mining equipment and for operational support. These arrangements required advance payments to the operators pursuant to the contractual obligations associated with these services. At the time the contract terminates, any remaining balances are due to the Company, and such amounts are recorded as Other receivables, either current or non-current, in the Condensed Consolidated Balance Sheets, depending upon the term of the contract over which the deposits are expected to be recovered.

Other receivables, current and non-current, consisted of the following (in thousands):

Based on management’s assessment of the age of the amounts receivable and the financial viability of the debtor, the Company records a provision for credit losses related to its short and long-term receivables. During the three and nine months ended September 30, 2026, there wasno provision for credit losses related to its short and long-term receivables. There was $1.9 million in provision for credit losses related to its short and long-term receivables during the three and nine months ended September 30, 2025.

The following table presents the activity in the Company's allowance for credit losses (in thousands):

NOTE 8. LEASES

Lessor Arrangements: Digital Infrastructure Leasing Revenue

On October 14, 2025, the Company entered into a leasing arrangement to provide digital infrastructure solutions to a single tenant at its Ward County facility which is accounted for under ASC 842. The lease commencement date for accounting purposes is December 19, 2025, and the lease term extends through January 2037. The lessee has oneten-year option to renew, as well as a right of first refusal on any additional power capacity that becomes available at our Ward County site. In February 2026, the Company reached an agreement to amend the lease of its Ward County facility. The amended agreement obligates the tenant to lease an additional 89 MW of capacity when such capacity becomes available, and requires the Company to add the tenant as a qualified occupant for Texas data center tax incentive purposes.

The Company is the lessor in this arrangement and identifies the right of the customer to use the land, land improvements, buildings, and equipment as a lease component of the contract. The amendment represents a separate contract under ASC 842, as the assets leased will be in addition to those covered in the original agreement. Control of the assets leased per the amendment has not yet transferred to the tenant; as such, no revenue has been recognized.

In both agreements, the Company has a stand-ready obligation to provide maintenance services to ensure the energy step-down transformation assets are operating reliably, which has been identified as a non-lease component of the arrangement. The Company determined that the lease component represents an operating lease, and the timing of the Company’s transfer of the aforementioned lease and non-lease components of the contract are the same. As such, and in accordance with ASC 842, the Company has elected the practical expedient to combine the accounting of the lease and non-lease components of the contract, with the predominant component of the arrangement being the lease component. Thus, the Company accounts for its lease of the Ward County property in accordance with ASC 842. The lease is classified as an operating lease, and leasing revenue is recognized on a straight-line basis over the lease term. Fixed lease payments are allocated to the combined lease components under the arrangement and total $1.9 billion. Other variable operating costs are paid for by the Company but consumed by the lessee and will be recognized as incurred. Variable lease payments received were immaterial and $0.2 million during the three and nine months ended September 30, 2026, respectively. There wereno variable lease payments received during the three and nine months ended September 30, 2025.

Reimbursements for taxes and insurance, as well as the Company’s obligation to add the tenant as a qualified occupant for Texas data center tax incentive purposes, are considered non-lease components and are accounted for separately. Non-lease components are recorded in Other revenue in the Condensed Consolidated Statements of Operations.

Initial direct costs of $7.5 million are deferred and recognized over the lease term in accordance with ASC 842. Amortization of initial direct costs is presented in Cost of digital infrastructure solutions revenues, exclusive of depreciation in the Condensed Consolidated Statements of Operations.

The following table summarizes the classes of the Company’s underlying leased assets, which are included within Property and equipment, net in the Condensed Consolidated Balance Sheets (in thousands):

Depreciation expense for the three and nine months ended September 30, 2026 was $1.5 million and $4.5 million respectively. There wasno depreciation expense for the three and nine months ended September 30, 2025.

The amounts presented below represent fixed lease payments to be received by the Company under the lease agreement as of September 30, 2026 and excludes variable lease payments, which are recognized as revenue in the period in which they occur (in thousands):

Lessee Arrangements

Ionic Digital’s lease arrangements primarily consist of operating leases for land for the purpose of running data center facilities used for cryptocurrency mining. Certain leases include options to renew for periods ranging fromone month toten years, which are included in the measurement of the right-of-use asset and lease liability when the Company determines it is reasonably certain that the renewal option will be exercised. Operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term determinable at the lease commencement date. Variable lease payments include amounts paid by the Company for the right to use an asset that vary because of changes in facts and circumstances occurring after the commencement date, such as energy consumption or revenue generation. Variable lease payments not based on an index or rate, such as those based on usage or performance, are excluded from the measurement of the right-of-use asset and lease liability and are recognized as lease expense in the period incurred. The Company has no finance leasing arrangements.

The Company leases the land attwo of our Midland sites. The following table presents the Company's right-of-use assets, which are included within Deposits and other non-current assets in the Condensed Consolidated Balance Sheets, and lease liabilities, which are included in Accrued expenses and other current liabilities and Non-current portion of lease liability (in thousands):

One of the Company’s lease agreements is based entirely on variable payments as was in an agreement terminated in the second quarter of 2025. The lease expense disclosed herein for 2025 related to the mining facility in Georgia represents an amount allocated between the lease and non-lease components of the Company’s hosting agreement with EZB. In addition, the Company has several short-term equipment rental agreements for which it elects the practical expedient not to record the right-of-use asset and lease liability on the balance sheet.

The components of total lease cost recorded in the Condensed Consolidated Statements of Operations are as follows (in thousands):

Additional supplemental operating lease information is as follows (dollars in thousands):

(1)As the rate implicit in the leases was not readily determinable, the incremental borrowing rate at the lease commencement was used to determine the present value of minimum lease payments.

As of September 30, 2026, maturities of Ionic Digital’s operating lease liability, which do not include variable lease payments, are as follows (in thousands):

NOTE 9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities represent management’s best estimates of liabilities incurred that are expected to be settled in the normal course of business within twelve months. Actual amounts paid may differ from estimated accruals due to timing of invoice receipt, final contractual terms, or changes in service usage. Differences between accrued amounts and actual payments are recognized in the period in which such information becomes available.

Accrued expenses and other current liabilities consisted of the following (in thousands):

NOTE 10. GOODWILL

Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. The Company reviews its goodwill for impairment annually or whenever events or circumstances indicate that the fair value of a reporting unit may be less than its carrying amount. These indicators may include, but are not limited to, a significant adverse change in the regulatory or business climate, a significant increase in expected future development costs, or a tenant default on the lease contract.

In the fourth quarter of 2025, following the commencement of the Company’s digital infrastructure leasing activities, the Company identifiedtwo reporting units, Cryptocurrency Mining and Digital Infrastructure Solutions, and reassigned goodwill between them. The Company performed a quantitative impairment test as of December 31, 2025, which resulted in a full impairment of the $68.2 million of goodwill allocated to the Cryptocurrency Mining reporting unit; the fair value of the Digital Infrastructure Solutions reporting unit substantially exceeded its carrying amount. As of September 30, 2026, the Company performed a qualitative assessment of the Digital Infrastructure Solutions reporting unit and determined that it is not more likely than not that its fair value is less than its carrying amount. No goodwill impairment was recognized during the three and nine months ended September 30, 2026 or 2025.

The following table shows the Company’s activity in goodwill, by reporting unit, for the current year (in thousands):

NOTE 11. STOCK-BASED COMPENSATION

On January 31, 2024, the Company adopted the Ionic Digital Inc. Omnibus Incentive Plan (the “Omnibus Plan”), pursuant to which it may grant equity and equity-based incentive awards (including non-statutory and incentive stock options, stock appreciation rights, restricted stocks, restricted stock units, performance awards, other stock-based awards and cash awards) to eligible employees, consultants, individual contractors and other service providers. The number of shares of Common Stock available under the plan was initially limited to 4,317,960 shares. The share limit automatically increases by 4% of all shares outstanding on January 1 of each calendar year beginning in 2025, unless a smaller number of shares is determined by the Board of Directors. As of September 30, 2026, the Company has reserved 5,551,944 shares (subject to an evergreen) for future awards under the Omnibus Plan.

Restricted Stock Units

During the three and nine months ended September 30, 2026, the Company granted stock-based awards in the form of RSUs under the Omnibus Plan, which vest over afive-year period in equal installments, with one-fifth vesting on each of the first five anniversaries of the grant. These awards are classified as equity awards and are measured at fair value on the grant date. Compensation cost related to the RSUs is recognized on a straight-line basis over the applicable service periods and is recorded within general and administrative expenses, with a corresponding increase to additional paid-in-capital.

The following table summarizes the Company’s RSU activity:

The fair value of RSUs granted during the nine months ended September 30, 2026 was determined using the fair value of the Company’s common stock on the grant date. For shares issued prior to the Company’s direct listing, the market value per common share was adjusted using a discount for lack of marketability calculated using a weighted average expected term of 3.0 years, a weighted average expected volatility of 95.8%, and a dividend yield of 0.0%.

Performance Restricted Stock Units

The Company also granted equity-based awards under the Omnibus Plan in the form of performance restricted stock units (“PRSUs”). These awards are classified as equity awards and vest upon the achievement of a service condition of six months of continuous employment after achievement of market conditions established by the Compensation Committee of the Board as of the grant date, which is based on the achievement of each market condition. The number of shares earned total one-third of the total awards granted based on achievement of the performance condition. The fair value of these PRSUs was determined using a Monte Carlo simulation incorporating the grant-date market value per common share. The resulting fair values were then adjusted using a discount for lack of marketability that considered a weighted average expected term of 1.2 years, a weighted average expected volatility of 89.5%, and a dividend yield of 0.0%. Compensation expense for these PRSUs is recognized over the requisite service period (the derived service period, plus the six-month post-achievement service period) regardless of whether the market condition is ultimately achieved.

The following table summarizes the Company’s PRSU activity:

Total stock-based compensation expense for three and nine months ended September 30, 2026 was $4.9 million and $20.3 million, respectively. There wasno stock-based compensation expense for the three and nine months ended September 30, 2025. Unrecognized stock-based compensation expense was $38.4 million as of September 30, 2026 with a remaining weighted average vesting period of 1.4 years.

On August 27, 2026, the Board of Directors approved an amendment to all outstanding PRSU awards. Previously, if a holder’s employment ended for any reason during thesix-month service period after a market condition was achieved, the holder forfeited the PRSUs attributable to that condition. Under the amendment, those PRSUs instead vest if, during that period, the Company terminates the holder without Cause or the holder resigns for Good Reason (each as defined). All other terms of the awards are unchanged.

The Company accounted for the amendment as a modification under ASC 718. Vesting was probable both before and after the modification, and the amended service condition does not affect the awards’ fair value. As a result, the modification producedno incremental fair value or compensation cost. The remaining unrecognized compensation cost continues to be recognized over the original requisite service period.

The first market condition was achieved on September 25, 2026. As a result,382,927 PRSUs are in theirsix-month post achievement service period which ends March 25, 2027.

NOTE 12. EARNINGS PER SHARE

Prior to its conversion into Class A common stock on July 28, 2026, the Company’s Series A Preferred Stock was a participating security, as holders were entitled to participate, on an as-converted basis, in any dividends declared on common stock. Accordingly, the Company applies the two-class method to compute basic earnings (loss) per share. Undistributed earnings are allocated between common stockholders and the Series A Preferred Stock based on their participation rights for the portion of the period the Series A Preferred Stock was outstanding. Net losses are not allocated to the Series A Preferred Stock, as holders had no contractual obligation to share in losses.

Diluted earnings (loss) per share is computed using the more dilutive of the two-class method or the if-converted method for the Series A Preferred Stock, and the treasury stock method for warrants, RSUs and PRSUs. Under the if-converted method, the Series A Preferred Stock is assumed to have converted at the beginning of the period, and income allocated to it in computing basic earnings per share is added back to the numerator.

The Company’s potentially dilutive equity instruments are primarily instruments in the form of convertible Preferred Stock, warrants, RSUs and PRSUs. For the three and nine months ended September 30, 2026, outstanding warrants, performance restricted stock units and restricted stock units in aggregate of 3,351,507 and 4,735,928, respectively, have been excluded from the calculation of diluted earnings per share as such securities were anti-dilutive. There wereno potentially dilutive equity instruments as of September 30, 2025.

The following table summarizes the calculation of the Company’s basic and diluted earnings per share of Common stock (in thousands, except share and per share data):

NOTE 13. STOCKHOLDERS' EQUITY

Private Placement

On June 26, 2026, the Company entered into a private placement transaction (the “Private Placement”) pursuant to securities purchase agreements (the “Securities Purchase Agreements”), under which the Company agreed to sell an aggregate of (i)7,547,166 shares of Series A convertible preferred stock, par value $0.00001 per share (the “Series A Preferred Stock”), at a price of $53.00 per share (“Stated Value”), (ii) warrants to purchase an aggregate of 1,006,286 shares of Class A common stock at an exercise price of $63.60 per share, (iii) warrants to purchase an aggregate of 1,006,286 shares of Class A common stock at an exercise price of $74.20 per share, and (iv) warrants to purchase an aggregate of 1,006,286 shares of Class A common stock at an exercise price of $87.45 per share (the warrants described in clauses (ii) through (iv), collectively, the “Warrants”) to certain institutional accredited investors (the “Investors”) for an aggregate purchase price of $400.0 million, before $16.7 million of transaction costs. This Private Placement closed on June 30, 2026.

Prior to its automatic conversion into Class A common stock on July 28, 2026 (as described below), the Series A Preferred Stock was convertible into Class A common stock at the option of the holder and was subject to automatic conversion upon completion of the direct listing or certain other specified liquidity events. The Series A Preferred Stock voted together with the Class A common stock on an as-converted basis, except as otherwise required by law, and was entitled to separate class voting rights with respect to specified protective provisions. If any shares of Series A Preferred Stock remained outstanding as of June 26, 2028, each share would have been convertible at the holder’s option at a maturity conversion rate based on the greater of the Stated Value (as defined in the Certificate of Designation) and $79.50. The Series A Preferred Stock had a mandatory redemption provision, under which any shares remaining outstanding after June 26, 2028 would have been redeemed for cash at an amount per share equal to the greater of 100% of the Stated Value or the as-converted liquidation value, subject to a minimum return, taking into account dividends and other payments, of 150% of the Stated Value. In accordance with ASC 480 -Distinguishing Liabilities from Equity, the Series A Preferred Stock was classified as temporary equity (Mezzanine Equity) outside of permanent stockholders’ equity from its issuance on June 30, 2026 until its conversion on July 28, 2026.

The Investors agreed that, with the exception of 2% of each tranche of the Warrants, they will not transfer or otherwise dispose of the Series A Preferred Stock, the Class A common stock issued upon conversion of the Series A Preferred Stock, the Warrants, or the shares of Class A common stock issuable upon exercise of the Warrants at a price of less than $70.00 per share until January 28, 2027, the date six months after the Class A common stock was first listed on Nasdaq.

The Warrants are classified as liabilities in accordance with ASC 480-10-25-8, as they contain provisions that could require net cash settlement in the event the Company is sold, which is not solely within the Company’s control. The proceeds from the Private Placement were allocated first to the Warrants based on their issuance-date fair value, with the residual allocated to the Series A Preferred Stock. Warrants were allocated $34.1 million and recorded as a liability upon issuance on June 30, 2026. The Series A Preferred Stock was allocated the remaining $365.9 million, before issuance costs and recorded as Mezzanine Equity upon issuance.

The Company remeasures the fair value of the Warrants at the end of each reporting period. Changes in the fair value of the Warrants are recognized in Change in fair value of warrant liabilities in the Condensed Consolidated Statement of Operations. As of September 30, 2026, none of the warrants had been exercised. Because redemption of the Series A Preferred Stock was not probable prior to its conversion, the Company did not accrete the carrying amount of the Series A Preferred Stock to its redemption amount.

Transaction costs of $16.7 million were allocated based on the allocation of proceeds, with $15.3 million allocated to the Series A Preferred Stock and recorded as a reduction of its carrying amount. The Warrants were allocated $1.4 million in transaction costs, which were expenses upon issuance and included in General and administrative expenses for the nine months ended September 30, 2026.

In June 2026, the Company also issued 40,000 shares of Series Z Preferred Stock for an aggregate of $0.40 in proceeds. The shares of Series Z Preferred Stock had 1,000 votes per share of Series Z Preferred Stock, but did not have any economic rights with respect to dividends, liquidation or otherwise. The holder of the Series Z Preferred Stock agreed that it would vote such stock in the same proportion as votes cast by holders of the Class A common stock on any matter submitted to stockholders at the Company’s 2026 annual meeting of stockholders. The shares of Series Z Preferred Stock were automatically redeemed for $0.40 in the aggregate following the conclusion of the Company’s 2026 annual meeting of stockholders, held on July 13, 2026. The Series Z Preferred Stock was intended to ensure the presence of a quorum to conduct an annual meeting of stockholders within the time period required by Delaware law.

On July 28, 2026, the Company completed the direct listing of its Class A common stock and, in accordance with its terms of the Certificate of Designation, all 7,547,166 outstanding shares of Series A Preferred Stock automatically converted into 7,547,166 shares of Class A common stock. Upon conversion, the $350.6 million carrying amount of Series A Preferred Stock was reclassified from Mezzanine Equity to Class A common stock and additional paid-in capital, and no gain or loss was recognized. In addition, the successful completion of the direct listing triggered a $10.0 million advisory fee, which was recognized in General and administrative expenses during the three months ended September 30, 2026.

NOTE 14. INCOME TAXES

Income Tax in Interim Periods

Beginning in the second quarter of 2026, the Company records its income tax expense or benefit for interim periods using the actual effective tax rate applicable to the year-to-date results, adjusted for discrete items recognized in the impacted interim period, rather than an estimated annual effective tax rate. The Company continued to apply this methodology during the third quarter of 2026. This approach differs from prior periods, in which the Company applied an estimated annual effective tax rate in accordance with ASC 740-270. The change was made because the Company determined it can no longer reliably estimate its annual effective tax rate, primarily due to the volatility of bitcoin fair values and the resulting variability in the Company’s deferred tax position, as well as a high degree of uncertainty in estimating annual pre-tax income. ASC 740-270 provides that the actual year-to-date effective tax rate may be used when application of the estimated annual effective tax rate is impractical because a reliable estimate of the annual effective tax rate cannot be made. The Company believes, at this time, the use of the year-to-date actual effective tax rate approach is more appropriate than the estimated annual effective tax rate method.

For the three and nine months ended September 30, 2026, the Company recorded income tax expense (including discrete items) of $6.7 million and $17.6 million, respectively. For the three and nine months ended September 30, 2025, the Company recorded income tax benefit of $1.0 million and income tax expense of $0.3 million, respectively (including discrete items).

Effective Tax Rate

The Company’s effective tax rate (including discrete items) was 27.7% and (132.4)% for the three and nine months ended September 30, 2026, respectively, and 18.9% and (126.2)% for the three and nine months ended September 30, 2025, respectively. The effective tax rate for the three and nine months ended September 30, 2026 differed significantly from the U.S. federal statutory rate of 21% primarily due to permanent differences associated with the non-deductible change in the fair value of warrants, non-deductible costs of the Company’s direct listing and Private Placement, and non-deductible officer compensation. For the nine months ended September 30, 2026, the increase in the Company’s valuation allowance also contributed to income tax expense. For the three months ended September 30, 2026, the tax effect of these permanent differences was partially offset by a decrease of approximately $15.7 million in the valuation allowance on the deferred tax asset for unrealized losses on cryptocurrency holdings, as the increase in the fair value of bitcoin during the quarter reduced the underlying deferred tax asset. These items resulted in the recognition of income tax expense despite the Company reporting a pre-tax loss for the nine months ended September 30, 2026.

During the nine months ended September 30, 2026, the Company evaluated all available evidence and concluded that it was more likely than not that the deferred tax assets associated with certain state net operating loss carryforwards and unrealized losses on cryptocurrency holdings will not be realized. The Company recorded incremental valuation allowance against the deferred tax assets associated with most of its state net operating losses subject to expiration and a portion of its indefinite-lived state net operating losses, because the Company does not expect to generate sufficient taxable income apportioned to the states in which those net operating losses arose to realize them. The Company has not recorded a valuation allowance against its federal deferred tax assets, other than the deferred tax asset related to unrealized losses on cryptocurrency holdings, including federal net operating loss carryforwards, because it expects to realize them primarily through the scheduled reversal of existing taxable temporary differences, principally the deferred tax liability related to digital infrastructure leasing revenue that is recognized for tax purposes later than for financial reporting purposes, and through taxable income from contracted lease payments. The Company also evaluated deferred tax assets associated with unrealized losses on cryptocurrency holdings. Under ASU 2023-08, changes in the fair value of cryptocurrency are recognized through earnings but are not taxable until disposition, at which point the resulting losses would generally be capital in character and available only to offset capital gains. The Company does not currently anticipate generating net capital gains in sufficient amount within the applicable carryforward period to permit realization of the deferred tax asset, and therefore maintains a full valuation allowance against that deferred tax asset. During the three months ended September 30, 2026, the related valuation allowance decreased by approximately $15.7 million, to $0.7 million, as the increase in the fair value of bitcoin reduced the underlying deferred tax asset. The Company’s total valuation allowance was $2.9 million and $1.4 million as of September 30, 2026 and December 31, 2025, respectively.

Uncertain Tax Positions

The Company files federal and state income tax returns. The 2024-2025 tax years generally remain subject to examination by the Internal Revenue Service and various state taxing authorities, although the Company is not currently under examination by any jurisdiction. As of September 30, 2026 and December 31, 2025, the total amount of unrecognized tax benefits was $0.8 million and $0.7 million, respectively. If recognized, these tax benefits would affect the Company’s effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits within the provision for income tax. During the three and nine months ended September 30, 2026, the Company recorded an immaterial amount and $0.1 million, respectively, of discrete tax expense, inclusive of interest and penalties. During the three and nine months ended September 30, 2025, the Company recorded discrete tax expense of $0.1 million and $0.4 million, respectively, inclusive of interest and penalties.

NOTE 15. COMMITMENTS AND CONTINGENCIES

Commitments – Purchase agreements

During the nine months ended September 30, 2026, the Company entered into binding agreements to purchase transformers and for the construction costs and materials to expand its substation at the Ward County site for approximately $29.6 million. There was approximately $19.6 million remaining under the commitment as of September 30, 2026. The Company expects to fund the commitment using available cash.

Contingencies

The Company is subject to legal proceedings arising in the ordinary course of business, including matters involving governmental agencies or regulators, entities with whom we do business, actions by our stockholders and other proceedings, whether arising in the ordinary course of business or otherwise. These actions may seek, among other things, breach of contract, property damage, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. The Company accrues losses for a legal proceeding when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. However, the uncertainties inherent in legal proceedings make it difficult to reasonably estimate the costs and effects of resolving these matters. Accordingly, actual costs incurred may differ materially from amounts accrued and could materially adversely affect the Company’s business, cash flows, results of operations, financial condition, and prospects. Unless otherwise indicated, the Company is unable to estimate reasonably possible losses in excess of any amounts accrued.

Mawson Infrastructure Group

On February 23, 2022, Celsius Mining entered into a Co-Location Agreement with Luna Squares LLC, a subsidiary of Mawson Infrastructure Group., Inc., a bitcoin miner and public company listed on the Nasdaq (collectively, “Mawson”), under which Mawson hosted miners owned by Celsius Mining at Mawson’s facility in Midland, Pennsylvania. On August 23, 2023, the agreement expired. Following expiration, Mawson failed to return Celsius Mining’s $15.3 million deposit to Celsius Mining and Celsius Mining failed to pay $5.1 million in Mawson invoices. Celsius Mining initiated an adversary complaint against Mawson in the Bankruptcy Court seeking return of the amounts owed to it under the Co-Location Agreement, to offset the unpaid invoices against the deposit, and other damages suffered by Celsius Mining due to breaches of the contract. In February 2026, the Company entered into a settlement that finalized the Mawson matter and resulted in a $5.1 million payment to the Company.

NOTE 16. BUSINESS SEGMENT DATA

Selected financial and descriptive information is provided about reportable operating segments, considering a “management approach” concept as the basis for identifying reportable segments. The management approach is based on the way that management organizes the segments within the Company for making operating decisions, allocating resources, and assessing performance. Consequently, the segments are evident from the structure of the Company’s internal organization, focusing on financial information that the Company’s Chief Executive Officer (“CEO”), who is the Chief Operating Decision Maker (“CODM”), uses to make decisions about the Company’s operating matters.

With the execution of the agreement to lease the Ward County facility, the CODM began considering resource allocations and investments in Company operations separately between the historical cryptocurrency mining business and the prospects of leasing the Company’s powered land and assets for use in the high-powered computing and artificial intelligence sectors. As such, the Company has determined it hastwo reportable segments: Cryptocurrency Mining and Digital Infrastructure Solutions. Each is individually managed and provide separate services. Revenues by segment represent revenues earned from the services offered within each segment. The Company does not report results by geographic region, as all of its operations are domestic. All revenues are generated through external customers, and the accounting policies applied to each reportable segment are consistent with those policies described in Note 2.

The primary metric reviewed by the CODM is adjusted gross profit, and this metric is reviewed to evaluate the Company’s operating results, its business strategies, and to determine resource allocation for digital asset purchases and other expenditures. The Company defines adjusted gross profit as revenues less cost of revenues applicable to each reportable segment, exclusive of depreciation.

The following tables present financial information for the Company’s reportable segments for the periods indicated (in thousands):

The Company had one customer (Nscale Ward County LLC (“Nscale”) who accounted for 89.6% and 88.4% of total revenues for the three and nine months ended September 30, 2026, all of which were recorded within the Digital Infrastructure Solutions Segment. There was one individual customer (Foundry) who accounted for 100% of total revenues for the three and nine months ended September 30, 2025, all of which were recorded in the Cryptocurrency Mining Segment.

The following tables present depreciation and capital expenditures for the Company’s reportable segments (in thousands):

The following table presents total assets for the Company’s reportable segments, all of which are held in the United States, for the periods indicated (in thousands):

The increase in Cryptocurrency mining segment assets between December 31, 2025 and September 30, 2026 primarily reflects the addition of approximately $335 million of cash to accounts associated with that segment.