The interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and SEC Regulation S-X Rule 10-01. Except for the updates described below, the Company’s significant accounting policies are unchanged from those disclosed in Note 2 to the audited consolidated financial statements in the 2025 Form 10-K and should be read in conjunction therewith.

Use of estimates

Management uses estimates in preparing financial statements. Key estimates include revenue recognition, allowance for doubtful accounts, fair value of derivatives and investments, stock-based compensation, warranty reserves, and deferred tax valuation allowances.

Revenue recognition

The Company follows ASC 606. Product revenue is recorded at shipment when control transfers. Construction-type contracts are recognized over time using an input-cost method that depicts transfer of control to the customer. Contract losses are recognized immediately when determined. Contract receivables, contract assets, and contract liabilities reflect the timing difference between performance and customer billing.

Loss per share

Basic loss per share is net loss divided by weighted-average common shares. Diluted loss per share is the same as basic because all potential common shares are anti-dilutive.

Fair value of financial instruments

Financial assets and liabilities measured at fair value are classified under ASC 820’s three-level hierarchy. Derivative liabilities are Level 3 and are measured at each end of the period. No material changes in valuation techniques or inputs have occurred since December 31, 2025, so interim disclosure of Level 1 and Level 2 hierarchy tables is omitted per ASC 820-10-50-2A.

The following table reconciles the Company’s Level 3 derivative liabilities for the three months ended March 31, 2026:

Leases

Under ASC 842, right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of lease payments. Short-term leases (12 months or less) are expensed as incurred.

Stock-based compensation

Equity awards are measured at grant-date fair value and recognized over vesting periods under ASC 718. Warrants issued for services or financing are recorded at fair value on the grant date.

Derivatives

The Company evaluates all instruments for embedded derivative features and records derivatives at fair value with changes recognized in earnings. A binomial lattice model is used for valuation; classification between liability and equity is reassessed each period.

Equity Investments and Joint Ventures

The Company accounts for investments in entities over which it exercises significant influence but does not have control under the equity method of accounting (ASC 323). Under this method, the investment is initially recorded at cost and adjusted each period for the Company’s proportionate share of the investee’s net income or loss and other comprehensive income, if applicable. When the Company’s share of cumulative losses exceeds the carrying amount of the investment, the balance is reduced to zero, and additional losses are recognized only to the extent the Company has committed to providing financial support.

The Company’s joint ventures and equity method investments, including the Block40X JV, Bitmern-OriginSpark JV LLC, and GridWater Inc., are accounted for under this method. As of March 31, 2026, none of these ventures had material assets, liabilities, or operations, and no earnings or losses were recognized. 

Other policies

Policies for consolidation, cash and cash equivalents, contract assets and liabilities, prepaid expenses, property and equipment, goodwill and indefinite-lived intangibles, marketable securities, work-in-process, recently issued pronouncements, and reclassifications remain as disclosed in the 2025 Form 10-K.

Interim reporting

Footnote disclosure that would duplicate the 2025 Form 10-K such as detailed loss-per-share reconciliation tables, property and equipment roll-forwards, or full fair-value hierarchy tables is omitted for this interim filing under Regulation S-X Rule 10-01, including property roll forwards, full EPS tables, and fair value levels 1 and 2.

Recently issued accounting pronouncements

Management has evaluated all recently issued accounting standards and does not expect any to have a material effect on the Company’s condensed consolidated financial statements.

Reclassifications

Certain prior-period amounts have been reclassified to conform to the current-period presentation with no effect on previously reported net loss or shareholders’ deficit.