Exhibit 99.1

 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited Consolidated Balance Sheets as of December 31, 2025 and June 30, 2026 F-2
Unaudited Consolidated Statements of Comprehensive Loss for the six months ended June 30, 2025 and 2026 F-4
Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2026 F-6
Notes to the Consolidated Financial Statements F-8

 

 

CANAAN INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

As of December 31, 2025 and June 30, 2026

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

      As of
December 31,		   As of
June 30,		 
   Note  2025   2026 
      US$   US$ 
ASSETS             
Current assets:             
Cash  2(c)   80,778    66,006 
Accounts receivable, net  4   19,290    1,725 
Inventories  5   180,816    128,835 
Prepayments and other current assets  6   99,243    83,134 
Cryptocurrency receivable, current  8   52,699    29,139 
Held-for-sale assets, current      464    1,713 
Total current assets      433,290    310,552 
Non-current assets:             
Cryptocurrency  7   83,339    47,019 
Cryptocurrency receivable, non-current  8   35,133    41,786 
Investment in equity investees  10   —    11,790 
Property, equipment and software, net  9   44,028    27,388 
Intangible assets      689    583 
Operating lease right-of-use assets      2,880    2,090 
Deferred tax assets      191    197 
Other non-current assets      489    3,835 
Non-current financial investment      2,845    1,000 
Total non-current assets      169,594    135,688 
Total assets      602,884    446,240 
LIABILITIES AND SHAREHOLDERS’ EQUITY             
Current liabilities:             
Current portion of long-term loans  12   28,515    23,888 
Accounts payable      25,600    15,455 
Contract liabilities  2(d)   9,317    4,107 
Income tax payable      11,403    11,832 
Accrued liabilities and other current liabilities  11   54,548    51,986 
Operating lease liabilities, current      1,706    1,228 
Total current liabilities      131,089    108,496 
Non-current liabilities:             
Long-term loans  12   23,731    34,901 
Operating lease liabilities, non-current      948    481 
Deferred tax liabilities      117    99 
Other non-current liabilities  11   9,631    9,557 
Total liabilities      165,516    153,534 

 

Contingencies (Note 19)

 

 

CANAAN INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)

As of December 31, 2025 and June 30, 2026

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

      As of
December 31,		   As of
June 30,		 
   Note  2025   2026 
      US$   US$ 
Shareholders’ equity:             
Class A Ordinary shares (US$0.00000005 par value; 999,643,050,556 authorized, 10,431,482,973 and 11,237,922,873 shares issued, 9,703,445,043 and 10,557,490,218 shares outstanding as of December 31, 2025 and June 30, 2026, respectively)  14   1    1 
Class B Ordinary shares (US$0.00000005 par value; 356,624,444 shares authorized, 311,624,444 shares issued and outstanding as of December 31, 2025 and June 30, 2026, respectively)  14   —    — 
Subscriptions receivable from shareholders      —    — 
Treasury stocks (US$0.00000005 par value; 366,981,615 and 342,319,770 shares as of December 31, 2025 and June 30, 2026, respectively)  15   (37,172)   (20,255)
Additional paid-in capital      1,177,057    1,192,812 
Statutory reserves      14,892    14,892 
Accumulated other comprehensive loss      (56,653)   (47,632)
Accumulated deficit      (660,757)   (847,112)
Total shareholders’ equity      437,368    292,706 
Total liabilities and shareholders’ equity      602,884    446,240 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

CANAAN INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Six Months Ended June 30, 2025 and 2026

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

      For the six months ended
June 30,		 
   Note  2025   2026 
      US$   US$ 
Revenues             
Products revenue      130,245    56,493 
Mining revenue      52,326    36,781 
Other revenues      414    1,281 
Total Revenues      182,985    94,555 
Cost of revenues             
Products cost      (117,949)   (102,642)
Mining cost      (54,935)   (43,065)
Other cost      (149)   (1,087)
Total cost of revenues      (173,033)   (146,794)
Gross profit (loss)      9,952    (52,239)
Operating expenses:             
Research and development expenses      (35,353)   (30,255)
Sales and marketing expenses      (7,408)   (3,104)
General and administrative expenses      (33,269)   (30,100)
Impairment on property, equipment and software  9   —    (9,220)
Gain on disposal of property, equipment and software      1,379    1,147 
Total operating expenses      (74,651)   (71,532)
Loss from operations      (64,699)   (123,771)
Interest expense, net      (603)   (1,271)
Change in fair value of cryptocurrency  7   8,312    (34,211)
Change in fair value of financial instruments other than derivatives      (21,877)   — 
Change in fair value of financial derivatives  13   9,385    (24,882)
Excess of fair value of convertible preferred shares      (28,179)   — 
Foreign exchange gains (losses), net      1,173    (7,037)
Other income, net      477    10,196 
Loss before income tax expense      (96,011)   (180,976)
Income tax expense  17   (1,478)   (1,453)
Equity in losses of equity investees  10   —    (3,926)

 

 

      For the six months ended
June 30,		 
   Note  2025   2026 
      US$   US$ 
Net loss      (97,489)   (186,355)
Foreign currency translation adjustment, net of nil tax      319    9,021 
Total comprehensive loss      (97,170)   (177,334)
Weighted average number of shares used in per Class A and Class B ordinary share calculation:             
— Basic  18   5,385,963,052    10,198,604,961 
— Diluted  18   5,385,963,052    10,198,604,961 
Net loss per Class A and Class B ordinary share (cent per share)             
— Basic  18   (1.81)   (1.83)
— Diluted  18   (1.81)   (1.83)
Share-based compensation expenses were included in:             
Cost of revenues      156    175 
Research and development expenses      3,133    1,288 
Sales and marketing expenses      112    72 
General and administrative expenses      9,986    7,623 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

CANAAN INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2025 and 2026

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

   For the six months ended
June 30,		 
   2025   2026 
   US$   US$ 
Cash flows from operating activities          
Net cash used in operating activities   (199,555)   (51,924)
Cash flows from investing activities:          
Purchase of property, equipment and software   (21,001)   (5,552)
Proceeds from disposal of property, equipment and software   483    3,837 
Proceeds from disposal of cryptocurrency   51,107    20,749 
Purchase of cryptocurrency   (2,413)   (27)
Proceeds from disposal of non-current financial investments   —    2,936 
Payment for non-current financial investments   —    (1,000)
Payment of transaction cost related to acquisition of equity investee   —    (1,582)
Distribution from equity investees   —    3,550 
Contribution to equity investees   —    (258)
Net cash provided by investing activities   28,176    22,653 
Cash flows from financing activities:          
Proceeds from issuance of ordinary shares, net of issuance costs under At-the-Market Offering Agreements   42,222    735 
Proceeds from issuance of convertible preferred shares, net of issuance costs   99,529    — 
Proceeds from supplier financing arrangement   —    9,999 
Proceeds from borrowings from long-term loan, net of issuance cost   —    9,560 
Repayment of long-term loan   —    (7,436)
Payment for repurchase of ordinary shares   (2,135)   (2,000)
Proceeds from resale of treasury stock   1,030    217 
Repurchase for tax withholdings on vesting of restricted share units   (1,030)   (217)
Net cash provided by financing activities   139,616    10,858 
Net decrease in cash   (31,763)   (18,413)
Effect of exchange rate changes on cash   1,179    3,641 
Cash at the beginning of period   96,488    80,778 
Cash at the end of period   65,904    66,006 
                 
Supplemental disclosure of cash flow information:                
Cash paid for interest     810       736  
Cash paid for income tax     1,083       1,054  
Supplemental disclosure of non-cash investing and financing activities:                
Mining equipment transfer from inventory to property, equipment and software     24,492       3,129  
Issuance of ordinary shares pursuant to share lending arrangement     944       —  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

1. Organization and principal activities

 

Canaan Inc., an exempted company with limited liability incorporated in the Cayman Islands, through wholly-owned subsidiaries (collectively referred to as the “Company”), is principally engaged in integrated circuit (the “IC”) design and sale of Bitcoin mining equipment and related components, with sales primarily conducted in the United States and Singapore, as well as mining activity mainly in the North America and Ethiopia.

 

2. Summary of significant accounting policies

 

  (a) Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements of Canaan Inc. and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The consolidated balance sheet as of December 31, 2025 was derived from the audited consolidated financial statements of the Company. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company as of and for the year ended December 31, 2025.

 

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of June 30, 2026, the results of operations and cash flows for the six months ended June 30, 2025 and 2026, have been made.

 

The preparation of the unaudited condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet dates, and the reported revenues and expenses during the reported periods.

 

The Company believes that accounting estimation of valuation of convertible preferred shares, deferred tax assets, write-down for inventories and prepayments, provision for reserve for inventory purchase commitments, and impairment of property, equipment and software reflect significant judgments and estimates used in the preparation of its consolidated financial statements.

 

Management bases the estimates on historical experience and on various other assumptions as discussed elsewhere to the consolidated financial statements that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could materially differ from these estimates.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

The Company assesses the estimated useful lives of its long-lived assets on an ongoing basis. In the first quarter of 2026, the Company revised the useful life of mining equipment, which are included in “Property, equipment and software”, from 1.5 years to 2 years, based on the historical and current use of the mining equipment as well as industry trends and practices. This change in estimated useful life is accounted for as a change in accounting estimate, prospectively beginning in fiscal year 2026. The effect of the change was a reduction in depreciation expense and a decrease in net loss of US$7,437 for the six months ended June 30, 2026. The effect of change in basic and diluted loss per share was a decrease of US$0.07 cent per share for the six months ended June 30, 2026.

 

(b)Fair value measurements

 

The following table sets forth the Company’s assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:

 

As of December 31, 2025  Level 1   Level 2   Level 3   Fair value at
December 31,
2025		 
Prepayments and other current assets (Note 13)   —    181    —    181 
                     
Cryptocurrency receivable (Note 13)   —    87,832    —    87,832 
Cryptocurrency (Note 7)   83,339    —    —    83,339 
                     
Accounts payable (Note 13)   —    (2,927)   —    (2,927)
Accrued liabilities and other current liabilities (Note 13)   —    (5,566)   —    (5,566)
Long-term loans (Note 13)   —    (49,711)   —    (49,711)

 

As of June 30, 2026  Level 1   Level 2   Level 3   Fair value at
June 30,
2026		 
Cryptocurrency receivable (Note 13)   —    70,925    —    70,925 
Cryptocurrency (Note 7)   47,019    —    —    47,019 
                     
Accounts payable (Note 13)   —    (2,465)   —    (2,465)
Long-term loans (Note 13)   —    (48,687)   —    (48,687)

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

  (c) Cash

 

Cash represents bank deposits placed with banks or other financial institutions, which are unrestricted as to withdrawal or use.

 

   As of
December 31,		   As of
June 30,		 
   2025   2026 
US dollar denominated bank deposits with financial institutions in the U.S.   17,743    54,665 
Financial institutions in the PRC          
RMB denominated bank deposits   3,689    2,627 
US dollar denominated bank deposits   3,186    640 
Others denominated bank deposits   77    6 
Subtotal   6,952    3,273 
Financial institutions in Singapore          
US dollar denominated bank deposits   52,624    4,524 
Singapore dollar (SGD) denominated bank deposits   1,270    1,184 
Others denominated bank deposits   7    7 
Subtotal   53,838    5,715 
Bank deposits with other overseas financial institutions   2,245    2,353 
Total   80,778    66,006 

 

The bank deposits with financial institutions in the mainland of the PRC, Hong Kong, United States, Singapore, Malaysia and Kahzakhstan are insured by the government authorities up to RMB500, HKD500, US$250, SGD100, Malaysia Ringgit (MYR) 250 and Kahzakhstan Tenge (KZT) 15,000 per bank, respectively. The bank deposits are insured by the government authorities with amounts up to US$2,831 and US$3,059 as of December 31, 2025 and June 30, 2026, respectively. The Company has not experienced any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts. To limit exposure to credit risk, the Company primarily places bank deposits with large financial institutions in the PRC mainland, United States, and Singapore with acceptable credit rating.

 

  (d) Contract liabilities

 

The prepayments received from customers as of December 31, 2025 and June 30, 2026 was US$9,317 and US$4,107, respectively. The revenue recognized during the six months ended June 30, 2025 and 2026 for the beginning balance of contract liability was US$22,322 and US$5,513, respectively.

 

  (e) Investment in equity investees

 

Investment in equity investees represent investments in entities in which the Company can exercise significant influence but does not own a majority equity interest or control and are accounted for using the equity method of accounting in accordance with ASC Subtopic 323-10, Investments-Equity Method and Joint Ventures: Overall (“ASC 323-10”). Under the equity method, the Company initially records its investment at cost and prospectively recognizes its proportionate share of each equity investee’s net profit or loss into its consolidated statements of operations. A difference between the cost of an investment and the amount of underlying equity in net assets of an investee shall be accounted for as if the investee were a consolidated subsidiary. If the difference is assigned to depreciable or amortizable assets or liabilities, then the difference should be amortized or accreted in connection with the equity earnings based on the Company’s proportionate share of the investee’s net income or loss. The Company evaluates its equity method investments for impairment under ASC 323-10. An impairment loss on the equity method investments is recognized in the consolidated statements of operations when the decline in value is determined to be other-than-temporary.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

3. Risks and concentration

 

  (a) Concentration of credit risk

 

As of December 31, 2025 and June 30, 2026, accounts receivable were US$19,290 and US$1,725, respectively.

 

Accounts receivable concentration of credit risk is as below:

 

   As of
December 31,		   As of
June 30,		 
   2025   2026 
Customer A   44%   * 
Customer B   23%   * 
Customer C   20%   99%
Customer D   13%   * 

 

* Less than 10%

 

For the six months ended June 30, 2025 and 2026, customer which contributed more than 10% of total revenue is as below:

 

   For the six months ended
June 30,		 
   2025   2026 
Customer A   *    35%
Customer E   *    23%
Customer F   21%   15%

 

* Less than 10%

 

  (b) Supplier concentration

 

For the six months ended June 30, 2025 and 2026, the Company’s purchases substantially all its integrated circuits from one supplier.

 

Although only a limited number of manufacturers for such integrated circuits are available, management believes that they could change their suppliers within these manufacturers which provided integrated circuits on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would affect operating results adversely.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

4.Accounts receivable, net

 

Accounts receivable, net consist of the following:

 

   As of December 31,   As of June 30, 
   2025   2026 
Accounts receivable   19,382    1,733 
Less: allowance for doubtful accounts   (92)   (8)
Total   19,290    1,725 

 

The movement of the allowance for doubtful accounts is as follows:

 

   For the Six months ended
June 30,		 
   2025   2026 
Balance at the beginning of the year   1,093    92 
Additions charged to bad debt expense   11    2,623 
Write-off of bad debt allowance   (151)   (2,707)
End Balance   953    8 

 

5. Inventories

 

Inventories consist of the following:

 

   As of
December 31,		   As of
June 30,		 
   2025   2026 
Raw materials   99,769    71,754 
Work in process   23,543    16,555 
Finished goods   57,504    40,526 
Total   180,816    128,835 

 

During the six months ended June 30, 2025 and 2026, the Company recorded write-down of US$3,465 and US$44,039 in cost of revenues, respectively.

 

6. Prepayments and other current assets

 

The prepayments and other current assets consist of the following:

 

   As of
December 31,		   As of
June 30,		 
   2025   2026 
VAT recoverable and refund   57,828    53,226 
Prepayments to vendors (Note a)   33,997    22,468 
Deferred charges   2,724    2,369 
Deposits   2,145    2,294 
Others   2,549    2,777 
Total   99,243    83,134 

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

Note a: Prepayments to vendors mainly represent prepayments made to third-party suppliers for foundry services. The Company also records a write-down for the prepayment to third-party suppliers when the Company believes that the net realizable value (being the estimated selling price of final products, less the costs of completion and selling expenses) is less than carrying amount. During the six months ended June 30, 2025 and 2026, the Company recorded write-downs of US$5 and US$860 for the prepayment to third-party suppliers in cost of revenues.

 

7. Cryptocurrency

 

Cryptocurrency consist of the following:

 

   As of December 31,
2025		   As of June 30,
2026		 
(in thousands, except for quantity)  Quantity   Cost Basis   Fair Value   Quantity   Cost Basis   Fair Value 
Bitcoin  813   74,143   71,431   699   45,806   40,708 
ETH  3,951   16,249   11,780   3,952   16,252   6,174 
USDT  127,138   127   128   136,816   137   137 
Total Cryptocurrency      90,519   83,339       62,195   47,019 

 

Additional information about cryptocurrency consists of the following:

 

   For the six months ended
June 30,		 
   2025   2026 
Beginning Balance   61,821    83,339 
Revenue recognized on acceptance of cryptocurrency*   74,383    40,786 
Cryptocurrency received under long-term loans agreements*   20,742    4,250 
Cryptocurrency received as customer deposits*   2,564    — 
Purchase of cryptocurrency   2,413    27 
Return of cryptocurrency as prepayment*   1,626    — 
Pledged and derecognized cryptocurrency under long-term loans agreements*   (31,099)   (10,195)
Return of cryptocurrency as customer deposits*   (218)   — 
Cost of revenues recognized on payment of cryptocurrency*   (27,592)   (16,228)
Proceeds from disposal of cryptocurrency   (51,107)   (20,749)
Change in fair value of cryptocurrency   8,312    (34,211)
Ending Balance   61,845    47,019 

 

* represents non-cash investing or financing activity.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

8. Cryptocurrency receivable

 

Cryptocurrency receivable consist of the following:

 

   As of December 31,
2025		   As of June 30,
2026		 
(in thousands, except for quantity)  Quantity   Fair Value   Quantity   Fair Value 
Bitcoins transferred to fixed term product (Note a)  100    8,783   100    5,828 
Bitcoin pledged for current portion of long-term loans (Note 12)  500    43,916   400    23,311 
Cryptocurrency receivable, current       52,699        29,139 
                   
Bitcoin pledged for long-term loans (Note 12)  400    35,133   717    41,786 
Cryptocurrency receivable, non-current       35,133        41,786 

 

Note a: On December 23, 2024, the Company transferred 100 Bitcoins to a crypto assets exchange institution to purchase a fixed term investment product with a minimum annual return of 1% for one year and the Company extended for another one year in December 2025.

 

9. Property, equipment and software, net

 

Property, equipment and software consist of the following:

 

   As of
December 31,		   As of
June 30		 
   2025   2026 
Cost:          
Mining equipment   126,691    120,315 
Computers and electronic equipment   14,218    14,627 
Leasehold improvements   5,217    5,350 
Mechanical equipment   115    118 
Software   3,871    4,129 
Construction in progress   4,369    929 
Motor vehicles   244    246 
Land   120    120 
Total cost   154,845    145,834 
Less: Accumulated depreciation and amortization   (110,817)   (118,446)
Property, equipment and software, net   44,028    27,388 

 

Depreciation and amortization expense during the six months ended June 30, 2025 and 2026 was US$19,064 and US$14,009, respectively. The Company recognized impairment of nil and US$9,220 during the six months ended June 30, 2025 and 2026, respectively.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

10. Investment in equity investees

 

On February 19, 2026, the Company, through a wholly-owned subsidiary, acquired a 49% equity interest in each of Alborz LLC, Bear LLC and Chief Mountain LLC (collectively, the "ABC Projects") from Cipher Mining Technologies Inc. ("Cipher"). As part of the same transaction, the Company also purchased 6,840 mining equipment from Cipher. The Company issued 53,762,660 ADSs (806,439,900 Class A ordinary shares) to Cipher as consideration for the acquired equity interest and mining equipment, with the fair value of US$24,801 on the settlement date.The issued ADSs are subject to a lock-up period of six months.

 

The Company does not have a controlling voting interest in, and its investment does not meet the definition of a variable interest entity under ASC 810 with respect to, any of the ABC Projects. However, the Company has the ability to exercise significant influence over the operating and financial policies of each of the ABC Projects. Accordingly, the Company accounts for its 49% equity interest in each of the ABC Projects under the equity method of accounting in accordance with ASC 323, Investments—Equity Method and Joint Ventures.

 

The Company initially recorded its investment in the equity interests of the ABC Projects at cost of US$15,878, representing the fair value of the consideration allocated to the equity interests acquired.

 

At acquisition date, the fair value of the mining equipment held by the ABC Projects was lower than their historical cost as recorded by each of the ABC Projects, resulting in a basis difference between the Company's share of carrying amount of its equity method investments and its proportionate share of the underlying net assets of the ABC Projects. The initial basis difference was US$26,194. The Company accretes this basis difference over the remaining expected depreciation period of the underlying mining equipment, with the accretion recorded each period within equity in net losses of equity investees in the consolidated statements of comprehensive loss, until the related mining equipment are fully depreciated by the ABC Projects and the corresponding basis difference is fully accreted.

 

In April and May 2026, the Company delivered an aggregate of 3,600 used mining equipment to Bear LLC and Chief Mountain LLC, among which 49% of the consideration was treated as capital contributions and the remaining 51% of the consideration of US$3,527 was settled by cash by Bear LLC and Chief Mountain LLC through funding from the other investor. The Company recorded the gain from the sale of used mining equipment of US$856 in the gain on disposal of property, equipment and software. The capital contributions by the Company were recorded at the cost of US$3,130, plus associated sales tax of US$258, which increased the carrying value of the Company's investments in equity investees. No basis difference arose from these contributions, as the fair value of the contributed mining equipment approximated their cost at the time of contribution.

 

The movement of investment in equity investees for the six months ended June 30, 2026 consist of the following:

 

   Investment in equity
investees		 
Beginning balance as of January 1, 2026   — 
Initial capital contribution   15,878 
Cost of mining equipment contributed   3,388 
Accretion of basis differences related to initial acquisition   7,346 
Equity in net losses of equity investees   (11,272)
Capital distribution   (3,550)
Ending balance as of June 30, 2026   11,790 

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

11. Accrued liabilities and other liabilities

 

   As of
December 31,		   As of
June 30,		 
   2025   2026 
Accrued liabilities and other current liabilities          
Salary and welfare payable   22,999    12,041 
Payables under supplier financing arrangement  (Note a)   —    10,157 
Provision for reserve for inventory purchase commitments (Note b)   3,904    8,773 
Other tax payables   6,240    5,812 
Customer refund   3,738    3,819 
Warranty reserve (Note c)   4,146    3,201 
Professional services payable   3,740    3,069 
VAT received from customers related to contract liabilities   490    298 
Customer deposits   5,566    — 
Others   3,725    4,816 
Total   54,548    51,986 
Other non-current liabilities          
Deferred government grant   9,261    9,557 
Others   370    — 
Total   9,631    9,557 

 

Note a: In March 2026, the Company entered into a supplier financing arrangement with a third party entity as financing source to pay to the Company’s vendor in the amount of US$9,999. The monthly interest rate was 0.5% before June 30, 2026 and 1.2% then after. The Company expected to repay such payables in one year and classified it as other current liabilities. As of June 30, 2026, the total outstanding balance including accrued interest was US$10,157.

 

Note b: The Company entered into several contracts to purchase foundry service. These contracts represent firm purchase commitments which are evaluated for potential losses. As of December 31, 2025 and June 30, 2026, the Company’s purchase obligation to third-party suppliers for foundry service was US$136,134 and US$105,712, respectively.

 

In connection with the preparation of the Company’s consolidated financial statements, the Company assessed the loss contingency under the foundry service contracts taking into account the estimated selling price of mining equipment. The provision was determined by applying a methodology similar to that used in the lower of cost or net realizable value with respect to inventory, using estimates of the costs to convert raw materials into final products in order to determine net realizable value. For the six months ended June 30, 2025 and 2026, a provision of nil and US$4,870 has been recognized in cost of revenues for the Company’s inventory purchase commitments under foundry service contracts as a result of the decline in the estimated selling price of mining equipment based on the most recent subsequent selling price.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

Note c: For mining equipment, the Company provides its customers for 360 days warranty, subject to certain conditions, such as normal use. The Company provides for the estimated costs of warranties at the time revenue is recognized. Factors that affect the Company’s warranty obligation include product defect rates and costs of repair or replacement.

 

Movement of warranty reserve is as follows:

 

   For the six months ended
June 30,		 
   2025   2026 
Beginning Balance   582    4,146 
Accrual for warranties issued during the period   1,732    1,027 
Warranty claims paid   (839)   (145)
Warranty expired   (223)   (1,946)
Foreign currency translation adjustment   5    119 
Ending Balance   1,257    3,201 

 

12. Long-term loans

 

On June 12, 2024, the Company, through a wholly-owned subsidiary, entered into Master Loan and Pledge Agreements (the “Agreements 1”) with a third party (the “Lender 1”). Pursuant to the Agreements 1, the Lender 1 will provide loans in tranches in USDT (also known as Tether, a stablecoin pegged to the U.S. Dollar) with a term of 18-month and an interest rate of 2.75% per annum. The Agreements 1 also require the Company to transfer 330 Bitcoins to the Lender 1 as collateral, and the loan amount will be 68% of the then-current fair market value (the “Loan-to-Value Ratio”) of the pledged Bitcoins. If the fair market value of Bitcoins fallen to below 70% of the fair market value at the loan receipt date, the Company is required to add Collateral. The repayment of the loan principal may be made in USD, USDT or if mutually agreed upon in writing prior to repayment, any other digital currency.

 

Pursuant to the Agreements 1, in June 2024, the Company pledged 330 Bitcoins as collateral to the Lender 1 with a fair value of US$21,041 at closing and obtained a loan with principal amount of 14,308,156 USDT. The net proceeds received in June 2024, after deducting issuance cost of 178,615 USDT, were 11,252,124 USDT (with a fair value of US$11,248). The issuance costs are reported as a direct deduction from the principal of the associated loan. The remaining net proceeds of 2,769,869 USDT (with a fair value of US$2,767), after deducting issuance cost of 107,548 USDT, were subsequently received in July 2024. For the years ended December 31, 2024 and 2025, the Company was not required to add additional Bitcoins as collateral. In December 2025, the Company repaid the loan principal of US$8,931 and received 200 Bitcoins pledged as collateral. In January 2026, the Company repaid the remaining loan principle and received the remaining 130 Bitcoins pledged as collateral.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

On June 21, 2024, the Company, through a wholly-owned subsidiary, entered into a Master Loan Agreement (the “Agreement 2”) with another third party (the “Lender 2”). Pursuant to the Agreement 2, the Lender 2 will provide a loan in amount of US$8,041 with a term of 18-months and an interest rate of 6.75% per annum. The Agreement 2 also requires the Company to transfer 200 Bitcoins to the Lender 2 as collateral. If the fair market value of Bitcoin fallen such that the Loan-to-Value Ratio equals or exceeds 80%, the Company is required to add Collateral.

 

Pursuant to the Agreement 2, in June 2024, the Company pledged 200 Bitcoins as collateral to the Lender 2 with a fair value of US$12,370 at closing and obtained a loan in amount of US$8,041. The net proceeds received in June 2024, after deducting issuance costs of US$121, were US$7,920. The issuance costs are reported as a direct deduction from the principal of the associated loan. In December 2025, the Company repay the loan principal of US$8,041 and received 200 Bitcoins pledged as collateral.

 

On August 9, 2024, the Company, through a wholly-owned subsidiary, entered into a Master Loan Agreement (the “Agreement 3”) with another third party (the “Lender 3”). Pursuant to the Agreement 3, the Lender 3 will provide a loan in amount of US$2,058 with a term of 18-months and an interest rate of 5.00% per annum. The Agreement 3 also requires the Company to transfer 70 Bitcoins to the Lender 3 as collateral. If the fair market value of Bitcoins fallen to below 50% of the fair market value at the loan receipt date, the Company is required to add Collateral.

 

Pursuant to the Agreement 3, in August 2024, the Company pledged 70 Bitcoins as collateral to the Lender 3 with a fair value of US$4,117 at closing and obtained a loan in amount of US$2,058. The net proceeds received in August 2024, after deducting issuance costs of US$41, were US$2,017. The issuance costs are reported as a direct deduction from the principal of the associated loan. In February 2026, the Company repay the loan principal of US$2,058 and received 70 Bitcoins pledged as collateral.

 

On January 22, 2025, the Company, through a wholly-owned subsidiary, entered into additional loan agreement pursuant to the Agreement 1 (the “Agreements 1.1”) with the Lender 1 under the Agreement 1. Pursuant to the Agreements 1.1, the Lender 1 will provide loans in tranches in USDT with a term of 18-month and an interest rate of 2.5% per annum. The Agreements 1.1 also require the Company to transfer 300 Bitcoins to the Lender 1 as collateral. If the fair market value of Bitcoins fallen to below 70% of the fair market value at the loan receipt date, the Company is required to add Collateral.

 

Pursuant to the Agreements 1.1, in January 2025, the Company pledged 300 Bitcoins as collateral to the Lender 1 with a fair value of US$31,099 at closing and obtained a loan with principal amount of 21,165,052 USDT. The net proceeds received in January 2025, after deducting issuance cost of 423,301 USDT, were 20,741,751 USDT (with a fair value of US$20,742). The issuance costs are reported as a direct deduction from the principal of the associated loan. In May 2026, the Company entered into an addendum to Agreement 1.1 with Lender 1 to extend the maturity date to July 2027. During the six months ended June 30, 2026, the Company was required to add 17 additional Bitcoins as collateral.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

On December 19, 2025, the Company, entered into an additional loan agreement pursuant to the Agreement 1 (the “Agreements 1.2”) through a wholly-owned subsidiary and a Master Loan Agreement (the “Agreement 4”) through another wholly-owned subsidiary with the Lender 1. Pursuant to the Agreement 1.2 and Agreement 4, the Lender 1 will provide loans in tranches in USDT with a term of 18 - month and an interest rate of 2.5% per annum. The Agreement 1.2 and Agreements 4 each require the Company to transfer 200 Bitcoins to the Lender 1 as collateral. If the fair market value of Bitcoins fallen to below 70% of the fair market value at the loan receipt date, the Company is required to add Collateral.

 

Pursuant to the Agreement 1.2 and Agreements 4, in December 2025, the Company pledged 400 Bitcoins as collateral to the Lender 1 with a fair value of US$34,184 at closing and obtained a loan with principal amount of 24,244,102 USDT. The net proceeds received in December 2025, after deducting issuance cost of 484,882 USDT, were 23,759,220 USDT (with a fair value of US$23,752). The issuance costs are reported as a direct deduction from the principal of the associated loan. As of June 30, 2026, the Company was not required to add additional Bitcoins as collateral.

 

On March 20, 2026, the Company, through a wholly-owned subsidiary, entered into a Master Loan Agreement (the “Agreement 5”) with the Lender 2. Pursuant to the Agreement 5, the Lender 2 will provide a loan in amount of US$9,706 with a term of 18-month and an interest rate of 3.0% per annum. The Agreement 5 also require the Company to transfer 200 Bitcoins to the Lender 2 as collateral. If the fair market value of Bitcoins fallen to below 72% of the fair market value at the loan receipt date, the Company is required to add Collateral.

 

Pursuant to the Agreement 5, in March 2026, the Company pledged 200 Bitcoins as collateral to the Lender 2 with a fair value of US$13,983 at closing and obtained a loan in amount of US$9,706. The net proceeds received in March 2026, after deducting issuance costs of US$146, were US$9,560. The issuance costs are reported as a direct deduction from the principal of the associated loan. As of June 30, 2026, the Company was not required to add additional Bitcoins as collateral.

 

On June 29, 2026, the Company, entered into an additional loan agreement pursuant to the Agreement 4 (the “Agreements 4.1”) through a wholly-owned subsidiary with the Lender 1. Pursuant to the Agreement 4.1, the Lender 1 will provide loans in tranches in USDT with a term of 18 - month and an interest rate of 2.25% per annum. The Agreement 4.1 also require the Company to transfer 200 Bitcoins to the Lender 1 as collateral. If the fair market value of Bitcoins fallen to below 70% of the fair market value at the loan receipt date, the Company is required to add Collateral.

 

Pursuant to the Agreement 4.1, in June 2026, the Company pledged 200 Bitcoins as collateral to the Lender 1 with a fair value of US$11,896 and obtained a partial loan disbursement with principal amount of 4,250,000 USDT. The remaining loan principal was received in July 2026. As of June 30, 2026, the Company was not required to add additional Bitcoins as collateral.

 

As of June 30, 2026, US$23,888 from Agreements 1.2 and Agreements 4 were classified as current portion of the long-term loans. Interest expense pertaining to the above loans amounted to US$736 and US$1,268 was recorded for the six months ended June 30, 2025 and 2026, respectively.

 

  13. Derivatives

 

During the periods presented, the Company’s derivatives were all embedded forward contracts to receive or deliver a fixed amount of cryptocurrency in the future.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

Impact of derivatives on the Consolidated Balance Sheets

 

The following table summarizes the balance sheet impact of derivative instruments outstanding as of June 30, 2026 and December 31, 2025 as measured in U.S. dollar equivalents, none of which were designated as hedging instruments at June 30, 2026:

 

Consolidated Balance Sheets Location  Notional   Derivative Fair
Value		   Total 
June 30, 2026               
Prepayments and other current assets (1)   182    (1)   181 
Cryptocurrency receivable   98,787    (27,862)   70,925 
Accounts payable (1)   3,106    (641)   2,465 
Long-term loans (1)   48,738    (51)   48,687 
December 31, 2025               
Prepayments and other current assets (1)   182    (1)   181 
Cryptocurrency receivable   83,743    4,089    87,832 
Accounts payable (1)   2,926    1    2,927 
Accrued liabilities and other current liabilities (1)   6,893    (1,327)   5,566 
Long-term loans (1)   49,760    (49)   49,711 

 

  (1) Represents the portion of the Consolidated Balance Sheet line item that is denominated in cryptocurrency.

 

Impact of derivatives on the Consolidated Statements of Comprehensive Loss

 

Gains and losses on derivative instruments recorded in the Consolidated Statements of Comprehensive Loss were as follows:

 

   For the six months ended
June 30,		 
   2025   2026 
Cryptocurrency receivable   10,264    (27,102)
Accrued liabilities and other current liabilities   (443)   1,380 
Accounts payable   (399)   835 
Long-term loans   (37)   5 
Total   9,385    (24,882)

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

14. Ordinary shares

 

As of June 30, 2026, the authorized ordinary shares are 999,999,675,000, of which 11,549,547,317 shares were issued and 10,869,114,662 shares were outstanding. These outstanding shares consist of (1) 10,557,490,218 Class A ordinary shares and (2) 311,624,444 Class B ordinary shares, which were held by the Chairman and CEO of the Company.

 

At-the-Market Offering Agreements

 

On December 23, 2024, the Company entered into an At-the-market offering agreement (the “2024 ATM Agreement”) with Macquarie Capital Limited, Keefe, Bruyette & Woods, Inc., China Renaissance Securities (Hong Kong) Limited, Compass Point Research & Trading, LLC, Craig-Hallum Capital Group LLC, Northland Securities, Inc., Rosenblatt Securities Inc., The Benchmark Company, LLC, and B. Riley Securities Inc. (“B. Riley”) as sales agents (the “sales agents”). The Company issued 50,000,000 ADSs (750,000,000 Class A Ordinary Shares) to its share depositary bank as a reserve in relation to the 2024 ATM Agreement. No consideration was received by the Company for this issuance of ordinary shares. These ordinary shares are legally issued but are treated as escrowed shares for accounting purpose, and therefore, have been excluded from the computation of net earnings (loss) per ordinary share for accounting purposes. For the year ended December 31, 2024, no ADS was utilized under the 2024 ATM Agreement. During the six months ended June 30, 2025, the Company issued 21,088,579 ADSs (316,328,685 Class A Ordinary shares) with net proceeds of US$42,222. The Company terminated the 2024 ATM Agreement in October 2025.

 

On October 24, 2025, the Company entered into an At-the-market offering agreement (the “2025 ATM Agreement”) with Macquarie Capital Limited, Keefe, Bruyette & Woods, Inc., China Renaissance Securities (Hong Kong) Limited, Compass Point Research & Trading, LLC, Northland Securities, Inc., Rosenblatt Securities Inc., The Benchmark Company, LLC, B. Riley Securities Inc. (“B. Riley”) and CLSA Limited as sales agents (the “sales agents”), pursuant to which the Company may issue up to US$270,000 of the ADSs. The remaining ADSs as the reserve in relation to the 2024 ATM Agreement could be used as a reserve in relation to the 2025 ATM Agreement. During the six months ended June 30, 2026, the Company issued 1,529,562 ADSs (22,943,430 Class A Ordinary shares) with net proceeds of US$735.

 

15. Repurchase of shares

 

On May 27, 2025, the Board of Directors approved a share repurchase program to repurchase in the open market up to US$30 million worth of its outstanding (i) American depositary shares, each representing 15 Class A ordinary shares, and/or (ii) Class A ordinary shares over the next six months starting from May 27, 2025 depending on a number of factors, including, but not limited to, price, trading volume and general market conditions, along with the Company’s working capital requirements and general business conditions, the relevant rules under United States securities laws and regulations, and the relevant stock exchange rules. On December 17, 2025, the Board of Directors approved the renewal of the share repurchase program over a 12 months period beginning December 12, 2025.

 

During the six months ended June 30, 2026, 2,815,144 outstanding ADSs (representing 42,227,160 Class A ordinary shares) were repurchased. For the six months ended June 30, 2025 and 2026, 69,382,845 and 66,889,005 restricted share units were transferred from treasury stock to ordinary shares upon vesting, respectively.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

16. Share-based compensation

 

The following table summarizes restricted share units (“RSUs”) activity during the six months ended June 30, 2026:

 

   Number of
shares		   Weighted average
grant date fair value		 
       US$ 
Outstanding as of January 1, 2026   551,294,295    0.09 
Granted   180,460,950    0.04 
Forfeited   (49,222,909)   0.04 
Vested   (66,889,005)   0.10 
Outstanding as of June 30, 2026   615,643,331    0.08 

 

As of January 1, 2026 and June 30, 2026, the Company’s outstanding, and vested and expected to vest share option is 60,000,000. There was no change on the share options during the six months ended June 30, 2026. The exercisable share option is 60,000,000 as of June 30, 2026.

 

17. Income Taxes

 

The Company recorded an income tax expense of US$1,478 and US$1,453 for the six months ended June 30, 2025 and 2026, respectively, representing effective tax rates of 1.5% and 0.8%, respectively.

 

The effective income tax rate of 0.8% in 2026 and 1.5% in 2025 were lower than the statutory income tax rate of 25.0% which was primarily due to additional valuation allowances provided.

 

18. Basic and diluted loss per share

 

Basic and diluted loss per share have been calculated in accordance with ASC 260 on computation of loss per share for the six months ended June 30, 2025 and 2026, as follows:

 

   For the six months ended
June 30,		 
   2025   2026 
Basic loss per share calculation        
Numerator:        
Net loss   (97,489)   (186,355)
Denominator:          
Weighted-average number of ordinary shares outstanding used in
calculating basic and diluted loss per Class A and Class B
ordinary share		   5,385,963,052    10,198,604,961 
Basic loss per Class A and Class B ordinary share (US$ cent per share)   (1.81)   (1.83)

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

The potentially dilutive securities that have not been included in the calculation of diluted net loss per share as their inclusion would be anti- dilutive as of June 30, 2025 and 2026 are as follows:

 

   As of June 30, 
   2025   2026 
RSUs   720,336,900    615,643,331 
Share options   60,000,000    60,000,000 
Convertible preferred shares   2,325,019,875    — 

 

19. Contingencies

 

The Company is and, from time to time, may in the future become, involved in other legal proceedings in the ordinary course of business. The Company currently believes that the outcome of any of these existing legal proceedings, either individually or in the aggregate, will not have a material impact on the operating results, financial condition or cash flows of the Company. The Company may incur substantial legal fees, which are expensed as incurred, in defending against these legal proceedings.

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

20. Changes in shareholders’ equity

 

        Clsss A Ordinary
shares		     Clsss B Ordinary
shares		           Treasury stocks                 Accumulated              
    Note   Number of
Shares		     Amount     Number of
Shares		     Amount     Subscription
Amount		     Number of
Shares		     Amount     Additional
paid-in
capital		     Statutory
reserves		     other
comprehensive
loss		     Accumulated
deficit		     Total
shareholders’
equity		  
Balance as of January 1, 2025       5,052,538,578     —     311,624,444     —     —     229,281,465     (57,055 )   816,363     14,892     (57,456 )   (450,490 )   266,254  
Share Repurchase       (46,856,670 )   —     —     —           46,856,670     (2,135 )   —     —     —     —     (2,135)  
Share-based compensation expense       —     —     —     —           —     —     13,387     —     —     —     13,387  
Repurchase of vested employee restricted share units for tax withholding       (14,859,360 )   —     —     —           14,859,360     (1,030 )   —     —     —     —     (1,030)  
Resale of vested employee restricted share units for tax withholding       14,859,360     —     —     —           (14,859,360 )   1,030     —     —     —     —     1,030  
Issuance of ordinary shares in at-the market offering, net of offering cost   14   —     —     —     —           —     —     42,101     —     —     —     42,101  
Issuance of ordinary shares pursuant to preferred shares financing, net of offering cost       1,977,030,615     —     —     —           —     —     100,222     —     —     —     100,222  
Issuance of ordinary shares pursuant to share lending arrangement       105,000,000     —     —     —           —     —     944     —     —     —     944  
Vesting of restricted share units       69,382,845     —     —     —           (69,382,845 )   16,544     (16,544 )   —     —     —     —  
Foreign currency translation       —     —     —     —           —     —     —     —     319     —     319  
Net loss       —     —     —     —           —     —     —     —     —     (97,489 )   (97,489)  
                                                                             
Balance as of June 30, 2025       7,157,095,368     —     311,624,444     —     —     206,755,290     (42,646 )   956,473     14,892     (57,137 )   (547,979 )   323,603  

 

 

CANAAN INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(all amounts in thousands, except share and per share data, or as otherwise noted)

 

      Class A Ordinary
shares		   Class B Ordinary shares   Subscription   Treasury stocks           Accumulated         
   Note  Number of
Shares		   Amount   Number of
Shares		   Amount   receivables
from
shareholders		   Number of
Shares		   Amount   Additional
paid-in
capital		   Statutory
reserves		   other
comprehensive
loss		   Accumulated deficits   Total
shareholders’
equity		 
Balance as of January 1, 2026     10,064,501,358   1   311,624,444   —   —   366,981,615   (37,172)  1,177,057   14,892   (56,653)  (660,757)  437,368 
Share Repurchase  15  (42,227,160)  —   —   —   —   42,227,160   (2,022)  —   —   —   —   (2,022)
Share-based compensation expense     —   —   —   —   —   —   —   9,158   —   —   —   9,158 
Repurchase of vested employee restricted share units for tax withholding     (7,493,670)  —   —   —   —   7,493,670   (217)  —   —   —   —   (217)
Resale of vested employee restricted share units for tax withholding     7,493,670   —   —   —   —   (7,493,670)  217   —   —   —   —   217 
Issuance of ordinary shares in at-the-market offering, net of offering cost  14  —   —   —   —   —   —   —   735   —   —   —   735 
Shares issued as consideration for the equity investment in ABC projects  10  806,439,900   —   —   —   —   —   —   24,801   —   —   —   24,801 
Vesting of restricted share units     66,889,005   —   —   —   —   (66,889,005)  18,939   (18,939)  —   —   —   — 
Foreign currency translation     —   —   —   —   —   —   —   —   —   9,021   —   9,021 
Net loss     —   —   —   —   —   —   —   —   —   —   (186,355)  (186,355)
Balance as of June 30, 2026     10,895,603,103   1   311,624,444   —   —   342,319,770   (20,255)  1,192,812   14,892   (47,632)  (847,112)  292,706 

 

  21. Subsequent events

 

As of the date of this report, the Company repurchased additional 13,585,855 ADSs for US$5,462 using proceeds generated from sale of cryptocurrency in August.