Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our historical financial statements and the notes to those statements and other financial information included elsewhere in this Quarterly Report. Certain statements in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Information." You should review the "Risk Factors" section of this Quarterly Report and in the Company's other filings with the Commission for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

BUSINESS OVERVIEW AND STRATEGIC EVOLUTION

In late 2024, the Company initiated its strategic transformation into a diversified technology and digital asset infrastructure company through the acquisition of its first Bitcoin Mining site in Alberta, Canada. What began as an entry point into the cryptocurrency sector has evolved rapidly into a comprehensive institutional platform bridging traditional capital markets with the onchain financial economy.

A defining milestone in this evolution was the closing of the Company's $219.1 million financing in November 2025. This capital infusion provided the financial foundation to meaningfully expand the Company's participation in the Avalanche ecosystem. The integration of Avalanche includes the establishment of a strategic digital asset treasury, the generation of recurring revenue through AVAX staking, and active pursuit of mergers and acquisitions. These potential acquisitions are focused on identifying cashflow positive businesses that can be optimized through the speed, scalability, and low transaction costs of the Avalanche blockchain.

Management believes this strategy of Avalanche ecosystem participation and Bitcoin Mining operations creates a robust and differentiated business model. It enables the Company to capitalize on the specialized expertise of its leadership team in both cryptocurrency and energy infrastructure. The strategy is expected to deliver stable cash flows in the short to medium term through AVAX staking and Bitcoin Mining, while positioning the Company for substantial long-term value and broader ecosystem investments.

Strategic Outlook and Value Creation Opportunities

From 2020 through 2025, more than 172 publicly traded companies incorporated cryptocurrency assets onto their balance sheets. A significant portion of these entities operated primarily as passive treasury vehicles, often lacking independent revenue streams, operational infrastructure, or sustainable cash flow generation capabilities.

AVAX One is not merely accumulating AVAX tokens as a passive treasury asset. As treasury operations scale, the Company anticipates increased financial flexibility to pursue several value-enhancing initiatives. These include further expansion of its digital asset operations, opportunistic acquisitions within the Avalanche ecosystem, and strategic investments that contribute to the overall health, security, and adoption of the Avalanche network.

Management remains confident that this integrated model of combining revenue producing assets with active ecosystem participation will differentiate AVAX One in the market and create enduring value for shareholders.

RECENT DEVELOPMENTS

Leadership Transition

As previously reported by the Company, Jolie Kahn resigned as the Company's Chief Executive Officer ("CEO"), effective July 3, 2026 and the Company's Board of Directors ("Board") subsequently appointed Peter Wylie Jr., the Company's Chief Operating Officer, as Interim CEO. Mr. Wylie has continued to serve as the Company's Chief Operating Officer. In connection with Mr. Wylie's increased responsibilities as interim CEO, Mr. Wylie's compensation increased to a total of $40,000 per month. Additionally, the Board has initiated a comprehensive search for a long-term successor and formally retained a global executive search firm to support the process.

In connection with Ms. Kahn's departure, Ms. Kahn and the Company entered into a separation and release agreement, dated July 5, 2026 (the "Kahn Separation Agreement"), that terminates the Consulting Agreement, dated November 1, 2025, as amended, between Ms. Kahn and the Company (the "Consulting Agreement"), effective as of July 3, 2026. Pursuant to the Kahn Separation Agreement, and in exchange for a general release of claims in favor of the Company and the other released parties, Ms. Kahn received a lump sum cash payment of $0.2 million in lieu of payment of her consulting fees through the end of the term of the Consulting Agreement, reimbursement for certain medical insurance costs, and a grant of unregistered common shares having a fair market value of $0.3 million.

As previously reported by the Company, Chris Polimeni resigned as the Company's Chief Financial Officer, effective August 17, 2026, and the Board subsequently promoted Stephanie Brady, the Company's Controller, to serve as the Company's Chief Accounting Officer and principal financial officer. In connection with Ms. Brady's promotion, Ms. Brady's compensation increased to a total of $20,000 per month.

In connection with Mr. Polimeni's departure, Mr. Polimeni and the Company entered into a separation and consulting agreement, effective as of August 18, 2026 (the "Polimeni Separation Agreement"), which provides for, among other things, Mr. Polimeni's separation from the Company as Chief Financial Officer and an associated separation payment, as well as the Company's engagement of Mr. Polimeni as an independently contracted consultant until March 31, 2027. In connection with services rendered under the Polimeni Separation Agreement, Mr. Polimeni will receive a monthly fee of $10,000 during the term thereof.

Debentures

During the nine months ended September 30, 2026, the Company completed a restructuring of certain debentures (the "Restructuring"). The Restructuring involved (i) the full repayment, retirement and cancellation of debentures held by two institutional investors and (ii) the reduction in the outstanding principal amount of a debenture held by another institutional investor and the amendment of certain provisions of that investor's debenture, including a key-person covenant and increasing the covenant governing the minimum amount of cash and bitcoin the Company is required to maintain from $100,000 to $3.5 million.

Pursuant to the Restructuring, the investors converted $7.7 million of principal and interest into the Company's common shares and the conversion was determined to be a modification of the existing debt. In addition, the Company incurred $5.3 million in accretion interest and made cash repayments totaling $3.5 million during the nine months ended September 30, 2026. Included in the Restructuring was the early extinguishment of the January 2026 Tranche, which unwound the escrow receivable and resulted in a loss on the early extinguishment of debt of approximately $0.8 million. The Restructuring was funded with cash on hand.

Subsequent to September 30, 2026, the October 2025 Tranche Investor converted approximately $1.0 million of the remaining principal and interest into 544,792 of the Company's common shares, and the conversion was determined to be a modification of the existing debt. In addition, the remaining DACA funds, totaling approximately $2.1 million, were released to the Company by the Investor.

Nasdaq Compliance

On March 13, 2026, the Company received a letter from The Nasdaq Stock Market LLC ("Nasdaq") that it no longer complied with Rule 5550(a)(2) of Nasdaq's Listing Rules, which requires listed securities to maintain a minimum bid price of $1 per share. Based upon the closing bid price for the last 30 consecutive business days (January 29, 2026 to March 12, 2026), the Company no longer met this requirement.

The Company presented its appeal to the Nasdaq Hearings Panel (the "Panel"), and the hearing was held on April 21, 2026. On May 8, 2026, the Company received from the Panel an exception to cure its listing deficiencies which provided for the continued listing of the Company's common shares on Nasdaq, subject to certain conditions. The conditions included, among other things, that the Company demonstrate compliance with the minimum bid price of $1.00 per share for a minimum of 10 consecutive trading days on or before July 6, 2026.

On July 8, 2026, the Company received formal notice from Nasdaq confirming the Company has regained compliance with Nasdaq's Listing Rule 5550(a)(2). According to the notification, Nasdaq determined that, for the ten consecutive trading days from June 15, 2026 through June 29, 2026, the closing bid price of AVAX One's common shares was at or above the required minimum of $1.00 per share. As a result, Nasdaq concluded that the Company satisfied the minimum bid price requirement, and the matter is now closed.

Share Repurchase Program

In November 2025, the Board authorized a share repurchase program (the "Repurchase Program") under which the Company may repurchase up to $40.0 million of its outstanding common shares, for a period of 12 months, subject to contractual requirements. The Board will periodically review the Repurchase Program and, among other things, may decide to extend its term or increase the authorized amount. As of September 30, 2026, the Company has repurchased 786,761 shares in the open market for a total cost of $5.8 million pursuant to the Repurchase Program. From October 1, 2026 to November 12, 2026, the Company repurchased an additional 810,000 shares in the open market for a total cost of $4.3 million.

STATUS AS AN EMERGING GROWTH COMPANY

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for private companies.

We continue to evaluate the benefits of relying on other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we have relied, and intend to continue to rely, on certain of these exemptions from, without limitation, (i) providing an auditor's attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an "emerging growth company" until the earliest of (a) the last day of our fiscal year following the 5th anniversary of the closing of our initial public offering, (b) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (c) the last day of our fiscal year in which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, or Exchange Act (which would occur if the market value of our equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter), or (d) the date on which we have issued more than $1 billion in nonconvertible debt during the preceding three-year period.

The Company will cease to be an "emerging growth company" effective December 31, 2026, on the last day of the fiscal year following the fifth anniversary of the Company's initial public offering in July 2021. The Company is currently evaluating the impact of complying with new or revised accounting standards. We continue to be a "smaller reporting company" and a non-accelerated filer and, as such, will continue to rely on the exemption outlined in (i) above for so long as we continue to qualify as such.

TRENDS AND UNCERTAINTIES IMPACTING OUR BUSINESS AND INDUSTRY

Digital Assets

We generate revenue from blockchain-based operations, comprised of two primary sources: (i) staking rewards earned from delegating and validator node operations, through the Avalanche Protocol and (ii) the production of digital assets through mining activities, in Bitcoin ("Bitcoin Mining"). We commenced our digital asset strategy with regards to the Avalanche Protocol in the fourth quarter of 2025 with our transition to AVAX One and with regard to Bitcoin Mining in the fourth quarter of 2024 with the acquisition of our first Bitcoin Mining facility. We currently own and operate three Bitcoin Mining facilities.

Our digital assets were comprised of the following as of September 30, 2026 and December 31, 2025, the value of which may be materially impacted as the market value of digital assets fluctuates.

		September 30, 2026												December 31, 2025
		Quantity				Cost Basis				Fair Value				Quantity				Cost Basis				Fair Value
AVAX tokens			12,390,785.586			$	154,156			$	135,433				12,409,212.272			$	160,040			$	152,509
Bitcoin			40.108				3,324				3,351				13.272				1,397				1,161
Total digital assets						$	157,480			$	138,784							$	161,437			$	153,670

Management believes, given our recent investments, coupled with our relative position and liquidity, we are well-positioned to execute on our long-term growth strategy.

Energy Cost

Energy cost is one of the most significant cost drivers for Bitcoin Mining operations and these costs can be highly volatile and sensitive to geopolitical events and weather conditions, such as winter storms and earthquakes, which impact supply and demand for power regionally. We believe these costs are effectively managed through our power purchase agreement which allow us to obtain natural gas required to generate power at our mining facilities at favorable prices. Though energy prices are less predictable, our power purchase agreement gives us greater flexibility and ability to actively manage the energy we consume with the goal of increasing energy efficiency and profitability.

Concentrations and Current Vulnerability

Our principal activities consist primarily of investing, staking and evaluating digital tokens technologies that run on the Avalanche public blockchain network. Due to the current nature of our operations and the scale of business transacted on the Avalanche Network, a concentration could potentially result in a vulnerability. The concentration and potential associated vulnerabilities include, but are not limited to:

●

A decline in, or loss of, staking rewards earned from the staking of AVAX tokens delegated to one or more validator nodes on the network,

●

A decline in, or loss of, our AVAX holdings and its utility to the Avalanche Network and a source of liquidity for our business, and

●

Disruption to the nature and extent of the business plan should the Avalanche public blockchain network fail or become redundant due to technological obsolescence or regulatory action.

The AVAX token performs various functions within the Avalanche ecosystem, including incentivizing network security and functionality and acting as the payment currency on the primary network. Therefore, this concentration may result in vulnerability to a near-term severe impact, and it is at least reasonably possible that events outside of our control may result in a severe impact in the near term.

As a result of the foregoing, we believe a concentration exists as of the date of these financial statements, and a dissolution of the Avalanche Foundation or an inability of the Avalanche public blockchain network and/or AVAX tokens to function as expected, could result in near-term severe impacts to our business.

RESULTS OF OPERATIONS FOR THE three and nine months ended September 30, 2026 and 2025

Revenues

Total revenue was comprised of the following during the three and nine months ended September 30, 2026 and 2025 (in thousands):

		Three Months Ended September 30,								Net Change								Nine Months Ended September 30,								Net Change
		2026				2025				$				%				2026				2025				$				%
Avalanche Protocol		$	1,779			$	-			$	1,779				*			$	5,845			$	-			$	5,845				*
Bitcoin Mining			666				526				140				27	%			1,928				1,251				677				54	%
Total Revenue		$	2,445			$	526			$	1,919				*			$	7,773			$	1,251			$	6,522				*

*	Represents an increase or decrease in excess of 100%.

We generate revenue from blockchain-based operations and comprises two primary sources: (i) staking rewards earned from delegating and validator node operations, primarily through our Avalanche Protocol and (ii) the production of digital assets through mining activities, primarily Bitcoin Mining.

Our Avalanche Protocol operations commenced in the fourth quarter of 2025 in connection with our transition to AVAX One and the implementation of our digital asset strategy. Our Avalanche Protocol revenues are generated through network-based smart contracts. We stake our crypto assets on our own validator nodes and nodes from third-party operators. Through these contracts, we provide crypto assets to stake to a node for the purpose of validating transactions and adding blocks to a respective blockchain network. We define the duration of our smart contracts, typically lasting from a few days to nine months, and these contracts require that the crypto assets staked remain locked up for the duration.

From our Bitcoin Mining operations, we earn revenue from the production of certain digital assets through mining activities. Our Bitcoin Mining operations commenced in December 2024 with the acquisition of our first mining facility in Alberta, Canada (the "Redwater acquisition"), and, then in January 2025, we added an additional mining facility with the Bald Eagle acquisition.

Operating Expenses

Operating expenses were comprised of the following during the three and nine months ended September 30, 2026 and 2025 (in thousands):

		Three Months Ended September 30,								Net Change								Nine Months Ended September 30,								Net Change
		2026				2025				$				%				2026				2025				$				%
Cost of revenue, excluding depreciation		$	977			$	266			$	711				*			$	3,120			$	729			$	2,391				*
Bitcoin operating costs			3				-				3				*				14				-				14				*
Selling, general and administrative			2,244				1,263				981				78	%			6,701				3,981				2,720				68	%
Repairs and maintenance			197				207				(10	)			-5	%			396				407				(11	)			-3	%
Share-based compensation			302				1,139				(837	)			-73	%			858				1,347				(489	)			-36	%
Depreciation and amortization			292				311				(19	)			-6	%			829				874				(45	)			-5	%
Loss on disposal of operating assets			653				-				653				*				912				-				912				*
Impairment of liquid staking tokens			-				-				-				*				3,740				-				3,740				*
Realized loss (gain) on digital asset transactions			483				(48	)			531				*				5,800				(48	)			5,848				*
Unrealized loss (gain) on market valuation of digital assets			(55,133	)			(1	)			(55,132	)			*				10,924				(81	)			11,005				*
Total Operating Expenses		$	(49,982	)		$	3,137			$	(53,119	)			*			$	33,294			$	7,209			$	26,085				*

*	Represents an increase or decrease in excess of 100%.

Total operating expenses decreased during the three months ended September 30, 2026, as compared to the prior year period, primarily due to the following:

	●	The increase in cost of revenue, excluding depreciation of $0.7 million is directly related to the increase in our Avalanche Protocol and Bitcoin Mining operations.
	●	Selling, general and administrative expenses increased primarily due to office and administrative expenses ($0.5 million) primarily due to insurance costs coupled with severance expense ($0.4 million).
	●	The decrease in share-based compensation of $0.8 million is directly related to the shares issued to directors and certain officers in the prior year.
	●	The loss on disposal of assets is directly attributable to the upgrade of Bitcoin Mining machines.
	●	The increase in realized loss on digital asset transactions of $0.5 million is directly attributable to the sale of AVAX tokens during the period.
	●	The decrease in unrealized loss on market valuation of digital assets is primarily due to the improvement in the market value of our AVAX tokens during the period.

During the nine months ended September 30, 2026 total operating expenses increased, as compared to the prior year period, primarily due to the following:

	●	The increase in cost of revenue, excluding depreciation of $2.4 million is directly related to the increase in our Avalanche Protocol and Bitcoin Mining operations.
	●	Selling, general and administrative expenses increased primarily due to office and administrative expenses ($1.6 million) primarily due to insurance costs, investor relations ($0.8 million) related to additional campaigns to promote the Company, coupled with severance expense ($0.3 million).
	●	The decrease in share-based compensation of $0.5 million is directly related to the shares issued to directors and certain officers in prior year.
	●	The loss on disposal of assets is directly attributable to the upgrade of Bitcoin Mining machines.
	●	The impairment of assets of $3.7 million is directly attributable to the liquid staking tokens (the tAVAX tokens) due to the decline in the market value of AVAX tokens and the realized loss on digital asset transactions of $5.8 million is directly attributable to the deployment of AVAX tokens to tAVAX tokens, which resulted in a loss on the deployment date due to the decline in the market value of AVAX tokens ($5.3 million), coupled with the sale of AVAX tokens ($0.5 million).
	●	The increase in unrealized loss on market valuation of digital assets is primarily due to the decline in market value of our AVAX tokens during the period.

Other (Expenses) Income

Total other (expenses) income were comprised of the following during the three and nine months ended September 30, 2026 and 2025 (in thousands):

		Three Months Ended September 30,								Net Change								Nine Months Ended September 30,								Net Change
		2026				2025				$				%				2026				2025				$				%
Accretion of interest on debentures		$	(1,733	)		$	(383	)		$	(1,350	)			*			$	(5,279	)		$	(2,321	)		$	(2,958	)			*
Change in fair value of derivative liabilities			-				-				-				*				-				2,977				(2,977	)			-100	%
Foreign exchange gain (loss)			(15	)			4				(19	)			*				(10	)			(74	)			64				-86	%
Gain on conversion of convertible debt			-				-				-				*				-				87				(87	)			-100	%
Loss on debt extinguishment			(792	)			(5,389	)			4,597				-85	%			(813	)			(10,120	)			9,307				-92	%
Other income (expense)			5				(16	)			21				-131	%			(5	)			52				(57	)			*
Total Other Expenses, net		$	(2,535	)		$	(5,784	)		$	3,249				-56	%		$	(6,107	)		$	(9,399	)		$	3,292				-35	%

*	Represents an increase or decrease in excess of 100%.

Total other expenses, net decreased during the three months ended September 30, 2026 primarily due to the prior period loss on debt extinguishment, partially offset by the increase in accretion of interest on debentures due to the issuance of additional debentures.

During the nine months ended September 30, 2026 total other expenses, net decreased primarily due to the prior year loss on debt extinguishment, partially offset by the change in fair value of derivative liabilities and the increase in accretion of interest on debentures. The change in fair value of derivative liabilities is directly attributable to the reclass of derivatives to additional-paid-in capital during the second quarter of 2025 as a result of the conversion of our functional currency, from the Canadian dollar to the United States dollar, effective April 1, 2025. The increase in accretion of interest on debentures is primarily due to the issuance of additional debentures.

Operating Segments

We have chosen to organize our operating segments based on products or services offered. Each operating segment is also a reportable segment (i.e., operating segments have not been aggregated). Our operating and reportable segments at September 30, 2026, include Avalanche Protocol and Bitcoin Mining. All other activities, including financing, are carried out through the corporate entity. We evaluate the performance of each of the segments using operating income (loss) to provide a consistent and comparable measure of our performance between periods. Our calculations of operating income (loss) herein may be different from the calculations used by other companies, therefore, comparability may be limited. The accounting policies for the operating segments are the same as those disclosed in the notes to the unaudited condensed consolidated financial statements in this Quarterly Report, specifically Part I, Item 1. Financial Statements, Note 2, "Summary of Significant Accounting Policies."

The following table summarizes our total revenues, by segment, during the three and nine months ended September 30, 2026 and 2025 (in thousands):

		Three Months Ended September 30,								Net Change								Nine Months Ended September 30,								Net Change
		2026				2025				$				%				2026				2025				$				%
Avalanche Protocol		$	1,779			$	-			$	1,779				100	%		$	5,845			$	-			$	5,845				100	%
Bitcoin Mining			666				526				140				27	%			1,928				1,251				677				54	%
Total Revenue		$	2,445			$	526			$	1,919				*			$	7,773			$	1,251			$	6,522				*

*	Represents an increase or decrease in excess of 100%.

Total revenue increased during the three and nine months ended September 30, 2026 primarily due to the Company's Avalanche Protocol operations, which commenced operations in the fourth quarter of 2025 with the implementation of our digital asset strategy, coupled with the increase in our Bitcoin Mining operations primarily due to the increase in our Bitcoin Mining infrastructure.

The following table summarizes our operating income (loss), by segment, during the three and nine months ended September 30, 2026 and 2025 (in thousands):

		Three Months Ended September 30,								Net Change								Nine Months Ended September 30,								Net Change
		2026				2025				$				%				2026				2025				$				%
Avalanche Protocol		$	55,128			$	-			$	55,128				100	%		$	(16,463	)		$	-			$	(16,463	)			100	%
Bitcoin Mining			(230	)			(70	)			(160	)			*				(1,643	)			(206	)			(1,437	)			*
Corporate			(2,471	)			(2,541	)			70				-3	%			(7,415	)			(5,752	)			(1,663	)			29	%
Total Operating Income (Loss)		$	52,427			$	(2,611	)		$	55,038				*			$	(25,521	)		$	(5,958	)		$	(19,563	)			*

*	Represents an increase or decrease in excess of 100%.

During the three months ended September 30, 2026, operating income was approximately $52.4 million, as compared to an operating loss of $2.6 million for the comparable prior year period. The net change is directly attributable to the improvement in the market value of our AVAX tokens during the period, coupled with the increase in revenue $1.9 million, partially offset by the increase in cost of revenue, excluding depreciation ($0.7 million), which is directly related to the increase in our Avalanche Protocol and Bitcoin Mining operations and the increase in selling, general and administrative expenses ($1.0 million) primarily due to insurance costs.

The increase in operating loss during the nine months ended September 30, 2026 is primarily attributable to the decline in market value of AVAX tokens, which resulted in an unrealized loss on market valuation of digital assets ($11.0 million), coupled with an impairment of assets related to the liquid staking tokens ($3.7 million) and the realized loss on digital asset transactions ($5.8 million) related primarily to the deployment of AVAX tokens to the liquid staking tokens (tAVAX tokens), partially offset by the increase in revenue ($6.5 million). The operating loss was further impacted by the increase in cost of revenue, excluding depreciation ($2.4 million), which is directly related to the increase in our Avalanche Protocol and Bitcoin Mining operations and the increase in selling, general and administrative expenses ($2.7 million) primarily due to costs associated with promoting the Company and insurance.

LIQUIDITY AND CAPITAL RESOURCES

Management's Assessment of Liquidity

Our primary need for liquidity is to fund working capital requirements, capital expenditures, and for general corporate purposes. Our ability to fund operations and make planned capital expenditures and debt service obligations depends on future operating performance and cash flows, which are subject to prevailing economic conditions, financial markets, business and other factors. Our sources of liquidity, including cash on hand, digital assets earned through staking arrangements and Bitcoin Mining, are expected to be sufficient to fund our operating expenses and capital expenditure requirements for at least twelve months from the date these financial statements are issued.

Though we experienced a loss from operations of approximately $25.5 million during the nine months ended September 30, 2026, this loss included $21.3 million of non-cash charges related to: (1) depreciation and amortization ($0.8 million); (2) impairment of assets ($3.7 million); and (3) realized and unrealized losses on digital asset transactions and market valuations ($5.8 million and $10.9 million, respectively). To supplement our GAAP financial results, we present non-cash loss from operations, a non-GAAP financial performance measure which excludes these non-cash charges, to provide useful information to help investors evaluate our operating performance because it: enables investors to compare this measure and component adjustments to similar information provided by peer companies and our past financial performance. Adjusting for these non-cash charges, the non-cash loss from operations would be $4.2 million during the nine months ended September 30, 2026.

Cash Flow Summary

The following information has been derived from the accompanying unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report. The change in cash, cash equivalents and restricted cash during the nine months ended September 30, 2026 and 2025 is as follows (presented in thousands):

		2026				2025				Net Change
Net loss		$	(31,628	)		$	(16,557	)		$	(15,071	)
Non-cash items			24,061				11,475				12,586
Net change in operating assets and liabilities			(403	)			(353	)			(50	)
Operating activities			(7,970	)			(5,435	)			(2,535	)
Investing activities			(1,169	)			(5,516	)			4,347
Financing activities			(2,394	)			11,465				(13,859	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			-				(109	)			109
Change in cash, cash equivalents and restricted cash		$	(11,533	)		$	405			$	(11,938	)

Operating Activities

Net cash used in operating activities was $8.0 million and $5.4 million during the nine months ended September 30, 2026 and 2025, respectively, an increase of $2.5 million, which is primarily due to the $2.5 million decline in the non-cash adjusted loss, operating results, partially offset by the $0.1 million net change in operating assets and liabilities.

Non-cash items increased primarily due to the unrealized loss on digital assets of $11.0 million, asset impairments of $3.7 million, realized loss on digital asset transactions of $5.9 million and the change in amortization of debt issuance costs of $3.0 million, coupled with the change in fair value of derivative liabilities of $3.0 million, partially offset by the decrease in loss on debt extinguishment of $9.3 million and the increase in rewards from blockchain infrastructure of $4.3 million. The net change in operating assets and liabilities is primarily due to the increase in staking rewards receivable of $2.2 million, partially offset by the net change in prepaid expenses and other current assets of $1.7 million.

Investing Activities

Net cash used in investing activities was $1.2 million and $5.5 million during the nine months ended September 30, 2026 and 2025, respectively, a decrease of $4.4 million, which is primarily due to the cash paid in prior year for an acquisition, partially offset by the increase in equipment purchased within the Bitcoin Mining segment.

Financing Activities

Net cash used in financing activities was $2.4 million, as compared to net cash provided financing activities of $11.5 million during the nine months ended September 30, 2026 and 2025, respectively, a decrease of $13.9 million, which is primarily due to the shares repurchased in the open market of $5.8 million, coupled with the decrease in proceeds from debenture and warrant issuances of $3.1 million, the increase in repayment of convertible debentures ($3.4 million) and the decrease in proceeds from issuance of common shares for cash ($1.3 million).

Off Balance Sheet Arrangements

None.

Critical Accounting Estimates

See the notes to our unaudited condensed consolidated financial statements for the nine months ended September 30, 2026 and 2025, included within this Quarterly report.