Exodus Movement, Inc.: Form 10-Q for the period ended Jun 30, 2025

The following discussion and analysis of Exodus’ financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 1A. Risk Factors” in the Form 10-K and “Cautionary Note on Forward Looking Statements” and in other parts of this Quarterly Report on Form 10-Q.

Overview of Our Business

We are engaged principally in the business of creating and distributing self-custodial wallets for digital assets. Because a majority of our revenue is derived from services provided by application programming interface (“API”) providers (“API Providers”) to persons located outside the United States pursuant to a transaction-based structure, our profitability is dependent on a number of factors including the pricing of digital assets, the volume of transactions and the quality of our third-party relationships.

Our revenues are primarily derived from digital asset-related transactions and consist of fees from third-party API agreements. These API agreements typically consist of transaction-based contracts and tiered subscription contracts where fees are generated based on transaction volume which is primarily driven by users interacting with the API providers.

Our expenses primarily consist of:

• Technology, development, user support;
• Amortization expense relating to software development; and
• General and administrative expenses (primarily including administrative, legal, financial operations, information technology services, marketing and advertising expenses).

Based on the services offered and transactions conducted by API Providers, the following table shows the digital assets that are most material to our business by revenue.

Known Trends and Uncertainties

Stablecoins - We expect stablecoin adoption will increase globally as cryptocurrencies become more widely used in the future. User adoption of cryptocurrency networks for payments, or lack thereof, as well as worldwide government regulation, both friendly and adversarial, have and will continue to influence global stablecoin usage. Stablecoins will not function without a digital asset wallet. The company’s wallet supports a wide variety of stablecoins, including the largest coins such as Tether’s USDT and Circle’s USDC. Additionally, by supporting over 40 different networks, including large networks like Ethereum, Solana, and Tron, we believe Exodus is positioned to natively support stablecoins wherever current and future use cases emerge. Furthermore, Exodus’ XO Swap product already provides the company’s partners a solution for swapping between stablecoins and between blockchains.

Cloud based infrastructure expense – Cloud infrastructure expenses decreased $0.3 million and $0.4 million for the three and six months ended June 30, 2025, respectively, compared to three and six months ended June 30, 2024 primarily due to cost optimization efforts, including monthly reviews by the Development Operations team to reduce waste, improve instance efficiency, and minimize inter-zone transfer costs. We anticipate increased cloud infrastructure expenses as the platform continues to grow due to increased database capacity and new users.

Investment in human capital – Costs related to investment in human capital (including recruiting costs, salary, incentive and compensation costs) increased $1.3 million and $2.6 million for the three and six months ended June 30, 2025 compared to three and six months ended June 30, 2024, primarily due to an increase in salaries, payroll taxes and stock based compensation. As the Exodus platform continues to expand, we anticipate the need to add more team members to accommodate the growth in our business, which is expected to materially increase expenses as a result of the impact on the human capital costs described above. Human capital costs are also expected to increase due to the need to add additional team members to address compliance with the evolving regulatory environment, including as a publicly traded company.

Marketing expenses – Marketing-related costs increased $3.4 million and $4.5 million for the three and six months ended June 30, 2025 compared to three and six months ended June 30, 2024, respectively. The increase was primarily due to increased spending on website advertisements targeted at the digital asset focused spaces and on online platforms, such as the App Store, and marketing agency expenses. To date, we have primarily focused our marketing strategy toward user growth. We continue to evaluate our marketing strategy and in the future may decide to refocus the current organic growth-based strategy in growing our user base to a more competitive approach, which would be expected to further increase marketing-related expenses.

Changes in tax laws –We operate in various jurisdictions and are subject to changes in applicable tax laws, treaties or regulations in those jurisdictions. A material change in the tax laws, treaties or regulations, or their interpretation, of any jurisdiction with which we do business, or in which we have significant operations, could adversely affect us. For example, the new Pillar 2 approach, which came into effect in 2023 in certain jurisdictions, will establish a global minimum tax rate of 15%, such that multinational enterprises with an effective tax rate in a jurisdiction below this minimum rate will need to pay additional tax. While many aspects of the application of Pillar 2 remain to be clarified, including how the jurisdictions in which we operate, and those in which we and our subsidiaries are based, choose to implement the Organization for Economic Cooperation and Development’s approach in their tax treaties and domestic tax laws, we do not expect Pillar 2 to apply in 2025. On July 4, 2025, the “One Big Beautiful Bill Act” (P.L. 119‑21) was enacted into law. The legislation reinstates and extends several provisions of the 2017 Tax Cuts and Jobs Act, including permanent 100% bonus depreciation, enhanced Section 179 expensing, full R&D expense deduction for domestic expenditures and modification to the international tax framework. We are currently assessing its impact on our consolidated financial statements.

Growth Initiative and Transaction-Related Expenses

During the three and six months ended June 30, 2025, the Company incurred approximately $1.2 million and $3.0 million in expenses associated with the evaluation, negotiation, and travel due to prospective business acquisitions. The Company expects these expenses to continue throughout 2025 as it continues to evaluate potential acquisition targets. These expenses primarily include legal and advisory costs and are recorded within general and administrative expenses in the accompanying condensed consolidated statements of operations. There were no growth initiative expenses in the three and six months ended June 30, 2024.

In addition, the Company incurred approximately $2.2 million and $6.5 million in revenue sharing expenses related to its business-to-business partnerships for the three and six months ended June 30, 2025, respectively and approximately $0.4 million and $0.8 million in revenue sharing expenses related to its business-to-business partnerships for the three and six months ended June 30, 2024. While the Company does not control the operations or growth of its partners, their success can directly impact our own performance. As these partners grow or as new partnerships are formed, our associated revenue sharing expenses are expected to increase. These expenses represent costs of revenue and are included within technology, development, and user support expenses in the consolidated statements of operations.

Monthly Active Users

Monthly Active Users ("MAUs") were 1.5 million at each of June 30, 2025 and 2024. Our strategic focus remains on expanding our active user base, improving app features, and expanding our business-to-business partnerships. We believe that over the long term, interest in digital assets and digital asset markets will continue to increase. However, during any given period, we cannot be certain that our MAU growth efforts will be effective or that interest in digital assets will remain or continue to increase.

MAUs are defined as any user with activity history in any month. A user has “activity history” if, in the last calendar month, the user performed any activity within the application such as opening their application to check digital asset prices, reading news, or accessing the services of our API Providers. MAUs provide a measurement of user engagement, allowing management to compare engagement over time. MAUs consist of both funded wallets and unfunded wallets. Because Exodus users do not have accounts, users do not close an account. Therefore, users may be inactive one month and active the next as they re-engage with the platform. Management views increasing interest in the Exodus Platform over time as a key indicator of increasing revenue, especially for MAUs outside of the United States as the likelihood of revenue generating transactions increases as user interest increases.

Quarterly Funded Users

In addition to MAUs, we utilize Quarterly Funded Users (QFUs) to assess user trends and market sentiment. QFUs are defined as unique users with an Exodus wallet that was funded at any point prior to or during the fiscal quarter and during which the user remained active, i.e. opening the app during the period. A wallet is considered “funded” if it holds a non-zero balance of any supported digital asset, QFUs offer a longer-term view of engagement by capturing users who have already funded their wallets.

QFUs totaled 1.7 million and 1.5 million as of June 30, 2025 and 2024, respectively, reflecting an increase of 0.2 million, or approximately 13%. This growth reflects user engagement in addition to active user count. We expect MAUs to fluctuate more significantly in response to app usage patterns and broader market conditions. In contrast, QFUs provide a longer-term view of engagement, representing a more stable cohort—users with funded wallets actively participating in the Exodus platform.

We consider both MAUs and QFUs to be Key Performance Indicators (KPIs) that provide insight into user activity and platform engagement. While MAUs may fluctuate more significantly due to changes in app usage patterns and broader market conditions, QFUs offer a longer-term view of engagement by capturing users with actively funded wallets who are transacting on the platform. Management uses these metrics to monitor platform health, inform product and marketing strategies, and assess user trends over time.

Results of Operations

Results of operations for the three and six months ended June 30, 2025 and 2024 (in thousands):

Revenue increased $3.5 million, or 16%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase was primarily driven by exchange aggregation revenue, which increased $3.5 million, or 17%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, which was primarily attributable to volume exchange growth related to our business-to-business partner efforts. Non-exchange aggregation (i.e., fiat onboarding, staking, consulting, and other) revenue increased $0.05 million, or 2%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase in non-exchange revenue was primarily driven by a $0.6 million (113%) rise in staking revenue, reflecting growth in total staked assets. This was partially offset by a 62% year-over-year decline in NFT and consulting revenue, due to lower business-to-business NFT activity and reduced demand for consulting services.

Revenue increased $10.5 million, or 20%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The increase was primarily driven by exchange aggregation revenue, which increased $10.5 million, or 23%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, which was primarily attributable to volume exchange growth related to our business-to-business partner efforts. Non-exchange aggregation (i.e., fiat onboarding, staking, consulting, and other) revenue decreased $0.1 million, or 2%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The non-exchange revenue decrease was driven by lower NFT revenue with a decrease of $0.8 million or 86% as a result of the business-to-business NFT revenue decreasing due to reduced market demand within the NFT market, but partially offset by growth in staking and fiat revenue, which grew by 45% and 8%, respectively, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024.

For the three and six months ended June 30, 2025, five API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $19.3 million and $43.9 million, respectively. For the three and six months ended June 30, 2024, four API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $15.5 million and $36.7 million, respectively.

The following table summarizes the revenue by users of the platform and the business-to-business partnerships for the three and six months ended June 30, 2025 and 2024:

Technology, development and user support increased $4.0 million, or 37%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. The increase was primarily due to a $1.5 million increase in partner fee expense as a result of a correlated increase in revenue from business-to-business partnerships, a $1.5 million increase in team member compensation and benefit expense as a result of increased team member compensation, payroll taxes and stock based compensation, a $0.6 million decrease in capitalized labor as a result of impairment of software projects, a $0.4 million increase in testing expenses, and a $0.2 million increase in subscription expenses primarily driven by higher costs associated with key infrastructure vendors for development tools, application development, performance optimization and security protections, partially offset by a $0.3 million dollar decrease in cloud services expenses and a $0.2 million decrease in depreciation and amortization expenses.

Technology, development and user support increased $8.2 million, or 38%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. The increase was primarily due to a $5.8 million increase in partner fee expense as a result of a correlated increase in revenue from business-to-business partnerships, a $0.7 million increase in team member compensation and benefit expense as a result of increased team member compensation, payroll taxes and stock based compensation, a $1.3 million decrease in capitalized labor as a result of impairment of software projects, a $0.4 million increase in testing expenses, and a $0.5 million increase in subscription expenses primarily driven by higher costs associated with key infrastructure vendors for development tools, application development, performance optimization and security protections, partially offset by a $0.4 million decrease in depreciation and amortization expenses and a $0.1 million decrease in technology equipment.

General and administrative expenses increased $9.8 million, or 108%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. Expenses driving the increase include a $3.4 million increase in marketing expenses, a $3.3 million increase in meeting and travel expense, a $2.5 million increase in legal and regulatory expenses, a $1.3 million increase in legal and consulting expenses, a $0.3 million increase in political contributions, a $0.2 million increase in subscription expenses, partially offset by a $1.4 million decrease in foreign currency expense and a $0.2 million decrease in team member compensation and benefit expenses.

General and administrative expenses increased $16.0 million, or 94%, for the six months ended June 30, 2025, compared to the six months ended June 30, 2024. Expenses driving the increase include a $4.5 million increase in marketing expenses, a $4.5 million increase in meeting and travel expenses, a $2.5 million increase in legal and regulatory expenses, a $1.8 million increase in team member compensation and benefit expenses as a result of increased team member compensation, payroll taxes and stock based compensation, a $3.3 million increase in legal and consulting expenses, $1.4 million increase in political contributions, a $0.4 million increase in subscription expenses, and a $0.1 million increase in technology equipment expenses, partially offset by a $2.9 million decrease in foreign currency expense and $0.1 million in network fees.

The Company experienced a favorable fluctuation in the market price of digital assets held during the three months ended June 30, 2025, primarily driven by institutional inflows and ETF adoption, regulatory clarity and stablecoin legislation, and macro and geopolitical tailwinds. During the three months ended June 30, 2025, the Company recognized net realized gains from exchange of digital assets of $1.2 million and net unrealized gains from remeasurement of digital assets of $51.2 million. During the three months ended June 30, 2024, the Company recognized net realized gains from exchange of digital assets of $1.8 million and net unrealized losses from remeasurement of digital assets of $19.0 million.

The Company experienced a favorable fluctuation in the market price of digital assets held during the six months ended June 30, 2025, primarily driven by institutional inflows and ETF adoption, regulatory clarity and stablecoin legislation, and macro and geopolitical tailwinds. During the six months ended June 30, 2025, the Company recognized net realized gains from exchange of digital assets of $6.3 million and net unrealized gains from remeasurement of digital assets of $17.3 million. During the six months ended June 30, 2024, the Company recognized net realized gains from exchange of digital assets of $5.8 million and net unrealized gains from remeasurement of digital assets of $33.7 million.

Income tax expense was $0.9 million for the six months ended June 30, 2025, compared to an expense of $9.3 million for the six months ended June 30, 2024. The effective tax rate during the six months ended June 30, 2025 was 3.6% compared to 17.3% during the six months ended June 30, 2024. For the six months ended June 30, 2025, the change from the effective rate was primarily impacted by the change in permanent differences, including non-deductible expenses, and discrete items, including stock-based compensation and tax effect of realized and unrealized digital asset gains and losses during the period. For the six months ended June 30, 2024, the change from the effective rate was primarily impacted by the change in permanent differences and discrete items, including the tax benefit from the foreign derived intangible income and the effect of digital asset gains and losses, specifically recognized in the period.

Liquidity and Capital Resources

Overview

Our primary source of funding is from API fee revenues. We fund our operational costs from these revenues. Our primary use of funds is payment of our operating costs, which consist mostly of compensation and benefit expenses and security costs. As of the date of this filing, based on current operating plans, we believe that our existing cash and cash equivalents, treasury bills, USDC and digital assets, together with cash generated from our operations, will be sufficient to fund our operations and anticipated growth for the next twelve months and thereafter for the foreseeable future. We may seek to opportunistically raise additional capital through private or public equity securities offerings in the future.

We expect that increased market acceptance of digital assets and blockchain technology, combined with our expected continued growth of the Exodus platform, market acceptance of our services and ability to attract and retain users on our platform, should support our ability to generate sufficient cash to meet our requirements and plans for cash.

Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

20

Net Cash Used In Operating Activities

Net cash used in operating activities increased from June 30, 2024 to June 30, 2025 by $9.5 million. The primary drivers of the change were a decrease in net income of $20.4 million, an increase of $4.5 million in operating activities settled in digital assets and USDC, an increase of $2.4 million in working capital, and a decrease in deferred tax expense of $4.1 million, offset by a net decrease on digital assets of $15.9 million and an increase in stock based compensation of $2.0 million. The primary drivers of the increase in operating activities settled in digital assets and USDC included an increase to revenue of $11.6 million related to increased transaction volume, increased currency conversion of $2.0 million and increased payroll liabilities of $2.1 million, partially offset by $6.5 million of increased expenses, $2.3 million of conversion of digital assets and USDC to cash, net for use in operational expense and $2.3 million in accounts receivable.

Net Cash Provided By Investing Activities

Net cash provided by investing activities increased from June 30, 2024 to June 30, 2025 by $16.8 million. The increases were related to $24.0 million of net change in treasury bills investments and redemptions, proceeds for the sale of future token interests of $2.0 million, a decrease in purchases of $1.0 million of digital assets, partially offset by a decrease of $10.2 million of digital assets sold for cash.

Net Cash Used In Financing Activities

Net cash used in financing activities increased from June 30, 2024 to June 30, 2025 by $8.6 million. This was primarily driven by cash used for the repurchase of shares of our common stock to pay employee withholding taxes as a part of our 2019 and 2021 Plan.

Total Digital Assets and Liquid Assets

The following tables show the Company’s holdings of digital assets and cash and cash equivalents (including treasury bills with a maturity date of less than three months), USDC, and treasury bills with a maturity date of greater than three months.

The digital asset holdings as of June 30, 2025 and December 31, 2024 were (in thousands, except units):

21

The liquid asset holdings as of June 30, 2025 and December 31, 2024 were (in thousands):

Material Capital Commitments

Exodus currently has no material commitments for capital expenditures.

Critical Accounting Estimates

See the section titled “Critical Accounting Estimates” set forth under “Item 7. Management’s Discussion and Analysis of the Financial Condition and Results of Operations” in the Form 10-K. There have been no material changes from those disclosed in the Form 10-K.

Market price risk of digital assets

A large portion of our revenue generated from API providers is received in Bitcoin. A decline in the market price of digital assets had (and could in the future, have) an adverse effect on the Company's operations, the value of our digital assets, and our future operations and cash flows.

The market price of Bitcoin is impacted by a variety of factors and is determined primarily using data from various exchanges, over-the-counter markets and derivative platforms. The digital asset industry has previously been negatively impacted by market price volatility. Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the value of Bitcoin. There can be no assurance that we will be able to exchange our digital assets for U.S. dollars on a timely basis, if at all, or for a fair price. If the value of our digital assets declines, or if we experience difficulties converting our digital assets to U.S. dollars, we may not have sufficient liquidity to satisfy our liabilities, expenses and costs as they become due, which may negatively affect our business operations and financial condition. A hypothetical 10% increase or decrease in the digital assets held would have resulted in a change to the fair value of $23.3 million and $19.6 million as of June 30, 2025 and December 31, 2024, respectively.

Interest rate risk

Our exposure to changes in interest rates primarily relates to interest earned on our cash and cash equivalents and U.S. Treasury Bills with maturities of approximately six months or less. We had no outstanding debt subject to interest rate risk as of June 30, 2025 and consequently, we do not currently expect to be exposed to fluctuations in interest rates for the foreseeable future.

Our investment policy and strategy related to our cash, cash equivalents, and treasury bills is to preserve capital and meet liquidity requirements without increasing risk. Our cash and cash equivalents consist of money market funds denominated in U.S. dollars, cash deposits, and treasury bills acquired with less than three months to maturity. Treasury bills outside of cash and cash equivalents include amounts acquired with three months to twelve months to maturity. Therefore the fair value of our cash, cash equivalents, and treasury bills would not be significantly affected by either an increase or a decrease in interest rates. A hypothetical 100 basis points increase or decrease in average interest rates applied to our daily balances held as of June 30, 2025 and 2024, would have resulted in a $0.6 million and a $0.7 million increase or decrease respectively, in interest earned on cash, cash equivalents, and treasury bills. The Federal Reserve has increased the Federal Funds Rate over 500 basis points since March 31, 2021 to control current levels of inflation and as of June 30, 2025, the Federal Funds Rate was 4.33%. A decrease in interest rates is possible. A hypothetical 500 basis points increase or decrease in average interest rates applied to our daily balances held as of June 30, 2025 and 2024, which hypothetical basis point increase corresponds closely to the increase of the Federal Funds Rate since early 2021, would have resulted in a $2.9 million and $3.5 million increase or decrease, respectively, in interest earned on cash, cash equivalents, and treasury bills.

Foreign currency risk

Foreign currency transaction risk

Revenues, expenses, and financial results of our foreign subsidiaries are recorded in the functional currency of these subsidiaries. Our foreign currency exposure is primarily related to transactions denominated in Swiss Francs attributable to cash and cash equivalents, and other intercompany transactions where the transaction currency is different from a subsidiary’s functional currency. Changes in foreign exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our results of operations as expressed in U.S. dollars. We have experienced and will continue to experience fluctuations in our results of operations as a result of gains or losses on the settlement and the remeasurement of monetary assets and liabilities denominated in foreign currencies that are not the functional currency.

We recognized net foreign currency gains of $1.9 million and losses of $0.9 million for the six months ended June 30, 2025 and 2024, respectively, in general and administrative expense, net in the condensed consolidated statements of operations and comprehensive income (loss). If an adverse 10% foreign currency exchange rate change was applied to total monetary assets, liabilities, and commitments denominated in currencies other than the functional currencies at the balance sheet date, it would not have a material impact on our financial results.

We have not, but may in the future enter into derivatives or other financial instruments in an attempt to hedge our exposure to foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations. Additionally, the volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our international operations increase our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a material impact on our future results of operations and cash flows.

Foreign currency translation risk

Fluctuations in functional currencies from our net investment in international subsidiaries expose us to foreign currency translation risk, where changes in foreign currency exchange rates may adversely affect our results of operations upon translation into U.S. dollars. We recognized losses on translation adjustments, net of tax, of $1.3 million for the six months ended June 30, 2025, compared to gains on translation adjustments, net of tax, of $0.7 million for the six months ended June 30, 2024, in the condensed consolidated statements of operations and comprehensive income (loss). As of June 30, 2025 and 2024, a 10% increase or decrease on foreign currency exchange rates for translation purposes would not have a material impact on our financial results.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of, and under the supervision of, our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated the effectiveness of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, 2025. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2025 the Company’s disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting, as described below.

Previously Reported Material Weakness

We identified errors in our previously reported financial information as of and for the year ended December 31, 2021. As a result of the errors that were identified, we identified a material weakness in the Company’s control environment whereby the Company did not design and maintain effective internal control over financial reporting with respect to the expertise and quantity of its resources. Specifically, we did not effectively execute a strategy to hire, train, and retain a sufficient quantity of personnel with an appropriate level of training, expertise, and experience in certain areas important to financial reporting. In addition, we also identified a material weakness whereby we did not design and implement effective control activities based on the criteria in the Internal Control -- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”). Specifically, the control activities did not adequately (i) address relevant risks, (ii) provide evidence of performance, (iii) provide appropriate segregation of duties, or (iv) operate at a level of precision to identify all potentially material errors. While the Company is progressing in its efforts to remediate the existing material weaknesses in full, certain control activities attributing to those material weaknesses continue to exist as of June 30, 2025.

Remediation Plan Update of Previously Reported Material Weaknesses

We have continued to implement remediation activities designed to improve our internal control over financial reporting and address the material weaknesses previously disclosed. Since March 2025, we added experienced accounting leadership, including hiring key accounting management positions, to strengthen oversight of our financial reporting processes. These remediation activities include the following:

• During the three months ended June 30, 2025, management hired and trained additional personnel with an appropriate level of expertise and professional experience in certain areas critical to the financial reporting process to allow for appropriate segregation of reporting duties and enhance its internal control over financial reporting. Additionally, management replaced certain key accounting leadership positions with enhanced expertise to strengthen supervision and control oversight.
• During the three months ended June 30, 2025, we engaged with a third-party consultant with experience in the digital asset sector to provide professional services to assist management with remediation of specific control deficiencies and overall process improvement and documentation. These remediation activities commenced in June 2025 and are currently ongoing.
• We implemented enhancements to the financial close and review process, including additional documentation, workflow controls, and formal review procedures.
• We enhanced control precision and accountability through improved review-level controls and more rigorous documentation standards.
• As previously disclosed, we implemented an approval workflow in our general ledger system to enforce segregation of duties, and implemented entity-level and process-level control activities across the Company’s operations and information technology environment.

We believe these actions have significantly improved our internal control over financial reporting. However, the material weaknesses previously identified remain unremediated as of June 30, 2025. Although management has made substantial progress, additional evaluation is ongoing to determine whether all control activities are sufficiently designed and operating as intended. External consultants are assisting management in reviewing and refining the control environment to improve alignment with the COSO framework. Management will continue to assess these enhancements and make additional improvements as necessary. We cannot ensure that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. While we believe the steps taken to date and those planned for future implementation will improve the effectiveness of our internal control over financial reporting, we have not completed all remediation efforts. The material weaknesses cannot be considered remediated until applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As we continue to evaluate and work to remediate the control deficiencies that gave rise to the material weaknesses, we may determine that additional measures or time are required to address the control deficiencies or that we need to modify or otherwise adjust the remediation measures described above. Accordingly, we will continue to monitor and evaluate the effectiveness of our internal control over financial reporting.

We believe that the steps detailed above, are substantially implemented and once successfully tested, will remediate the identified material weaknesses.

Changes in Internal Control over Financial Reporting

Except as described above with respect to our remediation plan, there have been no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in our risk factors from those previously disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2024 and Item 1A of Part II of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025.