ProCap Financial, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Unless the context otherwise requires, all references in this section to the “Company,” “ProCap,” “we,” “us,” or “our” refer to ProCap Financial, Inc., a Delaware corporation, and its subsidiaries. The following discussion and analysis of the financial condition and results of operations of the Company should be read together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q (the “Quarterly Report”) for the six months ended June 30, 2026 (the “Unaudited Condensed Consolidated Financial Statements”), the Annual Report on Form 10-K filed on February 18, 2026 (the “Annual Report”), and the Definitive Proxy Statement filed on March 2, 2026 and Risk Factors contained therein. On December 5, 2025, the Company completed a business combination (the “Transaction”) with Columbus Circle Capital Corp I (“CCCM”), which was accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (“GAAP”). ProCap BTC, LLC (“ProCap BTC”). was determined to be the accounting acquirer and CCCM was treated as the acquired company for financial reporting purposes. Following the Transaction, the Company became the publicly traded parent company, and ProCap BTC became its operating subsidiary. As a result, the historical financial statements of ProCap BTC became the historical financial statements of the Company. Accordingly, the comparative financial information presented for periods prior to the Transaction, including the period from June 10, 2025 (inception) through June 30, 2025, reflects the historical results of ProCap BTC. This discussion contains forward-looking statements that involve risks and uncertainties. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” and “continue,” or the negative of such terms or other similar expressions. Such statements include, but are not limited to, statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations regarding our asset management business and the proposed Silvia ETFs; our Bitcoin treasury strategy; the integration of CFO Silvia; the remediation of the material weakness in our internal control over financial reporting; possible business combinations and the financing thereof, and related matters; as well as all other statements other than statements of historical fact included in this Quarterly Report. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Overview ProCap Financial, Inc. is a U.S.-based modern finance company. The Company’s mission is to help independent investors make money. Historically, the Company’s operations included investor-focused media, educational content, and strategic investments designed to support independent investors through digital platforms and other content offerings. We believe advances in artificial intelligence and automation have the potential to transform financial analysis, investment research, and investor decision support. Our strategy is centered on developing scalable technology platforms, expanding our proprietary data and analytical capabilities, and pursuing strategic opportunities that enhance our products, services, and long-term growth prospects. Through a combination of internal development initiatives and strategic acquisitions, we seek to provide technology-enabled solutions designed to improve the accessibility, efficiency, and quality of financial information and analysis available to investors. During 2026, we expanded our AI-focused initiatives through the launch of ProCap Insights and the acquisition of CFO Silvia Inc., a Delaware corporation (“CFO Silvia” and such acquisition, the “CFO Silvia Acquisition”). ProCap Insights is an AI-driven research product designed to provide investors with market intelligence and investment research. CFO Silvia is a consumer-focused financial technology platform that utilizes AI to aggregate and analyze financial information. Together, these initiatives support our objective of developing technology-enabled solutions that improve the accessibility and efficiency of financial analysis and investor engagement. In addition, we have adopted a Bitcoin treasury strategy and intend to hold Bitcoin as a long-term treasury reserve asset. We believe that Bitcoin represents a superior long-term store of value and a viable alternative to traditional fiat-based reserve assets and that Bitcoin will play an increasingly important role as a reserve asset for individuals, corporations, and governments worldwide. 18 AI and Regulatory Uncertainty Our AI-related initiatives operate in rapidly evolving and competitive markets and are subject to changing legal, regulatory, and technological developments, including those relating to data privacy, cybersecurity, intellectual property, consumer protection, and the use of automated financial analysis tools. As we continue to develop and expand our platforms, we expect innovation, technology development, and disciplined capital allocation to remain important components of our strategy. Recent Developments Acquisition of CFO Silvia On April 6, 2026 (the “Acquisition Date”), we completed the CFO Silvia Acquisition, a consumer-focused financial technology platform that utilizes artificial intelligence to aggregate, organize, and analyze financial information. The CFO Silvia Acquisition expands our AI-driven product offerings and supports our strategy of developing technology-enabled solutions designed to improve financial analysis, research, and investor decision-making. The results of CFO Silvia have been included in our Unaudited Condensed Consolidated Financial Statements since the Acquisition Date. Additional information regarding the CFO Silvia Acquisition is included in Note 3 to the Unaudited Condensed Consolidated Financial Statements. Additional information regarding the CFO Silvia Acquisition and related agreements is also included in our Current Report on Form 8-K filed on April 6, 2026. CFO Silvia has developed a consumer-facing AI platform that aggregates and organizes financial data to provide users with automated financial education, tracking and analytical tools. The CFO Silvia platform connects to financial account integrations, including brokerage accounts, retirement accounts, cryptocurrency wallets, real estate valuation services, and alternative investment platforms, to deliver users a consolidated, real-time view of their net worth, holdings and liabilities. The CFO Silvia platform utilizes AI-driven analytical tools to perform portfolio tracking, concentration analysis, fee analysis, scenario modeling, and informational financial summaries through a conversational interface accessible via chat, email, and voice. The platform is designed to surface potential portfolio risks, including sector or asset class overconcentration, elevated fee structures, and inefficient cash allocation. The platform does not provide personalized investment advice within the meaning of the Investment Advisers Act of 1940 and is not intended to serve as a registered investment adviser or replace the judgment of a qualified financial professional. Asset Management During the quarter ended June 30, 2026, the Company expanded its business to include asset management through the launch of Silvia Innovation Fund I, LP, a Delaware limited partnership (the “Initial Fund” and together with any other private funds, alternative investment vehicles or co-investment vehicles that we or our subsidiaries sponsor, advise or manage, the “Funds”; the term “Funds” does not include the Silvia ETFs described below under “Proposed Exchange-Traded Funds”). The Initial Fund invests in early-stage companies aligned with the Company’s CFO Silvia platform strategy and is advised by ProCap Investment Advisers, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (the “Investment Manager”). The Company holds indirectly an interest in the Initial Fund through Silvia Innovation Fund I GP, LLC, the general partner of the Initial Fund (the “General Partner”). The launch of the Initial Fund represents the Company’s initial expansion into investment management activities supporting its broader AI-enabled financial technology strategy. As of June 30, 2026, the Fund and related entities had not commenced significant operations and had not engaged in material transactions. Appointment of Independent Director and Nasdaq Compliance On July 15, 2026, the Company appointed Benjamin Buchanan as an independent director of the Company’s board of directors (the “Board”) and member of the audit committee of the Board (the “Audit Committee”). As a result of this appointment, the Company regained compliance with The Nasdaq Stock Market LLC (“Nasdaq”) corporate governance requirements relating to Board and Audit Committee independence. On July 21, 2026, the Company received notice from Nasdaq confirming that the compliance matter had been resolved and closed. Proposed Exchange-Traded Funds On August 13, 2026, Tidal Trust IV, a Delaware statutory trust that is not affiliated with us, filed a registration statement on Form N-1A with the SEC with respect to five proposed actively managed exchange-traded funds (the “Silvia ETFs”). Tidal Investments LLC serves as investment adviser to the Silvia ETFs, and the Investment Manager is proposed to serve as investment sub-adviser and to provide portfolio management services. In connection with these arrangements, the Investment Manager expects to register with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. The registration statement remains subject to SEC review and comment and may be amended, delayed or withdrawn. No Silvia ETF may commence operations until its registration statement has become effective, its shares have been approved for listing on a national securities exchange, and applicable distribution and operational arrangements are in place. We have not earned any sub-advisory fees to date and do not expect the Silvia ETFs to generate meaningful revenue in the near term. See Part II, Item 1A, “Risk Factors - Risks Related to Our Expansion into Exchange-Traded Funds.” This Quarterly Report is not an offer to sell or the solicitation of an offer to buy shares of any Silvia ETF. Any offering of shares of a Silvia ETF will be made only by means of a prospectus. We are not the issuer of, and do not offer, shares of any Silvia ETF. 19 Results of Operations As discussed in Note 1 to our Unaudited Condensed Consolidated Financial Statements, the comparative financial information presented for the period from June 10, 2025 (inception) through June 30, 2025, reflects the historical results of ProCap BTC. (All figures in this Item 2 in thousands, except share, per share data, Bitcoin, and per Bitcoin data ) Comparison of the Three Months Period Ended June 30, 2026, and the Period from June 10, 2025 (Inception) through June 30, 2025 For the Three Months Ended Period from June 10, 2025 (Inception) through June 30, 2026 June 30, 2025 Increase (Decrease) Percentage Change Revenue $ 37 $ - $ 37 100 % Operating Expenses: General and administrative 11,304 8 11,296 100 % Stock-based compensation 3,723 - 3,723 100 % Total Operating Expenses 15,027 8 15,019 187738 % Operating Loss (14,990 ) (8 ) (14,982 ) 187275 % Other income (expense) Unrealized (loss) gain on digital assets (49,362 ) 14,296 (63,658 ) -445 % Realized loss on digital assets (2,676 ) - (2,676 ) 100 % Change in fair value of convertible notes conversion feature 109 - 109 100 % Interest and dividend income 128 - 128 100 % Interest expense (760 ) - (760 ) 0 % Change in fair value of derivative liability - 10,330 (10,330 ) -100 % Other (expense) income, net (52,561 ) 24,626 (77,187 ) -313 % Net (loss) income before taxes (67,551 ) 24,618 (92,169 ) -374 % Income tax benefit (2,504 ) - (2,504 ) 0 % Net (Loss) Income $ (65,047 ) $ 24,618 $ (89,665 ) -364 % 20 Revenues Revenue for the three months ended June 30, 2026 was $0.04 million and for the period from June 10, 2025 (Inception) through June 30, 2025 was $0. Revenue remained limited as we launched new revenue generating products during the period relating to ProCap Insights and CFO Silvia. The Company’s revenue growth will depend on the successful commercialization of its products and services and the continued execution of its growth strategy. General and Administrative Expenses General and administrative expenses were $11.3 million for the three months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (Inception) through June 30, 2025. The 2026 period reflects operations as a public company and inclusion of $6.7 million of payroll compensation (including a one-time signing bonus of $5.0 million for the Chief Technology Officer), $1.3 million of software licensing fees, $1.2 million of amortization of acquired intangible assets, $1.0 million of professional fees (including acquisition related expenses), among other expenses. The inception period reflected only limited administrative activities as we had recently commenced operations then and had not yet developed the infrastructure, personnel base, and operational scale necessary to support its current business activities. Stock-based compensation Stock-based compensation expense was $3.7 million for the three months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The increase was attributable to equity awards granted to employees and consultants under the Company’s equity incentive plans. Other Income (Expense), net Other expense, net for the three months ended June 30, 2026 was $52.6 million, compared to other income, net of $24.6 million for the period from June 10, 2025 (Inception) through June 30, 2025. The Company’s results during the period were primarily driven by the change in fair value of digital assets as a result of decline in Bitcoin market prices. 21 Unrealized gain (loss) on digital assets Unrealized loss on digital assets was $49.4 million for the three months ended June 30, 2026, compared to an unrealized gain on digital assets of $14.3 million for the period from June 10, 2025 (inception) through June 30, 2025. The change was primarily attributable to declines in the fair value of the Company’s Bitcoin holdings during the 2026 period. Realized loss on digital assets Realized loss on digital assets was $2.7 million for the three months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The loss was attributable to sales of digital assets during the 2026 period. Interest and dividend income Interest and dividend income was $0.1 million for the three months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The increase was primarily attributable to income earned on cash, cash equivalents, and investments held during the 2026 period. Change in fair value of derivative liabilities Change in fair value of derivative liabilities was $0 for the three months ended June 30, 2026, compared to $10.3 million for the period from June 10, 2025 (inception) through June 30, 2025. The change was attributable to the absence of derivative liabilities during the 2026 period. Comparison of the Six Months Period Ended June 30, 2026, and the Period from June 10, 2025 (Inception) through June 30, 2025 For the Six Months Ended Period from June 10, 2025 (Inception) through June 30, 2026 June 30, 2025 Increase (Decrease) Percentage Change Revenue $ 38 $ - $ 38 100 % Operating Expenses: General and administrative 15,556 8 15,548 100 % Stock-based compensation 7,263 - 7,263 100 % Total Operating Expenses 22,819 8 22,811 285138 % Operating Loss (22,781 ) (8 ) (22,773 ) 284663 % Other income (expense) Unrealized (loss) gain on digital assets (154,829 ) 14,296 (169,125 ) -1183 % Realized loss on digital assets (2,676 ) - (2,676 ) 100 % Change in fair value of convertible notes conversion feature 946 - 946 100 % Realized loss on put option liability (914 ) - (914 ) 100 % Gain on extinguishment of debt 5,933 - 5,933 100 % Interest and dividend income 871 - 871 100 % Interest expense (1,860 ) - (1,860 ) 100 % Change in fair value of derivative liability - 10,330 (10,330 ) 100 % Other (expense) income, net (152,529 ) 24,626 (177,155 ) -719 % Net (loss) income before taxes (175,310 ) 24,618 (199,928 ) -812 % Income tax benefit (2,504 ) - (2,504 ) 0 % Net (Loss) Income $ (172,806 ) $ 24,618 $ (197,424 ) -802 % 22 Revenues Revenue for the six months ended June 30, 2026 and for the period from June 10, 2025 (Inception) through June 30, 2025 was $0.04 million and $0, respectively, as we launched new revenue generating products during the June 30, 2026 period relating to ProCap Insights and the CFO Silvia Acquisition. The Company’s revenue growth will depend on the successful commercialization of its products and services and the continued execution of its growth strategy. General and Administrative Expenses General and administrative expenses were $15.6 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (Inception) through June 30, 2025. The 2026 period reflects operations as a public company and inclusion of $7.7 million of payroll compensation (including a one-time signing bonus of $5.0 million for the Chief Technology Officer), $1.3 million of software licensing fees, $1.2 million of amortization of acquired intangible assets, $2.8 million of professional fees (including acquisition related expenses), among other expenses. The inception period reflected only limited administrative activities as we had recently commenced operations then and had not yet developed the infrastructure, personnel base, and operational scale necessary to support its current business activities. Stock-based compensation Stock-based compensation expense was $7.3 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The increase was attributable to equity awards granted to employees and consultants under the Company’s equity incentive plans. Other Income (Expense), net Other expense, net was $152.5 million for the six months ended June 30, 2026, compared to other income, net of $24.6 million for the period from June 10, 2025 (inception) through June 30, 2025. The change was primarily attributable to unrealized losses on digital assets recognized during the 2026 period. 23 Unrealized gain (loss) on digital assets Unrealized loss on digital assets was $154.8 million for the six months ended June 30, 2026, compared to an unrealized gain on digital assets of $14.3 million for the period from June 10, 2025 (inception) through June 30, 2025. The change was primarily attributable to declines in the fair value of the Company’s Bitcoin holdings during the 2026 period. Realized loss on digital assets Realized loss on digital assets was $2.7 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The loss was attributable to sales of digital assets during the 2026 period. Change in fair value of convertible notes Change in fair value of convertible notes resulted in income of $0.9 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The income was attributable to changes in the fair value of the conversion feature embedded within the Company’s convertible notes. Realized loss on put option liabilities Realized loss on put option liabilities was $0.9 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The loss was attributable to the settlement of put option liabilities during the period. Gain on extinguishment of debt Gain on extinguishment of debt was $5.9 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The gain was primarily attributable to the repurchase of a portion of the Company’s outstanding convertible notes at a discount to the principal outstanding. Interest expense Interest expense was $1.9 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. The increase was primarily attributable to amortization of debt discount and debt issuance costs associated with the Company’s convertible notes, as well as the repayment of a portion of such notes during the period. Change in fair value of derivative liabilities Change in fair value of derivative liabilities was $0 for the six months ended June 30, 2026, compared to income of $10.3 million for the period from June 10, 2025 (inception) through June 30, 2025. The decrease was attributable to the absence of derivative liabilities during the 2026 period. Liquidity and Capital Resources As of June 30, 2026, we had cash and cash equivalents of approximately $15.3 million and working capital of approximately $(77.3 million). The working capital deficit resulted primarily from the reclassification of the Company’s outstanding convertible notes as current liabilities as of June 30, 2026 due to holders’ contractual repurchase rights that may become exercisable within the next twelve months. As of June 30, 2026, the aggregate principal amount of the outstanding convertible notes was $99.6 million. Although the notes mature in December 2028, holders may have contractual repurchase rights that become exercisable beginning June 5, 2027. As a result, the convertible notes were classified as current liabilities as of June 30, 2026. See Note 7, Convertible Notes, for additional information. As of June 30, 2026, we held approximately 5,355 Bitcoin with an aggregate fair value of approximately $313.4 million, a portion of which serves as collateral under our convertible note arrangements. Other than collateral arrangements associated with financing activities , we currently have no off-balance sheet financing arrangements and did not have any material capital expenditure commitments as of June 30, 2026. We do not maintain any committed external sources of liquidity, including credit facilities or other financing arrangements. In evaluating our liquidity position, we considered our anticipated operating cash needs, the timing and nature of potential obligations under the convertible notes, our current cash and cash equivalents balance, and the availability of financing and capital-raising alternatives. While our Bitcoin is held for long-term appreciation, we also considered it in the overall evaluation of our liquidity position given its active trading market. As a result, a significant increase or decrease in the market value or liquidity of bitcoin would impact our evaluation. 24 Based on these considerations, we believe the Company has sufficient resources to satisfy its obligations as they become due, including any obligations that may arise under the convertible notes. In the near term, we expect to use available resources primarily to fund operating expenses, working capital requirements, investments in technology and infrastructure, and the development of our asset management and exchange-traded fund businesses, including registration and compliance costs, personnel and systems, the General Partner’s capital contributions to the Initial Fund and seed capital, expense limitation or reimbursement obligations we agree to provide in connection with the Silvia ETFs, if any. As of the date of this Quarterly Report, we have not committed to provide seed capital to any Silvia ETF. Amounts we commit to these businesses would not be available for our existing operations, debt service, acquisitions or other corporate purposes. We expect these costs to increase in future periods and to be incurred before, and substantially in advance of, any related revenue. Over the longer term, we may deploy capital to support strategic acquisitions, business expansion initiatives, investments in digital assets, and potential share repurchase programs. The timing and magnitude of these expenditures will depend on market conditions, the availability of capital, and strategic opportunities. Based on our assessment of its anticipated operating cash needs, potential obligations under the convertible notes, financial position, and available financing and capital-raising alternatives, we believe that the Company has sufficient resources to satisfy anticipated working capital and operating requirements for at least the next twelve months. Cash Flows for the Six Months Ended June 30, 2026 and for the period from June 10, 2025 (Inception) through June 30, 2025 The following table summarizes our cash flows from operating, investing and financing activities for the six months ended June 30, 2026 and for the period from June 10, 2025 (Inception) through June 30, 2025 (In thousands): For the six months ended June 30, 2026 Period from June 10, 2025 (Inception) through June 30, 2025 Net cash used in operating activities $ (14,541 ) $ - Net cash used in investing activities (30,724 ) (476,000 ) Net cash (used in) provided by financing activities $ (134,258 ) $ 476,000 Cash Flows Used in Operating Activities Net cash used in operating activities was $14.5 million for the six months ended June 30, 2026, compared to $0 for the period from June 10, 2025 (inception) through June 30, 2025. For the six months ended June 30, 2026, net cash used in operating activities reflected the Company’s net loss of $172.8 million, adjusted for non-cash items of $162.0 million. The most significant adjustment was $154.8 million of unrealized losses on digital assets resulting from declines in the fair value of Bitcoin holdings during the period. Changes in operating assets and liabilities resulted in a net use of cash of $3.8 million during the period. For the period from June 10, 2025 (inception) through June 30, 2025, net cash provided by operating activities was not significant. Net income of $24.6 million, primarily attributable to unrealized gains on digital assets and gains recognized from changes in the fair value of the conversion feature liability, was largely offset by non-cash fair value adjustments and changes in working capital accounts. 25 Cash Flows Used in Investing Activities Net cash used in investing activities was $30.7 million for the six months ended June 30, 2026. The use of cash was primarily attributable to $36.0 million of purchases of digital assets, $1.3 million paid in connection with the CFO Silvia acquisition, and $0.3 million of capital expenditures for property and equipment. These cash outflows were partially offset by $6.9 million of proceeds from sales of digital assets. For the period from June 10, 2025 (inception) through June 30, 2025, net cash used in investing activities consisted primarily of $476.0 million of purchases of digital assets. Cash Flows Used in Financing Activities Net cash used in financing activities was $134.3 million for the six months ended June 30, 2026. The use of cash primarily consisted of $119.2 million of payments to repurchase a portion of the Company’s outstanding convertible notes, $12.8 million of treasury stock repurchases, $1.7 million of purchases of derivative securities, $1.0 million of tax payments associated with the vesting of restricted stock units, and $0.6 million of settlements of derivative securities. These outflows were partially offset by $0.9 million of proceeds received from derivative securities. For the period from June 10, 2025 (inception) through June 30, 2025, net cash provided by financing activities consisted primarily of $476.0 million of proceeds from the issuance of preferred units, which were used principally to fund the acquisition of digital assets. Critical Accounting Policies and Estimates Our Unaudited Condensed Consolidated Financial Statements and the accompanying notes thereto included elsewhere in this Quarterly Report are prepared in accordance with GAAP. The preparation of our Unaudited Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses, and related disclosure. We have based our estimates on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We are subject to uncertainties such as the impact of future events, economic and political factors, and changes in our business environment; therefore, actual results could differ significantly from these estimates under different assumptions or conditions. To the extent that there are differences between our estimates and actual results, our future Unaudited Condensed Consolidated Financial Statement presentation, financial condition, results of operations, and cash flows will be affected. We consider an accounting estimate to be critical if it requires assumptions about matters that were highly uncertain at the time the estimate was made and if changes in those assumptions, or changes in the estimate that are reasonably likely to occur from period to period, would have a material effect on our financial condition or results of operations. Our critical accounting estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2025. During the six months ended June 30, 2026, we identified the following additional critical accounting estimates as a result of the CFO Silvia Acquisition. Business Combinations We account for acquisitions in accordance with ASC 805, Business Combinations . The allocation of purchase consideration to the assets acquired and liabilities assumed requires significant estimates and management judgment, particularly with respect to the valuation of identifiable intangible assets, contingent consideration arrangements, estimated useful lives of acquired assets, and certain tax-related matters. The valuation of acquired intangible assets and contingent consideration involves the use of significant assumptions, including projected future cash flows, royalty rates, customer attrition rates, discount rates, expected volatility, and other market-based inputs. Changes in these assumptions could materially impact the amounts assigned to acquired assets and liabilities, the resulting amount of goodwill recognized, and future amortization expense. In addition, because the purchase price allocation remains subject to measurement period adjustments, future revisions to estimates may result in changes to the recorded amounts of assets acquired and liabilities assumed. Share-Based Compensation We account for share-based compensation in accordance with ASC 718, Compensation—Stock Compensation . The determination of the grant-date fair value of certain share-based awards requires significant judgment and the use of valuation models, particularly for awards containing market-based vesting conditions. Valuation of these awards requires management to develop assumptions regarding expected stock price volatility, expected term, risk-free interest rates, dividend yield, and other market-based inputs. Changes in these assumptions may significantly affect the estimated fair value of awards and, accordingly, the amount and timing of compensation expense recognized in future periods. See “Summary of Significant Accounting Policies” described in Note 2 to our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report for a description of our significant accounting policies. 26 Off-Balance Sheet Arrangements Other than collateral arrangements associated with financing activities, we do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources. Recent Accounting Pronouncements See “Recent Accounting Pronouncements” described in Note 2 of our Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report. Emerging Growth Company Status We are an emerging growth company (“EGC”), as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as to those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. In addition, we intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an EGC, the Company intends to rely on such exemptions, it is not required to, among other things: (i) provide an auditor’s attestation report on its system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation. We will remain an EGC until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our shares of common stock, par value $0.001 per share (“Common Stock”) that are held by non-affiliates exceeds $700 million as of the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period. Bitcoin Market Price Risk Our Bitcoin investment is measured using observed prices from active exchanges and adjustments are recorded in net income through “other income (expenses), net” on our Unaudited Condensed Consolidated Statement of Operations. The Bitcoin market price may fluctuate significantly and a decline in the market price of Bitcoin could result in a material adverse effect on our financial results in future periods. See the risk factors included under the heading “ Risks Related to Our Business and Bitcoin Treasury Strategy ” in our Annual Report for more information regarding the risks related to our Bitcoin holdings. As of June 30, 2026 and December 31, 2025, the fair value of our Bitcoin investment included in digital assets was $313.4 million and $441.8 million, respectively. For the six months ended June 30, 2026, we recognized an unrealized loss from the remeasurement of our Bitcoin investment of $154.8 million. 27 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Smaller reporting companies are not required to provide the information required by this item.