What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-19 compared with 2026-05-14 · 258 added, 208 removed, 372 unchanged (56% of the section changed)

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

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.

to the three months ended June 30, 2026 and June 30, 2025, respectively.

When we refer to the “2026 Period” and the “2025

Period” we are referring to the six months ended June 30, 2026 and June 30, 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

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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.

infrastructure activities, consisting primarily of validator node operations (NodeOps) and block building (Builder+), represent a core

driver of the Company’s revenues.

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.

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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

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

activities are closely integrated with the Company’s digital asset holdings, particularly ETH, which is deployed as collateral

and liquidity to support revenue generation.

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

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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.

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 around

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

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pool positions.

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

following table presents a summary of the Company’s digital asset token holdings as of June 30, 2026, including (i) digital assets

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

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assets across its operations.

As of March 31, 2026

Digital Assets Held at Fair Value

As of June 30, 2026

Digital Assets Held at

Digital Assets Underlying Liquidity Pool Positions

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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.

value for liquidity pool positions reflects cost less impairment, while fair value represents the estimated market value of the underlying

presented for digital assets and stablecoins reflect token units held as of June 30, 2026.

Total carrying value and total fair value

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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.

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.

Company’s treasury management strategy is designed to balance revenue generation, profitability, 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.

Instead, 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.

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

DeFi Revenue Variability

Revenue Variability

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

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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:

of Operations for the Three Months Ended June 30, 2026 and 2025

following table reflects our operating results for the three months ended June 30, 2026 and 2025:

For the Three Months Ended

Blockchain infrastructure revenues

$ (1,827,549 )

DeFi revenues

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Realized losses on digital asset transactions

Unrealized loss on digital assets

Unrealized loss (gain) on digital assets

Total operating expenses

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Total other income (expenses)

Net income (loss)

$ (34,903,230 )

$ (38,784,762 )

following table reflects our operating results for the six months ended June 30, 2026 and 2025:

For the Six Months Ended

Blockchain infrastructure revenues

$ (2,381,133 )

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.

DeFi revenues

Total revenues

Cost of revenues

Blockchain infrastructure costs

Total cost of revenues

Operating expenses:

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 (gain) on digital assets

Total operating expenses

Other income (expenses):

Interest expense

Change in fair value of warrant liabilities

Total other income (expenses)

Net income (loss)

$ (104,067,549 )

$ (13,387,165 )

$ (90,680,384 )

revenues for the 2026 Quarter decreased compared to the 2025 Quarter, primarily due to the decrease of Blockchain infrastructure revenues

partially offset by an increase in DeFi activities generated through the Company’s Imperium operations.

Blockchain 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.

DeFi revenues accounted

for approximately 61% of total revenues for the 2026 Quarter and reflect the Company’s expanded participation in decentralized

finance activities, including decentralized lending (approximately 22% of revenues) and liquidity pool strategies (approximately 39%

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

revenues for the 2026 Period increased compared to the 2025 Period, primarily due to a growth in Imperium operations, which more than

offset a decline in blockchain infrastructure revenues.

DeFi revenues accounted for approximately 55% of total revenues for the 2026

Period and reflect the Company’s expanded participation in decentralized finance activities, including decentralized lending (approximately

24% of revenues) and liquidity pool strategies (approximately 31% of revenues), which were not present in the 2025 Period.

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

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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.

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

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 for the 2026 Quarter and 2026 Period decreased compared to the 2025 Quarter and 2025 Period, 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.

DeFi-related costs were minimal during the 2026 Quarter and 2026 Period.

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

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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.

fees increased for the 2026 Quarter and the 2026 Period compared to the respective prior year periods, primarily due to higher accounting

fees reflecting the onboarding of a new audit firm and elevated annual audit billings.

For the 2026 Period, legal fees also increased

reflecting the Company’s ongoing operational and compliance activities.

These increases were partially offset by lower investor

relations costs in both the 2026 Quarter and the 2026 Period.

and Administrative Expenses

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 administrative expenses for the 2026 Quarter and 2026 Period decreased compared to the 2025 Quarter and 2025 Period, 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 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 for the 2026 Quarter and 2026 Period decreased compared to the 2025 Quarter and 2025 Period, primarily due to

the completion and wind-down of development activities related to ChainQ in 2025 and the transition of Builder+ and related infrastructure

initiatives from development into routine, revenue-generating operations, which resulted in a significant reduction in employee salary

allocations to R&D.

During the 2026 Quarter and 2026 Period, 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

and related expenses for the 2026 Quarter and 2026 Period increased compared to the 2025

Quarter and 2025 Period, primarily due to equity-based compensation expense related to amortization of unvested employee stock options

and restricted stock units issued during 2026.

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 value.

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 increased compared to the 2025 Quarter, primarily reflecting an increase 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.

expenses for the 2026 Period decreased compared to the 2025 Period, primarily due to the non-recurrence of significant one-time advertising

campaigns in the 2025 Period.

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

loss on intangible digital assets

the 2026 Quarter and 2026 Period, the Company recorded an impairment loss on intangible digital assets, including non-fungible tokens

(“NFTs”) and tokenized liquidity pool positions.

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.

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

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.

losses on digital assets transactions for the 2026 Quarter and 2026 Period increased compared to the 2025 Quarter and 2026 Period, 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

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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.

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

compared to the 2025 Quarter and 2025 Period.

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

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

operating expenses for the 2026 Quarter and 2026 Period increased compared to the 2025 Quarter and 2025 Period, 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 operations.

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

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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 for the 2026 Quarter and 2026 Period increased compared to the 2025 Quarter and 2025 Period, 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

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in Fair Value of Warrant Liabilities

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.

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

Period, as the outstanding warrants expired in the prior period and are no longer subject to remeasurement.

In 2025 Quarter and 2025

Period, the Company recognized a non-cash loss of approximately $165,000 and a non-cash gain of approximately $60,000 related to the

change in the fair value of warrant liabilities.

The prior quarter and period losses 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

other income (expenses) reflected a net expense for the 2026 Quarter and 2026 Period compared to the 2025 Quarter and 2025 Period.

net expense for the 2026 Quarter and 2026 Period was primarily driven by interest expense incurred in connection with DeFi borrowings

and outstanding convertible notes.

In the comparable 2025 Quarter, total other expense was further impacted by a non-cash loss related

to the change in the fair value of warrant liabilities.

In the comparable 2025 Period, total other income was primarily offset by a non-cash

gain related to the change in the fair value of warrant liabilities.

loss for the 2026 Quarter and 2026 Period increased compared to the 2025 Quarter net income and 2025 Period net loss.

In the 2025 Quarter,

the Company reported net income primarily due to unrealized gains on digital assets resulting from favorable market price movements during

that period, which were not present in the 2026 Quarter.

In the 2026 Quarter and 2026 Period, net loss was primarily driven by 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 sales.

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

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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.

As of the date of this report, the Company

had not sold any securities under the New Registration Statement.

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.

The New Registration Statement was declared effective on August 1, 2025.

As of the date of this report, the Company had not sold any

securities under the New Registration Statement.

September 14, 2021 through August 17, 2026, the Company sold a total of 33,361,730 shares of common stock under the ATM Agreement

for aggregate total gross proceeds of approximately $164.2 million at an average selling price of $4.92 per share, resulting in net

proceeds of approximately $159.1 million after deducting commissions and other transaction costs.

Repurchase Program

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

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.

September 11, 2025 through August 17, 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.

As of August 17, 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.

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.

January 1, 2025 through August 17, 2026, the Company borrowed an aggregate of approximately $130.4 million in stablecoins, primarily USDT

and GHO, through Aave, a DeFi lending protocol, using ETH as collateral, and repaid approximately $87.9 million during the same period.

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

As of August 17, 2026, the

Company had approximately $43.0 million in outstanding DeFi borrowings, inclusive of accrued interest, collateralized by approximately

46,525 ETH with an aggregate fair value of $88.7 million, based on the closing price of $1,905 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 protocol.

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

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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

As of August 17, 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

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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.

of June 30, 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

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on an ongoing basis.

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

At June 30, 2026, the Company had approximately $0.3 million of cash and cash equivalents and working capital of

approximately $45.6 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.

of August 17, 2026, the Company had approximately $113.4 million of cash, stablecoins, and liquid digital assets (primarily ETH).

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.

of August 17, 2026, the Company had total debt obligations of approximately $60.8 million, consisting of approximately $43.0 million

of DeFi borrowings on the Aave Protocol and approximately $17.9 million of convertible notes.

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.

Of these debt obligations, the $43.0 million of DeFi borrowings on Aave have no fixed maturity date and remain outstanding until repaid or liquidated in accordance with Aave’s protocol terms, and are classified

as a current liability on the Company’s balance sheet.

The $17.9 million

of convertible notes is due within 12 months of the filing date of this report.

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

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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.

As of August 17, 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.

used in operating activities was approximately $1.3 million for the 2026 Period, compared to approximately $3.2 million for the 2025

The decrease reflects the combined effect of changes in operating assets

and liabilities and significant noncash adjustments associated with the Company’s digital-asset-denominated operating model.

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

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non-cash adjustments impacting operating cash flows included:

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.

asset-denominated revenues of approximately $4.6 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 $2.0 million paid in native digital assets to third-parties and

external validators as part of Builder+ block-building activities.

losses on digital asset transactions of approximately $34.2 million, primarily from (i) sales of ETH to manage DeFi borrowing

positions and (ii) the derecognition of ETH upon deposit into liquidity pool positions.

losses from the fair value measurement of digital assets, primarily ETH, of approximately $57.1 million.

Impairment losses on intangible digital assets of approximately $5.5 million.

compensation expense of approximately $3.4 million, primarily reflecting the issuance and ongoing amortization of equity-based awards

to employees, including performance-based grants.

of debt discount and issuance costs of approximately $1.7 million related to the outstanding convertible notes.

interest expense of approximately $0.9 million paid in digital assets.

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

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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.

Net cash provided by (used in) investing activities was $0 during the 2026 Period, compared to net cash used in investing

activities of approximately $9.4 million in the 2025 Period.

The Company had no cash investing activity during the 2026 Period because

deployments of digital assets into liquidity pool positions, withdrawals of digital assets from liquidity pool positions, related swaps

between ETH and stablecoins undertaken to facilitate such liquidity pool activity, and the disposition of digital assets in exchange for

stablecoins were settled in digital assets rather than cash and, accordingly, are excluded from investing activities on the face of the

statement of cash flows and are presented within the supplemental disclosure of noncash investing and financing 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.

The Company had no net cash provided by or used in financing activities during the 2026 Period, compared to net cash provided by financing activities of approximately

$11.3 million in the 2025 Period.

During the 2026 Period, the Company received approximately $1.0 million of DeFi borrowing proceeds

in stablecoins, settled approximately $26.5 million of DeFi borrowing principal through digital assets and stablecoins, and settled the Loyalty Payment described in Note 11 – Dividends and Capital Distributions through a non-cash

distribution of approximately $723,000 in ETH to eligible common stockholders.

Because these

transactions did not involve cash or cash equivalents, they are excluded from financing activities on the face of the statement of cash

flows and are presented within the supplemental disclosure of noncash investing and financing activities.

Cash financing activities

during the 2025 Period primarily consisted of approximately $4.1 million of net proceeds from the Company’s at-the-market offering and

approximately $7.3 million of net proceeds from the issuance of convertible notes, partially offset by approximately $0.1 million of debt

issuance costs.

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 support ongoing

capital deployment across blockchain infrastructure and DeFi activities.

capital deployment.

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.

of June 30, 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.

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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.

have been no material changes to our critical accounting policies during the six months ended June 30, 2026.

However, the application

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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.

liquidity, capital resources;

digital asset strategy;

blockchain infrastructure operations (Builder+);

DeFi activities (Imperium);

capital allocation;

and revenue/gross profit expectations.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis