What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2025-11-13 · 519 added, 522 removed, 61 unchanged (94% of the section changed)

9 unchanged sentences

When we refer to the “2026 Quarter” and the “2025 Quarter” we are referring

to the three months ended September 30, 2025 and September 30, 2024, respectively.

When we refer to the “2025 Period” and

the “2024 Period” we are referring to the nine months ended September 30, 2025 and September 30, 2024, respectively.

Company Overview

(“BTCS” or the “Company”), short for Blockchain Technology Consensus Solutions , is a publicly traded,

Ethereum-first blockchain technology and digital asset company focused on scalable revenue generation and ETH accumulation through its

integrated blockchain infrastructure and decentralized finance (DeFi) operations.

The Company’s operations are built around its

DeFi/TradFi Flywheel strategy, a capital-formation and reinvestment framework that seeks to connect decentralized on-chain finance (DeFi)

and traditional capital markets (“TradFi”) to create a self-reinforcing cycle of growth, ETH accumulation, and shareholder

value creation.

this model, BTCS combines revenue generation from its blockchain operations, NodeOps (staking), Builder+ (block building), and Imperium

(DeFi), with complementary capital-formation activities, including At-The-Market (“ATM”) equity offerings, structured convertible

debt, and on-chain borrowings through DeFi protocols.

This integrated approach is designed to allow BTCS to reinvest capital efficiently

across its operating infrastructure with a goal of accelerating ETH-based revenue growth, enhancing ETH-per-share metrics, and minimizing

shareholder dilution.

Through this strategy, BTCS provides leveraged exposure to Ethereum (ETH) by combining scalable revenue generation

with a structured ETH accumulation model.

DeFi/TradFi Flywheel

Funding Strategy

DeFi/TradFi Flywheel represents a transformative extension of BTCS’s Ethereum-first strategy, combining innovative financing mechanisms

from both decentralized and traditional markets to optimize capital efficiency and grow its ETH treasury.

The Company’s planned

capital formation approach includes At-The-Market (“ATM”) equity offerings, above market convertible debt issuance, and on-chain

borrowing through DeFi protocols.

These capital sources are strategically aligned with BTCS’s operating infrastructure, staking

rewards from NodeOps, and ETH transaction fees captured through Builder+, creating a self-reinforcing flywheel designed to increase ETH

per share while minimizing shareholder dilution.

This approach reflects BTCS’s commitment to revenue scalability, ETH accumulation,

and capital stewardship.

Blockchain Operations:

NodeOps (staking), Builder+ (block building), and Imperium (DeFi)

operates Ethereum validator nodes through its NodeOps initiative, earning ETH-denominated staking rewards for performing validation and

consensus activities that secure the network.

These activities form a core component of BTCS’s blockchain infrastructure operations,

providing a recurring stream of on-chain ETH rewards that scale with the amount of staked assets, network transaction volume, and validator

performance uptime.

proprietary block builder, Builder+, constructs and submits optimized blocks to blockchain networks that have implemented a Proposer-Builder

Separation (“PBS”) framework, including Ethereum and Binance Smart Chain (“BSC”).

On these networks, Builder+

leverages algorithmic transaction-bundling, pricing, and block-optimization strategies to compete in decentralized block-space marketplaces

and capture native-token-denominated execution-layer fees and maximal extractable value (“MEV”) rewards.

Ethereum, Builder+ engages in the competitive block-building process by constructing bundles of transactions drawn from both the public

mempool and private order flow.

Revenues are generated primarily from transaction fees, priority tips, and MEV opportunities embedded

within successfully proposed and finalized blocks.

BSC, Builder+ participates in a similar block-construction process, earning BNB-denominated transaction and searcher-tip rewards when

its proposed blocks are selected and finalized by validators.

The BSC deployment leverages the same underlying Builder+ technology stack,

enabling efficient cross-network scalability and diversification of transaction-fee revenue beyond the Ethereum ecosystem.

represents a core driver of BTCS’s growth strategy and demonstrates the scalability of its infrastructure technology across multiple

EVM-compatible blockchains.

Its ability to operate across both Ethereum’s and BSC’s block markets underscores BTCS’s

focus on expanding its on-chain presence while maintaining an ETH-centric treasury strategy.

in 2025, Imperium extends BTCS’s on-chain operations into DeFi.

Through Imperium, the Company participates as a liquidity provider

in decentralized lending markets, primarily Aave, where it supplies ETH and other digital assets to earn token-denominated protocol rewards

directly from smart contracts.

This DeFi participation model is designed to allow BTCS to deploy its ETH treasury productively, compounding

revenue generation through decentralized lending while maintaining full on-chain transparency and control over assets.

Imperium complements

NodeOps and Builder+ by integrating DeFi reward generation into BTCS’s broader Ethereum-focused operating ecosystem.

Streamlined Focus

has paused further development of its consumer-facing platform ChainQ to allocate resources toward core on-chain operations and the execution

of its DeFi/TradFi Flywheel strategy.

Additionally, during the nine months ended September 30, 2025, BTCS completed the wind-down of

staking-as-a-service and validator operations on non-Ethereum networks including Avalanche (AVAX), Cosmos (ATOM), Akash (AKT), and Kava

(KAVA), and liquidated the majority of its non-Ethereum crypto asset holdings.

These actions reflect the Company’s strategic commitment

to focus its resources on scalable Ethereum-based operations that directly contribute to ETH accumulation and overall shareholder value.

Crypto Assets

tables below detail BTCS’s quarterly crypto asset holdings for each quarter from Q1 2024 through Q1 2025.

Crypto Assets Held

as of the End of the Following Calendar Quarters:

Ethereum (ETH)

BNB Chain (BNB)

Rocket Pool (RPL)

Cosmos (ATOM)

Avalanche (AVAX)

Axie Infinity (AXS)

NEAR Protocol (NEAR)

Polkadot (DOT)

Polygon (POL)

Cardano (ADA)

Evmos (EVMOS)

Band Protocol (BAND)

Fair Market Value of Crypto Assets as

of the End of the Following Calendar Quarters:

Ethereum (ETH)

BNB Chain (BNB)

Rocket Pool (RPL)

Cosmos (ATOM)

Avalanche (AVAX)

Axie Infinity (AXS)

NEAR Protocol (NEAR)

Polkadot (DOT)

Polygon (POL)

Cardano (ADA)

Evmos (EVMOS)

Band Protocol (BAND)

Prices of Crypto

Assets as of the End of the Following Calendar Quarters:*

to the three months ended March 31, 2026 and March 31, 2025, respectively.

is a blockchain

technology company focused on revenue generation through blockchain infrastructure and decentralized finance (“DeFi”) activities,

primarily on the Ethereum network.

During 2025, the Company continued to execute a strategic repositioning toward Ethereum-native operations

to generate scalable recurring revenue and drive sustainable growth and long-term shareholder value.

Company’s business model is centered on participating directly in core components of the Ethereum ecosystem, including validator

node operations as a validator (“Validator”), block-building activities as a block builder (“Builder”), and DeFi

asset deployment.

While BTCS holds significant Ethereum (“ETH”) assets, they are primarily maintained as operating assets

that support the Company’s revenue-generating activities, infrastructure participation, and DeFi activities, including deployment

into lending protocols and liquidity arrangements.

of Blockchain Infrastructure Operations

Blockchain infrastructure activities,

consisting primarily of validator node operations (NodeOps) and block building (Builder+), represent a core driver of the Company’s

Validator operations provide recurring ETH-denominated revenues through protocol-defined incentives and rewards, while Builder+

has emerged as a higher-growth, technology-driven revenue opportunity.

participates in Ethereum’s transaction execution ecosystem by constructing and submitting optimized transaction blocks.

2025, the Company continued to scale Builder+ operations by expanding private order flow integrations, enhancing infrastructure efficiency,

and increasing participation across Ethereum blockspace markets.

As a result, block building became an increasingly significant contributor

to the Company’s revenue mix, reflecting both increased transaction activity and improved execution performance.

believes that block building represents a scalable opportunity, driven by technology, infrastructure optimization, and access to transaction

flow rather than asset lock-up requirements.

Decentralized

Finance Operations through Imperium

conducts DeFi activities through its Imperium operating segment, which is designed to deploy digital assets into decentralized protocols

as a liquidity provider and market participant.

Imperium enables the Company to allocate assets across DeFi protocols that facilitate

decentralized lending, borrowing, and liquidity pool participation.

these activities, the Company earns variable digital asset rewards and transaction-based fees that depend on protocol utilization, capital

deployment, and prevailing market conditions.

In contrast to traditional staking, which is subject to protocol-defined reward structures

and lock-up mechanics, DeFi participation allows for more dynamic capital allocation, including the use of overcollateralized borrowing

arrangements and liquidity pool strategies.

During 2025, the Company’s

DeFi activities were primarily focused on decentralized lending and borrowing arrangements.

In 2026, the Company expanded these activities

to include participation in liquidity pools, further diversifying its DeFi revenue streams and capital deployment strategies.

These activities are closely integrated

with the Company’s digital asset holdings, particularly ETH, which is deployed as collateral and liquidity to support both revenue

believes that DeFi activities represent a core and expanding component of the Company’s operations and provide opportunities to

enhance capital flexibility and complement the Company’s blockchain infrastructure operations.

BTCS plans to continue expanding

asset deployments into DeFi protocols and pursue additional integrations to broaden its on-chain activities, subject to market conditions,

available capital, regulatory developments, and risk management considerations.

central element of BTCS’s operating model is its integrated capital strategy, which combines decentralized finance mechanisms with

traditional capital markets activities.

This framework includes the use of tools such as at-the-market equity (“ATM”) offerings,

structured convertible notes, and ETH-backed DeFi borrowing to fund operations, scale infrastructure, and deploy digital assets.

borrowing arrangements, which are typically overcollateralized, enable the Company to access liquidity by pledging digital assets as

collateral while maintaining exposure to the underlying digital assets.

Borrowed funds, generally denominated in stablecoins, may be

used to support operations, manage liquidity, or redeploy capital into blockchain infrastructure and DeFi activities, including decentralized

lending and liquidity pool participation.

approach allows the Company to actively manage its capital structure and allocate resources across its operating activities based on

market conditions, expected returns, and liquidity requirements.

The Company continuously evaluates these strategies to balance capital

deployment, liquidity, and risk management considerations.

BTCS entered 2026 with a strategic focus on decentralized finance activities under Imperium.

Management expects continued

expansion of Imperium to drive scalable revenue generation and gross profit growth, while ongoing development of blockchain infrastructure

operations, including Builder+, is expected to support the Company’s broader strategy.

Company’s performance will depend on a range of factors, including activity levels on the Ethereum network, transaction flow

within block-building markets, and utilization of DeFi protocols.

BTCS expects to continue allocating assets dynamically across

validator operations, block building, and DeFi strategies based on market conditions, liquidity needs, and operational

considerations.

following sections of Management’s Discussion and Analysis provide additional detail regarding the Company’s digital asset

and treasury management practices, known trends and uncertainties, results of operations, and liquidity and capital resources.

of Digital Assets in our Operations

Asset Holdings Overview

part of its operating model, the Company holds and deploys digital assets across blockchain infrastructure and decentralized finance

(DeFi) activities.

These digital assets are reflected in the Company’s financial statements in different line items based on their

nature and accounting treatment, including digital assets measured at fair value and intangible digital assets associated with liquidity

pool positions.

following table presents a summary of the Company’s digital asset token holdings as of March 31, 2026, including (i) digital assets

held directly and measured at fair value, (ii) digital assets underlying liquidity pool positions, and (iii) stablecoins held.

is intended to provide a consolidated view of the Company’s digital asset exposure and is supplemental to the disclosures included

in the accompanying financial statements.

Token quantities are presented to illustrate the Company’s exposure to underlying digital

assets across its operations.

As of March 31, 2026

Digital Assets Held at Fair Value

Digital Assets Underlying Liquidity Pool Positions

Stablecoins Held

Total Digital Asset Holdings

Ethereum (ETH)

1 unchanged sentence

Rocket Pool (RPL)

Cosmos (ATOM)

Avalanche (AVAX)

Axie Infinity (AXS)

NEAR Protocol (NEAR)

Polkadot (DOT)

Polygon (POL)

Cardano (ADA)

Evmos (EVMOS)

Band Protocol (BAND)

* The prices have been rounded to the nearest

whole dollar for prices above $100

Crypto Asset Rewards

tables below detail BTCS’s quarterly crypto assets earned during each of the following quarters:

Crypto assets earned

from blockchain infrastructure staking activities through NodeOps

Ethereum (ETH)

Solana (SOL) *

Rocket Pool (RPL) *

Cosmos (ATOM)

Axie Infinity (AXS) *

NEAR Protocol (NEAR)

Avalanche (AVAX) *

Stader (SD) *

Polkadot (DOT) *

Kusama (KSM) *

Polygon (POL) *

Tezos (XTZ) *

Cardano (ADA) *

Evmos (EVMOS) *

Oasis Network (ROSE) *

* All or a portion

of revenue earned from staking to third-party validator nodes

Crypto assets earned

from block building through Builder+

Ethereum (ETH)

BNB Chain (BNB)

Crypto assets earned

from DeFi activities through Imperium

Ethereum (ETH)

Fair Market Value

of Crypto Asset Rewards Earned and Recognized as Revenue

following table summarizes the revenues earned from the Company’s operations by revenue segment during the following calendar quarters:

Revenue by Segment

USD Coin (USDC)

Tether (USDT)

Aave GHO (GHO)

Total Carrying Value

$ 115,955,855

$ 127,848,220

Total Fair Value

$ 115,955,855

$ 128,197,459

value for liquidity pool positions reflects cost less impairment, while fair value represents

the estimated market value of the underlying assets.

presented for digital assets and stablecoins reflect token units held as of March 31, 2026.

Total carrying value and total fair value

are presented in U.S.

assets held at fair value primarily consist of ETH and other protocol tokens that are actively deployed in validator operations, block-building

activities, and DeFi lending arrangements.

Digital assets underlying liquidity pool positions represent the Company’s proportional

interest in pooled assets within decentralized exchanges and are accounted for as intangible assets.

Stablecoins are held for liquidity

management and deployment into DeFi strategies.

Company’s digital asset holdings may fluctuate based on market prices, capital deployment decisions, and participation in blockchain

infrastructure and DeFi activities.

Allocation and Treasury Strategy

ETH held by the Company

is actively deployed across its business lines, including validator node operations, block building, and DeFi activities conducted through

the Imperium operating segment.

Management evaluates how digital assets are deployed among these activities based on expected revenue,

profit margin, growth prospects, liquidity requirements, risk considerations, and prevailing market conditions.

The Company’s treasury management

strategy is designed to balance revenue and profit, liquidity, and risk management.

BTCS seeks to maintain sufficient liquidity to support

ongoing operations while deploying digital assets, including through DeFi lending and liquidity pool participation, to support scalable

revenue generation.

Company does not maintain a fixed allocation policy for digital assets across staking, block building, or DeFi activities.

allocation decisions are made dynamically in response to market conditions, protocol economics, and the Company’s capital requirements.

certain circumstances, the Company may convert digital assets to cash to fund operations or manage liquidity.

Conversely, the Company

may deploy cash or stablecoins into digital assets to support infrastructure operations or DeFi participation.

and Risk Considerations

Company’s digital asset balances may fluctuate period over period due to operational activity, redeployments, protocol participation,

borrowing activity, and market price movements.

These fluctuations are a function of the Company’s operating strategy and may materially

impact reported financial results.

Company’s digital asset and treasury management activities expose it to risks including digital asset price volatility, protocol

changes, smart contract vulnerabilities, and liquidity constraints, including collateral liquidation risk in overcollateralized borrowing

arrangements.

Management seeks to mitigate these risks through diversification of deployments, active monitoring of protocol performance,

conservative leverage practices, and disciplined capital allocation.

believes that the active deployment of digital assets across blockchain infrastructure and DeFi activities is a core differentiator of

the Company’s operating model and expects digital assets to remain central to the Company’s treasury strategy and overall

business performance.

Trends, Market Conditions, and Uncertainties

operates in blockchain infrastructure and DeFi markets that are characterized by rapid technological change, evolving market structures,

and significant variability in economic outcomes.

The Company’s operating results and financial condition are influenced by a number

of interrelated trends, market conditions, and uncertainties.

Asset Market Volatility

market prices of digital assets, particularly ETH, are subject to significant volatility driven by macroeconomic conditions, investor

sentiment, regulatory developments, technological changes, and activity within decentralized ecosystems.

Because ETH is a core operating

asset for the Company, fluctuations in its market price may significantly affect the value of the Company’s digital asset holdings,

reported results, and liquidity.

in ETH prices may impact period-to-period financial results independent of underlying operating performance.

Network and Protocol Dynamics

Company’s infrastructure and DeFi activities depend on the continued operation and adoption of the Ethereum network and related

Changes to network protocols, including updates to transaction fee structures, validator economics, or block-building dynamics,

may affect the profitability and scalability of the Company’s operations.

addition, transaction volumes, network congestion, and user activity levels influence execution-layer rewards, block-building opportunities,

and validator returns, and may vary significantly over time.

Building Market Conditions

performance is influenced by access to transaction flow, infrastructure efficiency, latency, and competition among block builders.

transaction execution markets evolve, competitive dynamics and margins may fluctuate.

DeFi Revenue Variability

generated through Imperium’s DeFi activities are inherently variable and depend on protocol utilization, fee rates, liquidity conditions,

and market demand for decentralized financial services, including both lending and liquidity pool participation.

These factors may fluctuate

as capital flows into or out of protocols and as market conditions change.

participation also exposes the Company to risks such as smart contract vulnerabilities, governance changes, and liquidity constraints,

which may impact returns or result in losses.

The occurrence of any such events could have a material adverse effect on the Company’s

financial condition and results of operations.

regulatory environment for digital assets and blockchain-based activities continues to evolve in the United States and internationally.

Changes in laws, regulations, or regulatory interpretations could affect the Company’s operations, access to capital, and compliance

for Operating Performance

Company seeks to manage these dynamics through disciplined capital allocation, active deployment of digital assets, and ongoing evaluation

of market conditions.

However, the impact of these factors on future operating results and financial condition may be material.

of Operations for the Three Months Ended March 31, 2026 and 2025

following table reflects our operating results for the three months ended March 31, 2026 and 2025:

For the Three Months Ended

Blockchain infrastructure revenues

Total revenue from blockchain

infrastructure staking activities through NodeOps

Total revenue from block-building

through Builder+

Total blockchain infrastructure revenues

Total revenue from Defi activities through Imperium

Total revenue

tables below detail the fair market value of BTCS’s quarterly crypto assets earned as revenue in each respective segment during

the following calendar quarters:

Revenue from blockchain

infrastructure staking activities through NodeOps

Ethereum (ETH)

Solana (SOL) *

Rocket Pool (RPL) *

Cosmos (ATOM)

Axie Infinity (AXS) *

NEAR Protocol (NEAR)

Avalanche (AVAX) *

Stader (SD) *

Polkadot (DOT) *

Kusama (KSM) *

Polygon (POL) *

Tezos (XTZ) *

Cardano (ADA) *

Evmos (EVMOS) *

Oasis Network (ROSE)

Total revenue from blockchain infrastructure staking

activities through NodeOps

* All or a portion

of revenue earned from staking to third-party validator nodes

Revenue from block building through Builder+

Ethereum (ETH)

BNB Chain (BNB)

Total revenue from block-building through Builder+

Revenue from DeFi

activities through Imperium

Ethereum (ETH)

Total revenue from DeFi activities through Imperium

Results of Operations

for the Three and Nine Months Ended September 30, 2025 and 2024

following tables reflect our operating results for the three and nine months ended September 30, 2025 and 2024:

the Three Months Ended

infrastructure revenues

infrastructure costs

Total cost of revenues

and administrative

and development

and related expenses

(gains) losses on crypto asset transactions

on extinguishment of debt

operating expenses

income (expenses):

in unrealized appreciation (depreciation) of crypto assets

in fair value of warrant liabilities

other income (expenses)

income (loss)

the Nine Months Ended

infrastructure revenues

infrastructure costs

DeFi revenues

Total revenues

Cost of revenues

Blockchain infrastructure costs

Total cost of revenues

and administrative

and development

and related expenses

(gains) losses on crypto asset transactions

on extinguishment of debt

Operating expenses:

income (expenses):

in unrealized appreciation (depreciation) of crypto assets

in fair value of warrant liabilities

Professional fees

General and administrative

Research and development

Compensation and related expenses

Impairment loss on intangible digital assets

Realized losses on digital asset transactions

Unrealized loss on digital assets

Total operating expenses

Other income (expenses):

income (loss)

for the 2025 Quarter and 2025 Period increased significantly compared to the corresponding 2024 periods, primarily due to the continued

expansion of our Builder+ operations, which focus on block-building activities across the Ethereum and Binance Smart Chain (BSC) networks,

and the addition of Imperium DeFi activities during the period.

the 2025 Quarter, Builder+ operations accounted for approximately 77% of total revenue, NodeOps contributed approximately 15%, and Imperium

DeFi revenue represented the remaining 8%.

The year-over-year increase reflects the scaling of Builder+ operations and the commencement

of block building on BSC, which together resulted in a substantial increase in block rewards earned during the period.

Increases in NodeOps

and Imperium revenues were supported by the deployment of additional crypto assets acquired through capital-raising activities during

the 2025 Quarter.

we anticipate continued growth across Builder+, NodeOps, and Imperium as we expand block-building, staking, and DeFi activities, the

fair value of rewards may fluctuate due to the inherent volatility of crypto asset markets.

Accordingly, revenue recognized in future

periods may be materially affected by changes in the market prices of the underlying crypto assets at the time of reward receipt or recognition.

Cost of Revenues

of revenues increased for both the 2025 Quarter and 2025 Period compared to the corresponding 2024 periods, primarily due to higher Validator

Payments made to external parties to secure block space as part of our Builder+ block-building activities.

The increase also reflects

higher blockchain infrastructure and network operation costs associated with the expansion of block-building and DeFi activities.

higher costs were partially offset by efficiencies realized within our validating infrastructure, including lower hosting fees and reduced

reliance on third-party service providers.

Gross profit improved year-over-year as higher revenue from NodeOps and Imperium activities,

combined with the scaling of Builder+, outpaced the growth in related costs.

expect cost of revenues to continue to rise in line with the scaling of Builder+ and DeFi operations.

Gross margins may fluctuate depending

on the level of Validator Payments required to secure block inclusion and on broader crypto market conditions that influence block reward

Operating Expenses

fees increased for both the 2025 Quarter and 2025 Period compared to the corresponding 2024 periods, primarily due to higher legal and

accounting costs associated with the Company’s new Form S-3 registration statement and the expansion of its at-the-market (“ATM”)

program during the 2025 Quarter.

The increase also reflects higher investor relations expenses, including campaign initiatives and related

consulting services.

expect professional fees to decrease in future quarters, as the corporate activities related to the S-3 filing and ATM program are non-recurring.

Investor relations expenses may continue to fluctuate based on timing, opportunities, and the scope of shareholder engagement initiatives.

Interest expense

Change in fair value of warrant liabilities

Total other income (expenses)

$ (69,164,319 )

$ (17,268,697 )

$ (51,895,622 )

revenues for the 2026 Quarter increased compared to the 2025 Quarter, primarily due to the addition of DeFi revenues generated through

the Company’s Imperium operations.

infrastructure revenues decreased compared to the prior period, primarily due to variability in block-building activity and execution-layer

rewards, which are influenced by transaction flow, validator participation, and network conditions.

Staking rewards under NodeOps also

decreased, primarily reflecting the redeployment of digital assets from staking to DeFi activities during the 2026 Quarter.

revenues accounted for approximately 47% of total revenues for the 2026 Quarter and reflect the Company’s expanded participation

in decentralized finance activities, including decentralized lending (approximately 25% of revenues) and liquidity pool strategies (approximately

22% of revenues), which were not present in the 2025 Quarter.

may fluctuate period over period due to changes in digital asset prices, network activity, and protocol utilization, as revenue is measured

based on the fair value of digital assets received at the time earned.

of revenues for the 2026 Quarter decreased compared to the 2025 Quarter, primarily due to lower validator payments (“Validator

Payments”) associated with block-building activities and improved infrastructure efficiencies.

of revenues continues to be primarily driven by validator payments required to secure block inclusion, as well as infrastructure and

hosting costs associated with blockchain operations.

DeFi-related costs were minimal during the 2026 Quarter.

margins improved compared to the prior period due to the increased contribution of DeFi revenues, which currently have relatively low

associated direct costs.

Gross margins may fluctuate in future periods based on validator economics, execution-layer reward dynamics

related to block-building activities, and changes in DeFi activity levels.

fees for the 2026 Quarter increased compared to the 2025 Quarter, primarily due to higher legal and accounting costs, including an increase

in audit fees.

The increase reflects higher accounting costs associated with audit and reporting requirements, as well as increased legal

expenses related to the Company’s ongoing operations.

Professional fees may fluctuate in future periods based on the level of legal

activity, regulatory requirements, investor relations opportunities and financial reporting needs.

and Administrative Expenses

and administrative expenses increased during the 2025 Quarter and 2025 Period compared to the corresponding 2024 periods, primarily due

to higher payments for order flow incurred in connection with supporting the Company’s expanding Builder+ block-building activities,

as well as SEC filing fees associated with the filing of the new Form S-3 registration statement.

These increases were partially offset

by continued discipline in overall administrative spending.

expect general and administrative expenses to fluctuate based on operational growth, regulatory filing activity, and the level of block-building

and order flow support required as operations continue to scale.

and administrative expenses for the 2026 Quarter decreased compared to the 2025 Quarter, primarily due to continued discipline in overall

administrative spending.

General and administrative expenses may fluctuate in future periods based on operational growth, regulatory

requirements, and overall business activity.

and Development Expenses

and development expenses decreased for the 2025 Quarter compared to the 2024 Quarter, primarily due to lower third-party development

costs, but increased slightly on a year-to-date basis as investment continued in Builder+ and Imperium system enhancements.

remained focused on improving block-building efficiency, expanding multi-chain capabilities, and advancing smart-contract automation

within Builder+.

We expect R&D spending to increase as technical improvements to block-building strategies and DeFi integrations

Compensation and

Related Expenses

and related expenses decreased during the 2025 Quarter and 2025 Period compared to the corresponding 2024 periods, primarily due to the

timing of performance-based bonus accruals and a reduction in stock-based compensation expense resulting from the forfeiture of unvested

restricted stock following certain executive transitions earlier in the year.

On a year-to-date basis, compensation expenses remained

relatively consistent, reflecting continued salary and benefits costs associated with core personnel and estimated accruals for performance-based

Company continues to utilize equity-based compensation as a key component of its total rewards strategy to align employee incentives

with long-term shareholder value.

We expect total compensation costs to fluctuate based on headcount changes, the timing of performance-based

accruals, and the issuance or forfeiture of equity awards.

expenses increased during the 2025 Quarter and 2025 Period compared to the corresponding 2024 periods, reflecting expanded advertising

campaigns and promotional activities aimed at enhancing brand visibility and supporting business development initiatives.

Marketing spend

is expected to remain at or above current levels as the Company continues to pursue strategic growth and community engagement efforts.

Losses on Crypto Asset Transactions

losses on crypto asset transactions increased substantially compared to the prior-year periods, primarily due to the sale of non-core,

non-ETH crypto assets that had previously carried unrealized losses.

These transactions were executed as part of a broader effort to

simplify the Company’s asset portfolio and reallocate resources toward core staking and block-building operations.

Future realized

gains or losses will depend on the timing and market conditions of any additional crypto asset sales.

on Extinguishment of Debt

Company recorded a loss on extinguishment of debt during the 2025 Quarter related to on-chain debt swaps executed through decentralized

finance (DeFi) lending protocols.

Future gains or losses from such transactions may vary depending on the timing and structure of debt

refinancings or restructurings undertaken within DeFi platforms.

Expense Trend

operating expenses increased year-over-year, reflecting ongoing investment in infrastructure, personnel, and public company operations

to support the scaling of Builder+, Imperium, and NodeOps.

The Company remains focused on maintaining disciplined expense management

while continuing to allocate resources toward strategic growth and technology development initiatives.

Other Income (Expenses)

expense increased during the 2025 Quarter and 2025 Period, primarily due to interest accrued on decentralized borrowings through Aave

and other DeFi lending protocols, as well as interest and amortization expense related to the Company’s May and July 2025 convertible

This includes both cash interest paid and the amortization of debt discount over the term of the convertible notes.

expect interest expense to rise in future periods as a result of ongoing utilization of DeFi borrowings and the full-term amortization

of outstanding convertible notes.

in unrealized appreciation (depreciation) of crypto assets

Company recognized significant unrealized appreciation in the fair value of its crypto asset holdings during the 2025 Quarter and 2025

Period, compared to unrealized depreciation in the corresponding 2024 periods.

The change was primarily driven by the overall recovery

in crypto market valuations, particularly for Ethereum and other assets held by the Company at period-end.

These fluctuations reflect

the inherent volatility of crypto asset prices, which may continue to materially affect the reported fair value of digital assets in

future periods.

and development expenses for the 2026 Quarter decreased compared to the 2025 Quarter, primarily due to the completion and wind-down of

development activities related to ChainQ in 2025 and the transition of certain Builder+ initiatives from development into routine, revenue-generating

During the 2026 Quarter, research and development activities were more limited and consisted primarily of feasibility assessments,

testing, and evaluation of blockchain infrastructure enhancements and decentralized finance initiatives, resulting in lower overall R&D

spending compared to the prior year.

and development expenses may fluctuate in future periods based on the scope and timing of infrastructure enhancements and exploratory

and Related Expenses

and related expenses for the 2026 Quarter increased compared to the 2025 Quarter, primarily due to equity-based compensation expense

related to amortization of unvested employee stock options and restricted stock units issued during the 2026 Quarter.

The Company continues

to utilize equity-based compensation as a key component of its total rewards strategy to align employee incentives with long-term shareholder

Total compensation costs may fluctuate based on headcount changes, the timing of performance-based accruals, and the issuance

or forfeiture of equity awards.

expenses for the 2026 Quarter decreased compared to the 2025 Quarter, primarily reflecting a reduction in marketing and promotional activities

during the period.

The timing and level of marketing expenditures may vary in future periods based on the Company’s strategic initiatives

and market conditions.

Impairment loss on intangible

digital assets

For the 2026 Quarter, the Company

recorded an impairment loss on intangible digital assets, including non-fungible tokens (“NFTs”) and tokenized liquidity pool

The impairment reflects declines in the estimated fair value of these assets, including changes in the value of underlying

digital assets for liquidity pool positions, below their carrying value during the period.

These impairment losses are non-cash in nature.

Impairment losses on liquidity

pool positions may arise due to changes in the fair value of underlying digital assets, market conditions, and liquidity factors associated

with decentralized finance protocols.

The Company will continue to evaluate these assets for impairment in future periods.

Gains and Losses on Digital Assets Transactions

losses on digital assets transactions for the 2026 Quarter increased compared to the 2025 Quarter, primarily due to (i) sales of ETH

to manage collateral levels and repay borrowings under DeFi arrangements and (ii) the derecognition of ETH upon deposit into liquidity

pool positions.

of ETH were executed at prices below their original cost basis as part of the Company’s active management of collateral levels

and health factors associated with DeFi borrowing arrangements.

In addition, deposits of ETH into liquidity pools are accounted for as

nonmonetary exchanges that result in the derecognition of the underlying ETH and recognition of a liquidity pool position.

To the extent

the fair value of ETH at the time of deposit is below its carrying value, a realized loss is recognized.

These transactions are part

of the Company’s normal operating activities within its DeFi and liquidity management strategies.

realized gains or losses will depend on digital asset price movements, the timing of asset sales, and the level of activity in DeFi borrowing

and liquidity pool strategies.

Gains and Losses on Digital Assets

Company recognized significant unrealized losses in the fair value of its digital asset holdings for the 2026 Quarter compared to the

2025 Quarter.

The change was primarily driven by declines in the market prices of Ethereum and other digital assets held and deployed

in the Company’s operations during the period, reflecting the inherent volatility of digital asset markets.

These fair value adjustments

are non-cash in nature but may continue to materially affect the reported fair value of digital assets and impact reported operating

results due to the volatility of digital asset markets in future periods.

Operating Expense Trend

operating expenses for the 2026 Quarter increased compared to the 2025 Quarter, primarily driven by realized and unrealized losses on

digital assets and higher compensation expense during the period.

Operating expenses for the current quarter also included unrealized

losses on digital assets, reflecting changes in the fair value of ETH and other digital assets held and deployed in the Company’s

expenses may fluctuate significantly from period to period due to changes in digital asset prices, non-cash compensation expense, and

the level of infrastructure and DeFi activity required to support the Company’s operating strategy.

Income (Expenses)

expense for the 2026 Quarter increased compared to the 2025 Quarter, primarily due to interest accrued on decentralized borrowings through

DeFi lending arrangements, as well as interest and amortization expense related to the Company’s May 2025 and July 2025 Senior

Secured Convertible Notes (the “Notes”).

This includes both cash interest paid and the amortization of debt discount over

the term of the Notes.

expense related to the Notes is expected to remain relatively consistent over their term due to the ongoing amortization of the associated

debt discount.

Interest expense associated with DeFi borrowings may fluctuate in future periods based on changes in outstanding balances

and borrowing activity.

in Fair Value of Warrant Liabilities

Company recognized a non-cash loss resulting from the change in the fair value of warrant liabilities during the 2025 Quarter and 2025

Period, compared to a gain in the corresponding 2024 periods.

The change was primarily attributable to movements in the Company’s

stock price and related volatility during the period.

Because these warrant liabilities are remeasured at fair value each reporting date,

future gains or losses will depend on changes in the Company’s share price and other valuation inputs.

other income (net) increased substantially compared to the prior-year periods, driven primarily by unrealized gains on crypto assets,

which offset higher interest expense and non-cash losses related to warrant remeasurement.

These items contributed significantly to the

Company’s profitability for the 2025 Quarter and 2025 Period.

Net income (loss)

The Company reported net income of approximately $65,589,000 for the 2025 Quarter,

compared to a net loss of approximately $9,040,000 in the 2024 Quarter, representing a year-over-year improvement of approximately $74,629,000.

The increase was primarily driven by unrealized appreciation in the fair value of the Company’s crypto asset holdings, reflecting

the broader recovery in digital asset markets during the quarter.

For the 2025 Period, the Company reported net income of approximately $52,202,000,

compared to a net loss of approximately $3,511,000 in the 2024 Period.

The year-to-date improvement was similarly driven by unrealized

gains on crypto assets, partially offset by higher realized losses on crypto asset sales, increased professional and administrative costs,

and interest expense associated with convertible note issuances and decentralized borrowing activities.

the Company benefited from market-wide appreciation in digital asset valuations during the 2025 Quarter, net income may continue to fluctuate

significantly in future periods due to volatility in crypto asset prices and related fair value adjustments.

Additionally, continued

investment in operations and financing activities may contribute to further variability in quarterly results.

Liquidity and

Capital Resources

ATM Financing

Company did not recognize any gain or loss related to the change in the fair value of warrant liabilities during 2026 Quarter, as the

outstanding warrants expired in the current period and are no longer subject to remeasurement.

In 2025 Quarter, the Company recognized

a non-cash gain of approximately $225,000 related to the change in the fair value of warrant liabilities.

The prior period gain was primarily

attributable to movements in the Company’s stock price and related volatility.

As there are no remaining warrant liabilities, the

Company does not expect to recognize further gains or losses related to this item in future periods.

Other Income (Expense) Impact

other income (expenses) reflected net expense for the 2026 Quarter and net income for the 2025 Quarter.

The net expense for the 2026

Quarter was primarily driven by interest expense incurred in connection with DeFi borrowings and outstanding convertible notes.

In the comparable 2025 Quarter, total other income was primarily attributable to

a non-cash gain related to the change in the fair value of warrant liabilities.

loss for the 2026 Quarter increased compared to the 2025 Quarter primarily due to unrealized losses on the fair value of the Company’s

digital asset holdings resulting from declines in digital asset market prices during the quarter, as well as realized losses on digital

asset transactions, including sales of ETH to manage collateral levels in DeFi borrowing arrangements and the derecognition of ETH upon

deposit into liquidity pool positions.

These items were primarily non-cash in nature, except for realized losses associated with asset

loss was also affected by higher interest expense related to DeFi borrowings and convertible notes.

These impacts were partially offset

by increased revenues from DeFi activities.

The Company’s results of operations may continue to fluctuate materially from period

to period due to digital asset price volatility, financing activities, and changes in fair value measurements of digital assets.

and Capital Resources

September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C.

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Wainwright, subject to the availability of an effective registration statement on Form S-3.

ATM sales were conducted under a $100,000,000 shelf registration statement that became effective in September 2021.

ATM sales were conducted under a $100 million shelf registration statement that became effective in September 2021.

October 4, 2024, a new Form S-3 registration statement became effective, increasing the total amount of securities that may be offered

and sold under the Company’s shelf registration to $250,000,000.

and sold under the Company’s shelf registration to $250 million.

As of the date of this report, there was approximately $103.4

available for sale under this Form S-3 registration statement.

million available for sale under this Form S-3 registration statement.

July 22, 2025, the Company entered into an amendment to its engagement with H.C.

Wainwright in connection with a new Form S-3 registration

statement filed on July 23, 2025, to register up to $2,000,000,000 of securities for future issuance (the “New Registration Statement”).

statement filed on July 23, 2025, to register up to $2 billion of securities for future issuance (the “New Registration Statement”).

The New Registration Statement was approved by the SEC and declared effective on August 1, 2025.

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had not sold any securities under the New Registration Statement.

September 14, 2021 through November 10, 2025, the Company sold a total of 32,762,523 shares of common stock under the ATM Agreement

for aggregate total gross proceeds of approximately $163,597,000 at an average selling price of $4.99 per share, resulting in net

proceeds of approximately $158,539,000 after deducting commissions and other transaction costs.

Share Repurchase

September 14, 2021 through May 14, 2026, the Company sold a total of 32,762,523 shares of common stock under the ATM Agreement for

aggregate total gross proceeds of approximately $163.6 million at an average selling price of $4.99 per share, resulting in net proceeds

of approximately $158.5 million after deducting commissions and other transaction costs.

Repurchase Program

September 4, 2025, the Board authorized a share repurchase program permitting the Company to repurchase up to $50 million of its common

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of shares and may be modified, suspended, or discontinued at any time.

September 14, 2021 through November 10, 2025, the Company repurchased and retired 888,677 shares of our common stock for an

aggregate purchase price of approximately $4,000,000.

The repurchases were funded from available cash on hand and are presented as a

financing cash outflow in our statement of cash flows.

All repurchased shares were immediately retired and are no longer considered

issued or outstanding.

As of November 10, 2025, approximately $46,000,000 remained available for repurchases under the

authorization.

Company expect that any future repurchases will be subject to our liquidity position, prevailing market conditions, and other capital

September 11, 2025 through May 14, 2026, the Company repurchased and retired 888,677 shares of our common stock for an aggregate purchase

price of approximately $4.0 million.

The repurchases were funded from available cash on hand and are presented as a financing cash outflow

in our statement of cash flows.

All repurchased shares were immediately retired and are no longer considered issued or outstanding.

of May 14, 2026, approximately $46.0 million remained available for repurchases under the authorization.

Company expects that any future repurchases will be subject to our liquidity position, prevailing market conditions, and other capital

allocation priorities, including funding of operations and strategic initiatives.

DeFi Borrowing

April 2025 through November 10, 2025, the Company borrowed an aggregate of approximately $61,447,000 in stablecoins through Aave, a

DeFi lending protocol, using Ethereum (ETH) as collateral, and repaid approximately $1,447,000 during the same period.

These borrowings

included transactions executed in connection with on-chain debt refinancing activities.

As of November 10, 2025, the Company had approximately

$61,052,000 in outstanding borrowings, inclusive of accrued interest, collateralized by approximately 39,077 ETH with an aggregate

fair market value of $138,988,000, based on the closing price of $3,557 per ETH on that date.

through Aave accrue interest at variable rates determined by Aave’s on-chain smart contracts, which adjust dynamically based

on protocol liquidity and market utilization.

ETH collateral posted to Aave simultaneously accrues variable interest at rates that

fluctuate based on the same market factors.

These rates are publicly available and updated in real time on the Aave protocol’s

As a result, the Company’s net cost of capital may vary depending on prevailing protocol-level conditions.

Company has no control over these rate adjustments and is subject to the risk of significant rate increases.

As of November 10,

2025, the USDT borrowing rate was approximately 6.07% per annum.

Convertible Notes

From January 1, 2025 through May 11, 2026, the Company borrowed an aggregate

of approximately $123.5 million in stablecoins, primarily USDT and GHO, through Aave, a DeFi lending protocol, using ETH as collateral,

and repaid approximately $79.7 million during the same period.

These borrowings included transactions executed in connection with on-chain

debt refinancing activities.

As of May 11, 2026, the Company had approximately $44.3 million in outstanding DeFi borrowings, inclusive

of accrued interest, collateralized by approximately 50,128 ETH with an aggregate fair value of $117.3 million, based on the closing price

of $2,339 per ETH on that date.

Because these borrowings are overcollateralized, declines in the market price of ETH could require the

Company to post additional collateral or repay a portion of the borrowings to maintain required collateralization levels under the Aave

Management monitors the collateral value and associated loan health factors on an ongoing basis and may add collateral or reduce

borrowings in response to significant market movements.

through Aave accrue interest at variable rates determined by Aave’s on-chain smart contracts, which adjust dynamically based on

protocol liquidity and market utilization.

ETH collateral posted to Aave simultaneously accrues variable interest at rates that fluctuate

based on the same market factors.

These rates are determined algorithmically by the protocol based on market conditions and are publicly

available through on-chain protocol data.

As a result, the Company’s net cost of capital may vary depending on prevailing protocol-level

The Company has no control over these rate adjustments and is subject to the risk of significant rate increases.

11, 2026, the Company had outstanding borrowings denominated in USDT and GHO, with variable borrowing rates on the Aave protocol applicable

to those borrowings of approximately 3.94% and 3.82% per annum, respectively.

through DeFi protocols are subject to risks not present in traditional financing arrangements, including collateral liquidation risk,

protocol governance changes, smart contract vulnerabilities, manipulation risk, market volatility affecting collateral values, and the

absence of traditional legal recourse or bankruptcy protections.

Management actively monitors collateralization ratios and protocol conditions

and may reduce or repay borrowings in response to market movements or changes in risk tolerance.

As of May 11, 2026, the Company has

not experienced any full or partial liquidation events related to its DeFi borrowings, but remains subject to such risks under adverse

market conditions.

Notes Payable

May 2025, the Company completed a private placement of Senior Secured Convertible Notes in the aggregate principal amount of approximately

$7,811,000, for net cash proceeds of approximately $7,306,000.

$7.8 million, for net cash proceeds of approximately $7.3 million.

In connection with the offering, the Company also issued approximately

1.9 million five-year warrants, exercisable at $2.75 per share.

The notes mature in May 2027, bear interest at a rate of 6% per annum,

The notes mature on May 13, 2027, bear interest at a rate of 6% per annum,

and are convertible into shares of common stock at a conversion price of $5.85 per share.

July 2025, the Company completed an additional private placement of Senior Secured Convertible Notes in the aggregate principal amount

of approximately $10,050,000, for net cash proceeds of approximately $9,538,000.

In connection with the offering, the Company agreed

to issue approximately 879,000 five-year warrants, exercisable at $8.00 per share.

The notes mature in July 2027, bear interest at 6%

per annum, and are convertible into shares of common stock at a conversion price of $13.00 per share.

Company used or intends to use the proceeds from both offerings primarily to accelerate the accumulation of Ethereum (ETH), expand operational

capacity, and support the continued expansion of its blockchain infrastructure operations.

The notes from the May and July 2025 offerings

are secured by all of the Company’s assets as collateral, except for Ethereum deposited as collateral for USDT borrowings on Aave

and certain other exclusions.

Dividends and Capital Distributions

August 1, 2025, the Board approved a special dividend of $0.05 per share (the “Bividend”), payable to stockholders of record

on September 26, 2025.

Holders of our common stock could elect to receive the dividend in either cash or Ethereum (ETH), while holders

of our Series V Preferred Stock were entitled to receive the dividend solely in cash.

As of September 30, 2025, dividends payable totaled

approximately $3,176,000, which was recorded as dividends payable within stockholders’ equity.

The Bividend was subsequently settled

in early October 2025 through aggregate cash payments of approximately $2,680,000 and distributions of approximately 123 ETH to stockholders

who elected to receive ETH.

of September 30, 2025, the Company’s outstanding convertible notes entitle the holders, upon any conversion, to participate in

dividends or other distributions on the Company’s common stock declared while the notes are outstanding, to the same extent as

if the notes had been converted prior to the record date of such distribution.

At September 30, 2025, there were 2,107,757 shares of

common stock underlying the outstanding convertible notes that would be entitled to the dividend payments if converted in accordance

with the note terms, representing a potential contingent distribution totaling approximately $105,000.

Because this obligation is contingent

on future conversions, no liability has been recorded.

addition to the Bividend, the Board also authorized a one-time loyalty payment of $0.35 per share (the “Loyalty Payment”),

payable solely in ETH.

The Loyalty Payment is available only to holders of our common stock who were record holders on September 26,

2025, who completed the required ETH Opt-In, and who continue to hold their shares through January 26, 2026.

Holders of Series V Preferred

Stock are not eligible for the Loyalty Payment.

Loyalty Payment is contingent on continued share ownership through January 26, 2026 and therefore did not give rise to a liability as

of September 30, 2025.

The number of ETH units per share for both the Bividend and Loyalty Payment was fixed on the record date based

on the ETH/USD exchange rate of $4,035.89.

As of September 30, 2025, shareholders owning approximately 3.9 million shares had completed

the Opt-In process and were held at our transfer agent.

If all such shares remain eligible through January 26, 2026, the hypothetical

maximum Loyalty Payment would be approximately $1,350,000, or about 335 ETH.

The actual payout, if any, will depend on the final number

of qualifying shares and ETH settlement terms at the time of eligibility.

of approximately $10.1 million, for net cash proceeds of approximately $9.5 million.

In connection with the offering, the Company issued

approximately 879,000 five-year warrants, exercisable at $8.00 per share.

The notes mature on July 21, 2027, bear interest at 6% per

annum, and are convertible into shares of common stock at a conversion price of $13.00 per share.

Company used the proceeds from both offerings primarily to accelerate the accumulation of ETH, expand operational capacity, and support

the continued expansion of its blockchain infrastructure operations.

The notes from the May and July 2025 offerings are secured by all

of the Company’s assets as collateral, except for Ethereum deposited as collateral for USDT borrowings on Aave and certain other

and Capital Distributions

the 2026 Quarter, the Company utilized digital asset distributions as part of its capital allocation strategy.

Board authorized a one-time loyalty payment of $0.35 per share, payable solely in ETH, to eligible holders of common stock who satisfied

specified opt-in and share-holding requirements.

The loyalty payment was designed to reward long-term stockholders and was settled in

February 2026 through the distribution of ETH.

Because the loyalty payment was settled in digital assets, it did not require the use

of incremental cash resources at the time of payment, although it reduced the Company’s digital asset holdings available for operational

use and revenue-generating activities.

of March 31, 2026, the Company did not have any recorded dividend payables or other obligations related to these distributions.

does not currently anticipate declaring regular cash or digital asset dividends, and the declaration of future dividends or other capital

distributions, if any, will depend on the Company’s financial condition, results of operations, liquidity position, capital requirements,

and other factors considered by the Board.

Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity

of operations, realization of assets, and liquidation of liabilities in the normal course of business.

Liquidity is the ability of a company to generate sufficient funds to support its

current and future operations, satisfy its obligations as they come due, and otherwise operate on an ongoing basis.

As of September 30,

2025, the Company had approximately $4,486,000 of cash and cash equivalents and working capital of approximately $235,993,000.

of November 10, 2025, the Company had approximately $2,787,000 of cash and stablecoins,

and the fair market value of the Company’s crypto assets was approximately $252,777,000.

of November 10, 2025, the Company had total debt obligations of approximately $78,891,000, consisting of approximately $61,030,000

under its lending arrangement with Aave Protocol and approximately $17,861,000 convertible notes payable.

Company believes that its existing cash and crypto assets, together with the proceeds from the convertible note financing and the ability

to raise additional funds through its ATM Agreement, provide sufficient liquidity to meet working capital requirements, anticipated capital

expenditures, strategic funding needs, and contractual obligations for at least the next twelve months from the filing date of this report.

This assessment is based on current market conditions, regulatory environment, and the Company’s operational plans, all of which

are subject to change.

of our staked crypto assets may be locked up for varying durations, depending on the specific blockchain protocol, and we may be unable

to unstake them in a timely manner or liquidate them to the extent desired, which could materially and adversely impact our liquidity

Additionally, technical issues, network congestion, or regulatory changes could further restrict our ability to access or liquidate

these assets.

As of November 10, 2025, lock-up periods for our staked crypto assets range from several hours to seven days, though these

periods may change based on protocol upgrades or network conditions.

During times of instability in the cryptocurrency markets, the Company

may not be able to sell its crypto assets at prices reflecting their perceived value or at all, which could result in substantial losses

given the historical volatility of cryptocurrency prices.

As a result, our crypto assets may not be able to serve as a source of liquidity

for us to the same extent as cash and cash equivalents.

Cash Used in Operating

Cash used in operating activities was approximately $6,032,000 during the 2025

Period, compared to approximately $2,388,000 for the 2024 Period.

The increase primarily reflects the impact of non-cash items and changes

in working capital arising from the Company’s expanding operations.

of operations, realization of assets, and settlement of liabilities in the normal course of business.

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate

on an ongoing basis.

At March 31, 2026, the Company had approximately $0.3 million of cash and cash equivalents and working capital of

approximately $84.1 million.

As of May 11, 2026, the Company had approximately $141.5 million of cash,

stablecoins, and liquid digital assets (primarily ETH).

Because the Company’s liquidity position includes digital assets and DeFi-related

balances that are subject to market volatility, protocol-based reward accruals, and borrowing activity, such balances may fluctuate materially

over short periods and may differ from balances as of the filing date.

As of May 11, 2026, the Company had total debt obligations of approximately

$62.1 million, consisting of approximately $44.3 million under its lending arrangement with Aave Protocol and approximately $17.9 million

of convertible notes payable.

The Company’s DeFi borrowing balances and related collateral values may fluctuate based on borrowing

activity, accrued interest, and changes in digital asset market prices.

Company believes that its existing cash and digital assets, together with the proceeds from recent convertible note financings and access

to capital through its ATM Agreement, as well as its ability to manage liquidity through DeFi borrowing arrangements, provide sufficient

liquidity to meet working capital requirements, anticipated capital expenditures, strategic initiatives, and contractual obligations

for at least the next twelve months from the filing date of this report.

This assessment is based on current market conditions, regulatory

environment, and management’s operational plans, all of which remain subject to change.

digital assets may be subject to protocol-defined unstaking or withdrawal periods, which could limit the Company’s ability to rapidly

convert those assets to cash.

As of May 11, 2026, unstaking periods for the Company’s staked digital assets generally ranged from

several hours to thirty days, though such periods may change based on protocol upgrades or network conditions.

Market volatility, network

congestion, or regulatory developments could further restrict liquidity or adversely affect realized prices.

Flows from Operating Activities

used in operating activities was approximately $1.7 million for the 2026 Quarter, compared to approximately $1.9 million for the 2025

The decrease primarily reflects improved operating efficiency during the period, including Imperium DeFi operations, partially

offset by the impact of stablecoin flows associated with liquidity pool deployments and other DeFi-related transactions.

cash flows are significantly influenced by non-cash items associated with the Company’s blockchain operating model, particularly

digital asset-denominated revenues, Validator Payments, and fair value adjustments of digital assets.

Although revenues are earned in

digital assets, these assets are typically retained to support staking, block-building, and DeFi activities rather than immediately converted

into cash, which may cause operating cash flows to differ significantly from reported revenues.

non-cash adjustments impacting operating cash flows included:

Stock-based compensation expense of approximately $3,851,000, primarily

reflecting issuance and ongoing amortization of equity-based awards to employees, including performance-based grants.

Non-cash Validator Payments of approximately $8,116,000 made in native

crypto tokens to external validators as part of block-building activities.

Realized losses on crypto asset transactions of approximately $8,568,000,

primarily from the sale of non-Ethereum crypto asset holdings.

Amortization of debt discount and issuance costs of approximately $754,000

related to the outstanding convertible notes.

A non-cash adjustment of approximately $67,987,000 from the unrealized

appreciation in the fair value of crypto assets, particularly Ethereum.

cash flows were further affected by a $2,855,000 reduction in accrued compensation resulting from the payment of previously accrued performance-based

Builder+ and Imperium operations continue to scale, we expect non-cash adjustments such as crypto-denominated revenues, validator payments,

and fair value changes in digital assets to continue to have a significant effect on reported operating cash flows.

The magnitude and

direction of these effects will depend on market conditions and the timing of crypto asset-related transactions.

Cash Used in Investing

cash used in investing activities was approximately $196,833,000 during the 2025 Period, compared to net cash provided by investing activities

of approximately $531,000 in the 2024 Period.

The 2025 activity primarily reflects the purchase of approximately $199,858,000 of crypto

assets, primarily Ethereum (ETH), to support validator (NodeOps) and DeFi (Imperium) operations and to advance the Company’s long-term

ETH accumulation strategy.

cash outflows also included $400,000 of investments in two private blockchain-based technology companies during the 2025 Period, partially

offset by proceeds of approximately $3,431,000 from sales of non-core productive crypto assets as we continue to streamline operations.

expect purchases of ETH and other productive crypto assets to continue in future periods as the Company executes on its ETH treasury

accumulation and operational scaling strategies.

Cash Provided by

Financing Activities

provided by financing activities was approximately $205,373,000 during the 2025 Period, compared to approximately $653,000 in the 2024

Financing inflows during the 2025 Period were primarily driven by:

Net proceeds of approximately $135,161,000 from common stock sales

under the Company’s At-the-Market (“ATM”) equity program.

Net proceeds of approximately $16,844,000 from the May and July 2025

issuances of senior secured convertible notes and related five-year warrants

Net borrowings of approximately $56,500,000 in stablecoins via Aave,

a decentralized finance (DeFi) lending protocol.

Company also paid approximately $3,000,000 for share repurchases of the Company’s common stock and debt issuance costs of approximately

$131,000 during the 2025 Period.

Digital asset-denominated

revenues of approximately $2.1 million earned from blockchain infrastructure and DeFi activities, which increased net income but

did not result in operating cash inflows.

Blockchain-based payments,

including Builder Validator Payments, of approximately $1.1 million paid in native digital assets to third-parties and external validators

as part of Builder+ block-building activities.

Realized losses on digital

asset transactions of approximately $29.3 million, primarily from (i) sales of ETH to manage DeFi borrowing positions and (ii) the

derecognition of ETH upon deposit into liquidity pool positions.

Unrealized losses from

the fair value measurement of digital assets, primarily ETH, of approximately $35.7 million.

Stock-based compensation

expense of approximately $1.7 million, primarily reflecting the issuance and ongoing amortization of equity-based awards to employees,

including performance-based grants.

Amortization of debt discount

and issuance costs of approximately $0.8 million related to the outstanding convertible notes.

DeFi interest expense of

approximately $0.5 million paid in digital assets.

Builder+ and Imperium operations continue to scale, non-cash adjustments, including digital asset-denominated revenues, Validator Payments,

and fair value changes in digital assets, are expected to continue to have a significant impact on reported operating cash flows.

cash flows may also be influenced by stablecoin flows and capital deployment associated with DeFi activities, including liquidity pool

participation and borrowing arrangements.

The magnitude and direction of these effects will depend on market conditions, protocol activity,

and the timing of digital asset transactions.

Flows from Investing Activities

cash provided by investing activities was approximately $18.2 million during the 2026 Quarter, compared to net cash used in investing

activities of approximately $34 thousand in the 2025 Quarter.

The 2026 activity primarily reflects the sale of approximately $18.2 million

of digital assets, primarily ETH, to support liquidity management and capital deployment into DeFi and blockchain infrastructure activities.

Flows from Financing Activities

cash used by financing activities was approximately $17.7 million during the 2026 Quarter, compared to net cash provided by financing

activities of approximately $0.2 million in the 2025 Quarter.

Financing outflows during the 2026 Quarter were primarily driven by:

Net repayments of DeFi

borrowing principal of approximately $17.7 million in stablecoins via Aave.

anticipate future financing activity may include additional DeFi borrowings and capital raised through the ATM program or through other

financing instruments, as we continue to scale blockchain infrastructure and DeFi operations, enhance liquidity, and accumulate ETH in

support of long-term growth.

Off Balance Sheet

of September 30, 2025, there were no off-balance sheet arrangements and we were not a party to any off-balance sheet transactions.

have no guarantees or obligations other than those which arise out of normal business operations.

financing instruments, as we continue to scale blockchain infrastructure and DeFi operations, enhance liquidity, and support ongoing

capital deployment across blockchain infrastructure and DeFi activities.

Balance Sheet Transactions

of March 31, 2026, there were no off-balance sheet arrangements, and we were not a party to any off-balance sheet transactions.

no guarantees or obligations other than those that arise out of normal business operations.

ACCOUNTING POLICIES AND ESTIMATES

discussed the material accounting policies that are critical in making the estimates and judgments in our Annual Report on Form 10-K

for the fiscal year ended December 31, 2024, under the caption “Management’s Discussion and Analysis—Critical Accounting

Policies and Estimates”.

There has been no material change in critical accounting policies or estimates during the period covered

by this report.

RECENT ACCOUNTING

PRONOUNCEMENTS

information on recent accounting pronouncements, see Note 3 - Summary of Significant Accounting Policies to the Unaudited Condensed

Financial Statements.

CAUTIONARY NOTE REGARDING

FORWARD-LOOKING STATEMENTS

report contains forward-looking statements, including statements regarding our liquidity, our growth strategy, our ability to generate

scalable and efficient revenue, anticipated increases in our revenues and gross margins, and our future business plans.

Forward-looking

statements can be identified by words such as “anticipates,” “intends,” “may,” “potential,”

“continues,” “plans,” “seeks,” “believes,” “estimates,” “expects”

and similar references to future periods.

preparation of the Company’s financial statements in conformity with U.S.

generally accepted accounting principles (“GAAP”)

requires management to make estimates, judgments, and assumptions that affect the reported amounts and disclosures.

Our critical accounting

policies and estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2025, under the caption “Management’s

Discussion and Analysis—Critical Accounting Policies and Estimates.”

have been no material changes to our critical accounting policies during the three months ended March 31, 2026.

However, the application

of these policies continues to involve significant judgment, particularly with respect to (i) the fair value measurement of digital assets,

(ii) the classification and liquidity of digital assets deployed in staking and DeFi arrangements, (iii) revenue recognition from blockchain

infrastructure and DeFi activities, and (iv) the evaluation of risks associated with collateralized borrowing arrangements.

the inherent volatility of digital asset markets and the evolving nature of blockchain-based activities, actual results could differ

materially from our estimates and assumptions.

ACCOUNTING PRONOUNCEMENTS

Note 3 - Summary of Significant Accounting Policies to the unaudited condensed financial statements for a discussion of recent

accounting standards and pronouncements.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities

Exchange Act of 1934.

These forward-looking statements are intended to qualify for the safe harbor from liability established by the

Private Securities Litigation Reform Act of 1995.

Forward-looking statements include, but are not limited to, statements regarding our

liquidity, our growth strategy, our ability to generate scalable and efficient revenue, anticipated increases in our revenues and gross

margins, our capital allocation and treasury management strategies, the expected performance of our blockchain infrastructure and DeFi

operations and our future business plans.

Forward-looking statements can be identified by words such as “anticipates,” “intends,”

“may,” “potential,” “continues,” “plans,” “seeks,” “believes,”

“estimates,” “expects” and similar references to future periods.

Forward-looking

8 unchanged sentences

factors that could cause actual results to differ materially from those in the forward-looking statements include:

(i) the rewards and

costs associated with staking or validating transactions on blockchains and successfully building blocks on Ethereum’s blockchain;

(ii) regulatory issues related to our business model, including potential classification of crypto assets as securities and changing

regulatory frameworks;

(iii) fluctuations in the price of our crypto assets;

(iv) potential decreases in the value of our crypto assets

(v) competition, (vi) risks related to the loss or theft of private withdrawal keys resulting in the complete loss of crypto

assets and rewards;

(vii) risks associated with DeFi lending protocols including smart contract vulnerabilities, liquidation risks, and

lack of regulatory protections;

(viii) counterparty risks in decentralized finance transactions;

and (ix) other risks and uncertainties

described in our filings with the SEC, including our Form 10-K for the year ended December 31, 2024.

Any forward-looking statement made

by us speaks only as of the date on which it is made.

Factors or events that could cause our actual results to differ may emerge from

time to time, and it is not possible for us to predict all of them.

We undertake no obligation to publicly update any forward-looking

statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

the rewards and costs

associated with staking or validating transactions on blockchains and successfully building blocks on Ethereum’s blockchain;

issues related to our business model, including potential classification of digital assets as securities and changing regulatory frameworks;

significant volatility in the market prices of digital assets, particularly Ethereum, which serves as both a core operating asset and

collateral for our borrowings and which can experience rapid and substantial price fluctuations;

failure to maintain required collateralization

levels under DeFi borrowing arrangements, which could result in automatic liquidation of assets;

competition in blockchain infrastructure

markets, including from other validators, block builders, and DeFi platforms, which may reduce our revenues, market share, or access

to transaction flow;

risks related to the loss, theft, or compromise of private withdrawal keys, digital wallets, or infrastructure systems,

which could result in the complete and unrecoverable loss of digital assets;

risks associated with DeFi lending protocols, including

smart contract vulnerabilities, coding errors, protocol exploits, oracle manipulation, lack of traditional regulatory protections, and

the absence of recourse in the event of loss;

collateral liquidation risk in DeFi borrowing arrangements, including the potential for

automatic liquidation by protocol smart contracts without prior notice if our health factor or collateralization ratio falls below protocol-defined

cybersecurity risks, including potential breaches, hacking incidents, or system failures affecting our operations or the

protocols in which we participate;

and other risks and uncertainties described in our filings with the SEC, including our Form 10-K for

the year ended December 31, 2025.

Any forward-looking statement made by us speaks only as of the date on which it is made.

events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future

developments or otherwise, except as may be required by applicable law.

You should not place undue reliance on forward-looking statements,

which reflect our management’s views only as of the date of this report.

3 Quantitative and Qualitative Disclosures About Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis