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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2026, and our Form 10-K for the year ended December 31, 2025.

Certain information in this Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements, other than statements of historical facts, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, our results of operations, financial position and our business outlook, business trends and other information, may be forward-looking statements. You can identify these forward-looking statements by the words "believes," "intends," "expects," "might," "may," "will," "should," "plans," "projects," "contemplates," "intends," "budgets," "potential," "predicts," "estimates," "anticipates," "future," "goal," and variations of such words or similar expressions. These statements are based on our beliefs, as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties, and assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, estimates and projections will result or be achieved, and actual future results may differ materially from what is expressed in or indicated by the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A, under the heading "Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission ("SEC") on March 31, 2026, and under "Part II, Item 1A., Risk Factors" in this Quarterly Report on Form 10-Q, if and as such risk factors may be updated from time to time in our periodic filings with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and a reader, whether investing in our common stock or not, should not place undue reliance on these forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

Overview

Axe Compute Inc. is a technology company focused on providing high-performance computing infrastructure for artificial intelligence ("AI") workloads by sourcing large-scale graphics processing unit ("GPU") capacity from hardware manufacturers and infrastructure suppliers and deploying that capacity for enterprise customers under long-term service agreements. We assist customers across the full GPU infrastructure stack, including hardware procurement, colocation, networking, storage, and financing. We can also immediately access compute capacity through relationships with third party compute providers to provide customers compute capacity that is already online and available for rent. We also continue to evaluate strategic alternatives for our legacy oncology drug discovery business (the "Legacy Business"), including its proprietary biobank of tumor samples and historical drug response data, which is not part of our core compute infrastructure operations.

Compute Services

Our principal revenue-generating activity is the provision of GPU compute to customers. We primarily provide compute services under two customer models: (1) designing and deploying customized, large scale compute infrastructure solutions for enterprise clients; and (2) providing immediate access to GPU capacity (in as fast as 24-48 hours) that is already online and available for rent from third parties.

For customers seeking large-scale, long-duration GPU compute capacity, we build and deploy dedicated compute infrastructure solutions. Under this model, customers contract for dedicated AI infrastructure tailored to their compute, performance, geographic, security, and operational requirements. We coordinate with customers to architect deployments that may include GPU compute, high-speed storage, networking, power infrastructure, and related managed services. Deployments are typically hosted in enterprise-grade data center facilities and are operated by us pursuant to service level commitments. We intend to finance and then retain ownership of the deployed hardware and related infrastructure, while providing customers access to the infrastructure through multi-year service agreements. Customer contracts are typically structured with deposits, prepayments, and recurring monthly payments, including take-or-pay provisions intended to provide income visibility throughout the contract term.

For customers that need immediate access to GPU compute capacity, we provide access to high-performance GPU compute infrastructure. Our access to third-party networks encompasses global locations and GPUs capable of supporting a broad range of artificial intelligence, machine learning, and high-performance computing workloads. Compute capacity is delivered to customers through a managed infrastructure model, typically within 48 hours of customer engagement, without requiring customers to make capital investments in physical hardware or data center facilities.

Drug Discovery Services / Legacy Business

The provision of compute services is our priority and remains our focus. We also maintain our legacy oncology drug discovery solutions business, which was previously conducted under the Predictive Oncology Inc. name. Current operations in this business are limited, and we are exploring strategic alternatives, including a potential sale or other disposition, although no definitive plan has been approved. Historically, this business applied AI to support the discovery and development of cancer therapies, with the objective of improving treatment effectiveness and patient outcomes. The business leveraged AI capabilities to provide actionable insights about drug compounds to improve the drug discovery process and increase the probability of drug compound success. In February 2026, we announced that we are exploring strategic alternatives for this oncology drug discovery solutions business. However, as of the date of this Quarterly Report on Form 10-Q, our Board of Directors has not yet committed to a specific course of action.

Strategic Compute Reserve

On September 29, 2025, we adopted a treasury strategy centered on ATH, the native utility token of the Aethir network. Aethir is a decentralized physical infrastructure network developed by DCI Foundation, a Panama foundation company ("DCI"), that aggregates enterprise-grade GPU resources to support artificial intelligence, cloud gaming and other compute-intensive workloads. ATH functions as a proxy for a unit of GPU compute power and serves as the medium of exchange and incentive mechanism for participants in the Aethir network.

Under this strategy, we maintain a Strategic Compute Reserve comprised primarily of ATH, which provides us with immediate access to GPU compute capacity that can be deployed to customers. As a holder of ATH, we accrue unrealized gains or losses from any appreciation or depreciation, as applicable, in the value of ATH tokens, which trade on various cryptocurrency exchanges.

We seek to generate value from our ATH holdings principally by utilizing ATH to procure GPU compute capacity on the Aethir network and reselling that capacity to enterprise, research, and commercial customers. We have not engaged in ATH staking to date and do not currently intend to stake ATH, although we may elect to do so in the future.

Our Strategic Compute Reserve is intended to create value for stockholders through:

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Maintaining access to GPU compute capacity through ownership of ATH;

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Deploying ATH to acquire compute capacity and reselling that capacity to customers;

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Opportunistically purchasing ATH in the open market, including receiving additional ATH incentives under the DCI agreement;

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Earning yield through lending arrangements and other approved treasury activities;

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Holding ATH as a strategic reserve to support future compute demand; and

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Selling ATH from time to time to support working capital requirements, operational needs or other corporate purposes.

There can be no assurance that the value of ATH will increase, and investors should carefully consider the risks associated with digital assets.

Recent Developments

During the quarter ended June 30, 2026, we appointed Kyle Okamoto as President effective April 1, 2026, and appointed Jeremy Yaukey-Witter as Chief Financial Officer effective May 18, 2026.

On April 22, 2026, we announced our entry into a 36-month enterprise infrastructure contract with an enterprise customer (the "April Agreement"). The April Agreement has an aggregate contract value of approximately $260 million. Under the April Agreement, we will deliver a dedicated cluster of 2,304 NVIDIA B300 GPUs and AI-focused high-speed storage infrastructure from a single U.S. Tier 3 data center facility. The cluster is intended to support large-scale AI model training, fine-tuning, and high-throughput inference workloads. The infrastructure will maintain NVIDIA reference architecture throughout the contract period. The initial term of the Agreement is 36 months, with targeted deployment commencing in the third quarter of 2026. The Agreement includes options to renew for additional years beyond the initial term.

In connection with the April Agreement, we purchased technology equipment of $17.1 million in the quarter ended June 30, 2026. This technology equipment consists of GPU cluster infrastructure and is considered construction in progress as of June 30, 2026, and will begin depreciating when placed in service.

On May 15, 2026, in accordance with the terms of the ATM Sales Agreement with Wainwright, we determined to further increase the number of shares we may sell under the Sales Agreement up to an aggregate of $100.0 million, inclusive of approximately $17.0 million of shares previously sold under the Sales Agreement, and we filed an additional prospectus supplement with the SEC on May 15, 2026. The net proceeds from the shares offered and sold pursuant to the ATM Sales Agreement during the three months ended June 30, 2026, after deduction of commissions and offering expenses, were approximately $10.3 million. As of June 30, 2026, approximately $83.0 million remained available for sales under the Sales Agreement.

In July 2026, we secured three new customer contracts with a total contract value of more than $2.8 billion across the United States and Europe. The agreements, secured through the Axe Compute Build program, expand our design-deploy-own-operate model into additional geographies and add significant dedicated, large-scale AI infrastructure capacity to our global footprint.

Capital Requirements

Since inception, we have incurred recurring losses and have not generated sufficient revenues to fund our operations. Historically, we have financed our activities through a combination of debt and equity financings. Since 2023, we have monetized certain assets and reduced operating expenses. In September 2025, we adopted the aforementioned treasury strategy, which introduced both new sources of capital and additional capital requirements. See "Liquidity and Capital Resources-Liquidity and Plan of Financing" and "Liquidity and Capital Resources-Financing Transactions" below.

As of June 30, 2026, we have approximately $21.9 million in cash and cash equivalents. Additionally, we also hold significant ATH digital assets, which may serve as an additional source of liquidity. However, the market price of ATH has exhibited significant volatility over recent periods and remains subject to rapid fluctuations driven by factors such as market sentiment, regulatory developments, network adoption, governance decisions of the Aethir Foundation, and broader crypto-asset market conditions.

Additional sources of liquidity include our at-the-market ("ATM") facility, under which approximately $83.0 million remains available as of the prospectus supplement filed with the SEC on May 15, 2026, as well as a standby equity purchase agreement ("SEPA") that allows us to sell up to $10.0 million of its common stock, in each case subject to the terms, conditions, and limitations of the respective arrangements.

Our future cash requirements and the adequacy of our available resources will depend on our ability to generate revenue from our compute services and treasury strategy, as well as our ability to access additional financing. We expect operating losses to continue in the near term as we scale these initiatives. Given our recent strategic shift, our future operating results are inherently uncertain, and period-to-period comparisons may not be indicative of future performance

Results of Operations

Comparison of the three months ended June 30, 2026 and 2025:

		2026				2025				Difference
Revenue		$	3,214,992			$	2,682			$	3,212,310
Gains (losses) on digital assets			(13,125,352	)			-				(13,125,352	)
Cost of revenues			3,013,339				18,221				2,995,118
General and administrative expenses			2,735,922				1,875,655				860,267
Research and development			492,227				499,715				(7,488	)
Sales and marketing expenses			1,176,162				268,959				907,203
Total operating gain (loss)			(17,328,010	)			(2,659,868	)			(14,668,142	)
Other income (expense)			122,128				680,973				(558,845	)
Income (loss) from continuing operations			(17,205,882	)			(1,978,896	)			(15,226,986	)
Income (loss) from discontinued operations			-				(91,567	)			91,567
Net income (loss)		$	(17,205,882	)		$	(2,070,462	)		$	(15,135,420	)

Comparison of the six months ended June 30, 2026 and 2025

		2026				2025				Difference
Revenue		$	3,250,303			$	112,992			$	3,137,311
Gains (losses) on digital assets			(17,421,620	)			-				(17,421,620	)
Cost of revenues			3,016,195				63,339				2,952,856
General and administrative expenses			5,644,958				3,703,855				1,941,103
Research and development			1,039,672				1,020,121				19,551
Sales and marketing expenses			1,184,549				272,592				911,957
Total operating gain (loss)			(25,056,691	)			(4,946,915	)			(20,109,776	)
Other income (expense)			141,866				682,604				(540,738	)
Income (loss) from continuing operations			(24,914,825	)			(4,264,311	)			(20,650,514	)
Income (loss) from discontinued operations			-				(249,024	)			249,024
Net income (loss)		$	(24,914,825	)		$	(4,513,335	)		$	(20,401,490	)

Revenue. We recognized revenue of $3.3 million for the six months ended June 30, 2026, compared to $0.1 million for the six months ended June 30, 2025. The increase was driven by a shift in our operating activities: revenue in the current period was generated primarily by our Compute Services and Treasury Management segment, while revenue in the prior-year period was attributable to our Drug Discovery Services segment.

Gains (losses) on digital assets. We recorded a loss on digital assets of $17.4 million in the six months ended June 30, 2026, with no such losses recorded in the comparative period. The losses in the 2026 period primarily represent the change in fair value of the Company's ATH holdings, which were not present in the comparative period.

Cost of revenues. Cost of revenues was $3.0 million and $0.1 million in the six months ended June 30, 2026 and 2025, respectively. Similarly to revenue, cost of revenues increased due to a shift in our operating activities.

General and administrative expenses. General and administrative ("G&A") expenses primarily consist of management salaries, professional fees, consulting fees, administrative fees, and general office expenses. G&A expenses increased by $1.9 million to $5.6 million in the six months ended June 30, 2026, compared to $3.7 million in the comparable period in 2025. The increase was primarily due to severance expense related to the prior Chief Executive Officer, higher payroll expenses resulting from salary increases for existing employees, hiring of additional employees related to the Compute Services and Treasury Management segment, and increased stock-based compensation expense recognized during the six months ended June 30, 2026.

Research and development expenses. Research and development expenses primarily consist of expenses related to product development, prototyping, and testing. Research and development expenses were stable at $1 million in the six months ended June 30, 2026, and 2025.

Sales and marketing expenses. Sales and marketing expenses consist of expenses required to market and sell our products and services. Sales and marketing expenses increased by $0.9 million to $1.2 million in the six months ended June 30, 2026, compared to $0.3 million in the comparable period in 2025. The increase was primarily due to increased sales and marketing activities to support the expansion of our compute services business.

Other income. We recognized other income of $0.1 million during the six months ended June 30, 2026, compared to $0.7 million in the comparable period in 2025. Other income in 2026 consisted of income from the Aethir lending arrangement and other income in 2025 consisted of the write-off of aged accounts payable and related accrued expenses.

Liquidity and Capital Resources

Cash Flows

On June 30, 2026, we had $21.9 million in cash and cash equivalents. Cash and cash equivalents from continuing operations increased by $11.1 million from December 31, 2025, due to the following factors.

Net cash provided by operating activities of continuing operations was $17.3 million in the six months ended June 30, 2026, compared to net cash used in operating activities of continuing operations of $4.3 million in the six months ended June 30, 2025. The cash provided by operating activities in the 2026 period was driven primarily by a $60.6 million increase in contract liabilities reflecting customer prepayments for compute capacity, partially offset by $34.1 million of compute prepayments and a $3.3 million increase in accounts receivable. Our net loss for the period included non-cash losses on digital assets of $17.4 million, which did not affect operating cash flows.

We used cash of $17.1 million in investing activities of continuing operations in the six months ended June 30, 2026, to acquire property and equipment. No cash was used in investing activities of continuing operations in the six months ended June 30, 2025.

Net cash provided by financing activities of continuing operations was $10.9 million in the six months ended June 30, 2026, compared to $3.2 million provided by financing activities of continuing operations in the six months ended June 30, 2025. Cash provided by financing activities of continuing operations in the 2026 period was primarily related to net proceeds of $10.8 million from the issuance of common stock and warrants, including sales under our at-the-market offering program. Cash provided by financing activities of continuing operations in the 2025 period was primarily related to proceeds from the issuance of common stock and warrants.

No cash was used or provided by discontinued operations in the six months ended June 30, 2026, compared to $0.8 million provided by discontinued operations in the six months ended June 30, 2025. The cash provided in the 2025 period related to proceeds from the sale of Eagan assets pursuant to the asset purchase agreement executed with DeRoyal in March 2025

Liquidity and Plan of Financing

Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We have incurred significant and recurring losses from operations for the past several years. As of June 30, 2026, and December 31, 2025, we had cash and cash equivalents of $21.9 million and $10.8 million, respectively, and working capital of $17.4 million and $38.5 million, respectively, and accumulated deficit of $438.4 million and $413.5 million, respectively.

To meet our short-term liquidity needs in the next twelve months, which are primarily comprised of working capital requirements, we have access to various sources of short-term liquidity including cash and cash equivalents and ATH tokens in our treasury. These include approximately 2.7 billion ATH tokens as of June 30, 2026, and an additional 1.6 billion ATH tokens expected to vest over the subsequent twelve-month period. Although we do not anticipate needing to use our ATH to meet our short-term liquidity needs, to the extent necessary, we may seek to use proceeds from the sale of our ATH to meet such needs. Additional sources of liquidity could include our ATM facility and the SEPA facility, subject to certain limitations and conditions associated with the respective facilities.

We consider the ATM facility to be a viable source of incremental liquidity during fiscal year 2026, subject to market conditions. We do not assume immediate or full utilization of the ATM facility in our base-case liquidity forecast. Rather, ATM proceeds are considered a discretionary funding source that could be accessed opportunistically during periods of sufficient market liquidity and pricing stability. Based on current market conditions, we believe that any ATM issuances, if undertaken, would likely have potential to occur in fiscal year 2026.

Additionally, subsequent to June 30, 2026, the SEC declared effective our Form S-3 registration statement on July 20, 2026. The registration statement permits us to offer up to $1 billion of securities from time to time. No securities have been issued under the registration statement as of June 30, 2026; however, this registration statement allows for future financing flexibility.

Beyond the next twelve months, our long-term liquidity needs are primarily for obligations related to working capital requirements. Our ability to meet these needs and the adequacy of available funds depend on our ability to generate income from our compute services and treasury strategy, and the availability of future financing to fulfill our business plans. We will also have access to an additional 1.6 billion ATH tokens expected to be vested beyond twelve months from June 30, 2026.

We note that a significant portion of our liquidity is held in ATH, a digital asset, which has exhibited substantial price volatility over recent trailing 3-, 6-, and 9-month periods. We acknowledge that ATH prices are subject to rapid fluctuations due to factors including market sentiment, regulatory developments, network adoption, governance decisions of the Aethir Foundation, and broader crypto-asset market conditions.

We have considered downside price scenarios in which the market price of ATH declines materially over the 12-month period following the balance sheet date. Under these scenarios, the U.S. dollar value of our ATH holdings available for liquidity purposes would be reduced, which has the potential to pressure our ability to fund operating expenses.

We have incorporated these possible scenarios when determining the our liquidity, however, we believe we have access to sufficient alternative liquidity sources, as noted above, to weather adverse ATH market price conditions

Financing Transactions

We have primarily funded our operations through a combination of debt and equity instruments including short-term borrowings, and a variety of debt and equity offerings. We have no off-balance sheet transactions.

At The Market Offering

We maintain an ATM equity offering program pursuant to a Sales Agreement with Wainwright under which we may offer and sell shares of our common stock from time to time. In May 2026, we increased the capacity under the ATM program to an aggregate of $100.0 million. During the three months ended June 30, 2026, we received approximately $10.3 million of net proceeds from sales under the ATM program with the most recent bringdown occurring on April 27, 2026. As of June 30, 2026, approximately $83.0 million remained available for future issuances under the program.

Standby Equity Purchase Agreement

In July 2025, we entered into a Standby Equity Purchase Agreement ("SEPA") with YA II PN, Ltd. that provides us with the ability to sell up to $10.0 million of common stock from time to time, subject to the terms, conditions and limitations set forth in the agreement. The facility may provide an additional source of capital to support our operations and growth initiatives. As of June 30, 2026, we have not issued any shares or received any proceeds under the SEPA.

September 2025 Private Placements

In September 2025, we completed private placement transactions consisting of a cash PIPE financing that generated gross proceeds of approximately $50.8 million and a crypto-denominated PIPE transaction for ATH digital assets with a discounted value of approximately $173.3 million. The transactions provided significant capital to support our operational, strategic, and treasury initiatives.

Recent Accounting Developments

See "Recent Accounting Pronouncements" and "Recently Adopted Accounting Standards" under Note 2 - Summary of Significant Accounting Policies to the unaudited condensed financial statements of this Quarterly Report on Form 10-Q for further details.