Janover (JNVR) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and related disclosures for DeFi Development Corp Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for DeFi Development Corp, including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the company's accounting policies, revenue recognition, segment reporting, digital asset strategy, debt, equity, and other financial instruments for the periods ended June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Asset/Liability Category | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | ASSETS | | | | Total current assets | $5,578 | $3,275 | | Digital assets, at fair value | $89,239 | $— | | Digital assets, at carrying value, net | $7,891 | $— | | Total assets | $107,230 | $4,376 | | LIABILITIES | | | | Total current liabilities | $5,142 | $593 | | Long-term debt | $21,210 | $— | | Total liabilities | $27,617 | $874 | | STOCKHOLDERS' EQUITY | | | | Total stockholders' equity | $79,613 | $3,502 | - Total assets significantly increased from $4,376 thousand at December 31, 2024, to $107,230 thousand at June 30, 2025, primarily driven by the introduction of digital assets (fair value and carrying value) totaling $97,130 thousand[15] - Total liabilities also saw a substantial increase from $874 thousand to $27,617 thousand, mainly due to new long-term debt ($21,210 thousand) and increased current liabilities[15] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income or loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Revenue | $1,986 | $441 | $2,273 | $852 | | Operating income (loss) | $17,190 | $(852) | $16,307 | $(1,870) | | Net income (loss) | $15,432 | $(805) | $14,654 | $(1,769) | | Basic Net income (loss) per share | $1.09 | $(0.08) | $1.21 | $(0.18) | | Diluted Net income (loss) per share | $0.84 | $(0.08) | $1.05 | $(0.18) | - Revenue for the three months ended June 30, 2025, increased by 350.3% to $1,986 thousand from $441 thousand in the prior year, and for the six months, it increased by 166.7% to $2,273 thousand from $852 thousand[16] - The company reported a significant turnaround from operating losses to operating income, with $17,190 thousand for the three months and $16,307 thousand for the six months ended June 30, 2025, primarily due to a $21,194 thousand gain from changes in fair value of digital assets[16] Condensed Consolidated Statements of Changes in Stockholders' Equity This section tracks changes in the company's equity over time, reflecting contributions, distributions, and net income Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Item | Balances at Dec 31, 2024 | Balances at June 30, 2025 | | :-------------------------------- | :----------------------- | :------------------------ | | Additional Paid-in Capital | $12,872 | $74,329 | | Accumulated Earnings (Deficit) | $(9,370) | $5,284 | | Total Stockholders' Equity | $3,502 | $79,613 | - Total stockholders' equity increased substantially from $3,502 thousand at December 31, 2024, to $79,613 thousand at June 30, 2025, driven by significant increases in additional paid-in capital and a shift from accumulated deficit to accumulated earnings[17] - Key contributors to the increase in equity include issuance of common stock ($36,015 thousand), discount on convertible notes ($11,704 thousand), conversion of convertible notes ($9,566 thousand), and net income ($15,432 thousand) during the six months ended June 30, 2025[17] Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(2,057) | $(1,827) | | Net cash used in investing activities | $(61,251) | $(13) | | Net cash provided by financing activities | $63,261 | $1 | | Net increase (decrease) in cash and cash equivalents | $(47) | $(1,839) | | Cash and cash equivalents, at end of period | $2,470 | $3,237 | - Net cash used in operating activities slightly increased to $(2,057) thousand for the six months ended June 30, 2025, from $(1,827) thousand in the prior year[18] - Net cash used in investing activities dramatically increased to $(61,251) thousand, primarily due to the purchase of digital assets, compared to $(13) thousand in the prior year[18] - Net cash provided by financing activities significantly increased to $63,261 thousand, mainly from proceeds from convertible notes and common stock issuances, compared to $1 thousand in the prior year[18] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements NOTE 1—OVERVIEW AND SIGNIFICANT ACCOUNTING POLICIES This note provides an overview of the company's operations and details its significant accounting policies Overview This section introduces the company's business model, recent name change, and new digital asset treasury strategy - DeFi Development Corp (formerly Janover Inc.) operates an AI-powered online platform connecting the commercial real estate industry with data, software subscriptions, and value-add services, also generating revenue through a digital asset treasury strategy by staking Solana (SOL) holdings and operating validator nodes[19] - Effective April 17, 2025, the company changed its name from "Janover Inc." to "DeFi Development Corp" and its ticker symbol to "DFDV" on Nasdaq Capital Market on May 5, 2025[20] - In April 2025, the Board of Directors approved a new treasury policy to allocate the principal holding in its treasury reserve to digital assets, starting with Solana, and to operate SOL validators to stake assets and earn rewards[21] - A change of control occurred on April 4, 2025, with the sale of approximately 51.0% of common stock and all Series A preferred stock for $4.0 million, identifying DeFi Dev LLC and NS Corp as the accounting acquirers[22] Significant Accounting Policies This section details the key accounting principles and methods applied in preparing the financial statements - The company re-evaluated its segment reporting structure in Q2 2025, now operating in two reportable segments: Digital Asset Treasury and Real Estate Platform, a change that had no effect on previously reported results[28] - Digital assets are accounted for as intangible assets under ASC 350-60, initially recorded at cost and subsequently remeasured at fair value with changes recognized in net income, or as indefinite-lived intangible assets tested for impairment annually[38][39] - The company is exposed to market risk related to digital asset holdings; a hypothetical 10% change in fair value would impact Income (loss) before income taxes by approximately $9.7 million for the six months ended June 30, 2025[53] Recently Issued Accounting Pronouncements This section outlines new accounting standards issued by FASB and their potential impact on the company's financial reporting - The FASB issued ASU 2024-03 (Expense Disaggregation Disclosures) effective for annual periods beginning after December 15, 2026, requiring more detailed disclosure of income statement expenses[54][56] - ASU 2023-09 (Income Taxes—Improvements to Income Tax Disclosures) was issued in December 2023, effective for annual periods beginning after December 15, 2024, enhancing income tax disclosures[57] - ASU 2023-06 (Disclosure Improvements) was issued in October 2023, amending various disclosure and presentation requirements, with effective dates tied to SEC's removal of related disclosure requirements[58] NOTE 2—REVENUE This note details the company's revenue recognition policies and disaggregates revenue by source Digital Asset Treasury Revenue This section explains how revenue is generated from staking digital assets and operating validator nodes - Revenue is generated from staking digital asset holdings with third-party validators (net basis) and from operating owned validators on the Solana network (gross basis), recognized at fair value upon receipt of SOL tokens[61][62] Real Estate Platform Revenue This section describes revenue streams from the real estate platform, including transaction fees and SaaS subscriptions - Platform revenue comes from fees charged to customers utilizing the technology platform to match lenders and borrowers, recognized on a net basis when lending transactions are fully funded and closed[63][64] - SaaS offerings provide data and tools on a subscription basis (1-3 years), with revenue recognized ratably over the contract term on a gross basis[65] Disaggregation of Revenue This section breaks down total revenue by its primary sources, highlighting contributions from digital assets and real estate Disaggregation of Revenue (in thousands) | Revenue Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Digital asset treasury | $1,206 | $— | $1,206 | $— | | Real estate platform | $780 | $441 | $1,067 | $852 | | Total revenue | $1,986 | $441 | $2,273 | $852 | - Digital asset treasury revenue, which was zero in 2024, contributed $1,206 thousand for both the three and six months ended June 30, 2025[66] - Real estate platform revenue increased by 76.9% to $780 thousand for the three months ended June 30, 2025, and by 25.3% to $1,067 thousand for the six months ended June 30, 2025, compared to the prior year periods[66] Deferred Revenue This section provides a breakdown of deferred revenue, showing changes in balances and recognized amounts Deferred Revenue (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $341 | $83 | | Deferred revenue additions | $1,710 | $138 | | Revenue recognized | $(586) | $(134) | | Ending balance | $1,465 | $87 | - Deferred revenue significantly increased from $87 thousand at June 30, 2024, to $1,465 thousand at June 30, 2025, primarily due to $1,710 thousand in deferred revenue additions[67] NOTE 3—NET INCOME (LOSS) PER SHARE This note presents the calculation of basic and diluted net income or loss per share for the reporting periods Net Income (Loss) Per Share (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net income (loss), basic | $15,432 | $(805) | $14,654 | $(1,769) | | Net income (loss), diluted | $16,146 | $(805) | $15,366 | $(1,769) | | Weighted-average of common shares outstanding, basic | 14,136 | 9,682 | 12,066 | 9,680 | | Weighted-average of common shares outstanding, diluted | 19,332 | 9,682 | 14,685 | 9,680 | | Basic EPS | $1.09 | $(0.08) | $1.21 | $(0.18) | | Diluted EPS | $0.84 | $(0.08) | $1.05 | $(0.18) | - Basic net income per share for the three months ended June 30, 2025, was $1.09, a significant improvement from a loss of $(0.08) in the prior year, reflecting the company's return to profitability[69] - Diluted net income per share for the six months ended June 30, 2025, was $1.05, compared to a loss of $(0.18) in the prior year, indicating the positive impact of dilutive securities in profitable periods[69] NOTE 4—SEGMENTS This note provides financial information for the company's two reportable segments: Digital Asset Treasury and Real Estate Platform - The company operates in two reportable segments: Digital Asset Treasury and Real Estate Platform, with the CEO serving as the Chief Operating Decision Maker (CODM) who evaluates performance based on segment operating income (loss)[70][71] Segment Operating Income (Loss) (in thousands) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Digital Asset Treasury | $17,543 | $— | $17,543 | $— | | Real Estate Platform | $(353) | $(852) | $(1,236) | $(1,870) | - The Digital Asset Treasury segment generated significant operating income of $17,543 thousand for both the three and six months ended June 30, 2025, as it was not operational in the prior year[74] - The Real Estate Platform segment reduced its operating loss by 58.4% to $(353) thousand for the three months ended June 30, 2025, and by 33.9% to $(1,236) thousand for the six months ended June 30, 2025, compared to the prior year periods[74] NOTE 5—DIGITAL ASSETS This note details the company's digital asset holdings, including fair value and carrying value, and related activities Digital Assets, at Fair Value (in thousands) | Digital Asset | Units | Cost Basis | Fair Value | | :------------ | :---- | :--------- | :--------- | | Solana (SOL) | 573 | $66,964 | $89,239 | | Total | 573 | $66,964 | $89,239 | Digital Assets, at Carrying Value (in thousands) | Digital Asset | Gross Carrying Amount | Accumulated Impairments | Net Carrying Amount | Fair Value | | :------------ | :-------------------- | :---------------------- | :------------------ | :--------- | | DFDV Staked SOL | $7,153 | $(895) | $6,258 | $6,301 | | Other | $1,633 | $— | $1,633 | $1,632 | | Total | $8,786 | $(895) | $7,891 | $7,933 | - The company held 573 thousand units of Solana (SOL) with a fair value of $89,239 thousand as of June 30, 2025, which were not held as of December 31, 2024[78] - Digital assets at fair value activity for the six months ended June 30, 2025, included $83,473 thousand in purchases, $1,260 thousand in additions from rewards, $17,768 thousand in dispositions, and $22,274 thousand in total gains from fair value changes and realized gains[78] NOTE 6—ACQUISITIONS This note describes the acquisition of validator nodes from a related party, including consideration details - On May 1, 2025, the company acquired two validator nodes from Solsync Solutions Partnership, a related party owned by its COO and CIO, for $3.6 million, with consideration including $0.6 million in cash and $3.0 million (604,884 shares) in restricted common stock[80][81] NOTE 7—PROPERTY AND EQUIPMENT, NET This note provides a breakdown of property and equipment, net, and explains changes in its carrying value Property and Equipment, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Computer and hardware | $40 | $38 | | Furniture and fixtures | $11 | $11 | | Gross property and equipment | $51 | $49 | | Less: accumulated depreciation | $(51) | $(8) | | Property and equipment, net | $— | $41 | - Property and equipment, net, decreased from $41 thousand at December 31, 2024, to $0 at June 30, 2025, due to impairment charges of $50.5 thousand recorded in the second quarter of 2025[82] NOTE 8—GOODWILL AND INTANGIBLES ASSETS This note details the company's goodwill and intangible assets, including their carrying amounts and changes Goodwill (in thousands) | Item | Amount | | :---------------------- | :----- | | Balance, December 31, 2024 | $607 | | Balance, June 30, 2025 | $607 | Intangible Assets, Net (in thousands) | Category | Useful Lives | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount (June 30, 2025) | Net Carrying Amount (Dec 31, 2024) | | :---------------- | :----------- | :-------------------- | :----------------------- | :---------------------------------- | :--------------------------------- | | Finite-lived: | | | | | | | Validators | 3 years | $3,645 | $(202) | $3,443 | $— | | Developed technology | 3 years | $576 | $(312) | $264 | $360 | | Customer database | 3 years | $3 | $(1) | $2 | $2 | | Indefinite-lived: | | | | | | | Domain name | Indefinite | $16 | $— | $16 | $16 | | Total intangibles, net | | $4,240 | $(515) | $3,725 | $378 | - Goodwill remained constant at $607 thousand from December 31, 2024, to June 30, 2025[83] - Total intangible assets, net, significantly increased from $378 thousand to $3,725 thousand, primarily due to the acquisition of validators with a net carrying amount of $3,443 thousand on May 1, 2025[84] NOTE 9—DEBT This note outlines the company's debt obligations, including short-term loans and long-term convertible notes Debt Outstanding (in thousands) | Debt Type | Contractual Interest Rate | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------------------ | :------------ | :---------------- | | Short-term debt: | | | | | Loan payable | 7.1% | $427 | $— | | Long-term debt: | | | | | Convertible notes | 2.5% | $28,902 | $— | | Less: unamortized discount | | $(7,692) | $— | | Total long-term debt, net | | $21,210 | $— | | Total debt | | $21,637 | $— | - As of June 30, 2025, the company had $21,637 thousand in total debt, including $427 thousand in short-term loans payable and $21,210 thousand in long-term convertible notes (net of unamortized discount), with no debt outstanding at December 31, 2024[86] - On April 4, 2025, the company issued convertible notes totaling approximately $42.0 million, due April 6, 2030, with a 2.5% annual interest rate, convertible upon meeting a $100 million market capitalization condition[88] - During Q2 2025, the market capitalization condition was met, setting the conversion price at $9.74, and approximately $13.1 million of notes were converted to common stock[91] NOTE 10—STOCKHOLDERS' EQUITY This note details the components of stockholders' equity, including authorized shares, warrants, and equity line of credit - The company is authorized to issue 110.0 million total shares, comprising 10.0 million preferred shares (including Series A) and 100.0 million common shares, each with a par value of $0.00001[95] - In connection with convertible notes, two series of warrants were issued, exercisable immediately for five years, to purchase 2.4 million shares at $17.14/share and 2.0 million shares at $21.43/share, all remaining unexercised as of June 30, 2025[102] - On May 1, 2025, the company issued pre-funded warrants to purchase up to 1,453,753 common shares at $0.0014/share, with 1.3 million warrants exercised and 135.8 thousand outstanding as of June 30, 2025[103] - An Equity Line of Credit (ELOC) agreement was entered into on June 11, 2025, allowing RK Capital to purchase up to $1.0 billion of common stock, with a $12.5 million commitment fee payable in common stock[105] NOTE 11—SHARE-BASED COMPENSATION This note provides information on share-based compensation expense and unrecognized compensation costs Share-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Sales and marketing | $23 | $2 | $34 | $6 | | Research and development | $34 | $3 | $39 | $6 | | General and administrative | $895 | $100 | $933 | $201 | | Total | $952 | $105 | $1,006 | $213 | - Total share-based compensation expense significantly increased to $952 thousand for the three months and $1,006 thousand for the six months ended June 30, 2025, compared to $105 thousand and $213 thousand in the prior year periods, respectively[109] - As of June 30, 2025, unrecognized pretax compensation for stock options was $1.8 million (weighted average period of 3.7 years) and for restricted stock units was $2.4 million (weighted average period of 3.8 years)[111][112] NOTE 12—INCOME TAXES This note explains the company's effective tax rate, valuation allowances, and the impact of new tax legislation - The effective tax rate for the three and six months ended June 30, 2025, was 7.2% and 7.6%, respectively, compared to 0.0% in the prior year periods, primarily due to windfall from share-based compensation expenses and higher operating income[113][115] - Management released all prior valuation allowances on deferred tax assets during Q2 2025, believing these assets are more likely than not to be realized[115] - New U.S. tax legislation (OBBBA) signed on July 4, 2025, makes permanent many 2017 tax provisions and introduces corporate tax changes effective 2026, but is not expected to have a material impact on current operations[116] NOTE 13—FAIR VALUE MEASUREMENTS This note describes the valuation methodologies and inputs used for assets and liabilities measured at fair value Assets and Liabilities Measured at Fair Value on a Recurring Basis (in thousands, June 30, 2025) | Item | Carrying Value | Level 1 | Level 2 | Level 3 | Total Fair Value | | :-------------------------- | :------------- | :------ | :------ | :------ | :--------------- | | Assets: | | | | | | | Digital assets, at fair value | $89,239 | $89,239 | $— | $— | $89,239 | | Marketable securities | $595 | $595 | $— | $— | $595 | | Total assets | $89,834 | $89,834 | $— | $— | $89,834 | | Liabilities: | | | | | | | Contingent consideration | $115 | $— | $— | $115 | $115 | | Total liabilities | $115 | $— | $— | $115 | $115 | - Digital assets at fair value and marketable securities are measured using Level 1 inputs (unadjusted quoted prices in active markets), totaling $89,834 thousand in fair value as of June 30, 2025[117] - Contingent consideration, valued at $115 thousand, is measured using Level 3 inputs (unobservable valuation model inputs), with fair value adjustments of $(64) thousand recorded for the six months ended June 30, 2025, due to revised revenue forecasts[117][119][120] - Convertible notes and warrants were measured at fair value on a nonrecurring basis using Monte Carlo simulation (Level 2 and 3 inputs) and Black-Scholes Option model (Level 2 inputs), respectively, resulting in a $7.9 million discount on notes and $7.9 million fair value for warrants[123][124] NOTE 14—COMMITMENTS AND CONTINGENCIES This note outlines potential legal proceedings, regulatory investigations, and future minimum lease payment obligations - The company may be subject to legal proceedings and regulatory investigations in the ordinary course of business, with potential losses estimated based on legal counsel opinions and similar cases[126] Future Annual Minimum Lease Payments (in thousands, as of June 30, 2025) | Year | Amount | | :-------------------------------- | :----- | | 2025 (remainder) | $29 | | 2026 | $15 | | Total minimum lease payments | $44 | | Less: imputed interest | $(1) | | Total lease obligations | $43 | | Less: Current portion | $43 | | Long-term portion of lease obligations | $— | - Lease expense for office space was approximately $31.0 thousand for the three months ended June 30, 2025, and $44.0 thousand for the six months ended June 30, 2025[128] NOTE 15—RELATED PARTY TRANSACTIONS This note discloses transactions with related parties, specifically the acquisition of validator nodes - The company acquired two validator nodes from Solsync Solutions Partnership, a related party owned by its Chief Operating Officer, for a total consideration of $3.6 million, as detailed in Note 6—Acquisitions[129] NOTE 16—SUBSEQUENT EVENTS This note reports significant events occurring after the balance sheet date, including new debt issuances and asset purchases - On July 7, 2025, the company issued $112.5 million in 5.5% convertible senior notes due 2030, with net proceeds of $108.1 million, primarily used to repurchase common stock and acquire SOL[131] - An additional $10.0 million in convertible senior notes was issued on July 9, 2025, yielding $9.7 million in net proceeds for general corporate purposes, including SOL acquisition[132] - On July 25, 2025, a master loan agreement was entered into with BitGo Hong Kong Limited, enabling borrowing of digital assets or cash, including a loan for 75,000 Solana collateralized by treasury assets[133] - The company issued 2.2 million shares of common stock for approximately $47.6 million under its ELOC agreement and made various purchases of SOL totaling approximately $101.2 million after the balance sheet date[135][137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the same periods in 2024, highlighting significant developments, consolidated and segment operating results, liquidity, and capital resources, emphasizing the impact of the new digital asset treasury strategy The Company This section provides an overview of the company's business model, encompassing its real estate platform and digital asset strategy - DeFi Development Corp operates an AI-powered online platform for commercial real estate, connecting borrowers and lenders, and generates revenue through a digital asset treasury strategy by staking Solana (SOL) and operating validator nodes[139] Recent Significant Developments This section highlights key corporate changes, strategic initiatives, and financing activities impacting the company - A change of control occurred on April 4, 2025, with the sale of approximately 51.0% of common stock and all Series A preferred stock for $4.0 million[140] - The company changed its name to "DeFi Development Corp" and its ticker to "DFDV" in April/May 2025, and adopted a new treasury policy authorizing long-term SOL accumulation[140] - On May 1, 2025, the company acquired two SOL validator nodes from Solsync Solutions Partnership for $3.5 million[140] - Net proceeds of $78.5 million were received through various financing transactions, used for digital asset purchases and working capital[140] Selected Consolidated Operating Results This section presents a summary of the company's overall financial performance, including revenue, operating income, and net income Selected Consolidated Operating Results (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------------------------------- | :------------------------------- | :------- | | Revenue | $1,986 | $441 | 350.3% | $2,273 | $852 | 166.7% | | Gain from changes in fair value of digital assets | $21,194 | $— | NM | $21,194 | $— | NM | | Operating expenses | $5,990 | $1,293 | 363.4% | $7,160 | $2,722 | 163.0% | | Operating income (loss) | $17,190 | $(852) | NM | $16,307 | $(1,870) | NM | | Net income (loss) | $15,432 | $(805) | NM | $14,654 | $(1,769) | NM | - Consolidated revenue increased by 350.3% for the three months and 166.7% for the six months ended June 30, 2025, primarily due to digital asset revenue from the new treasury strategy[141][142] - The company reported a $21.2 million gain from changes in fair value of digital assets for both periods, contributing to a significant shift from operating losses to operating income[141][143] - Net income (loss) improved significantly to $15,432 thousand for the three months and $14,654 thousand for the six months ended June 30, 2025, compared to losses in the prior year, mainly driven by digital asset gains[141][146] Segment Operating Results This section analyzes the financial performance of the company's distinct operating segments Digital Asset Treasury This section details the financial performance of the Digital Asset Treasury segment, including revenue and operating income - The Digital Asset Treasury segment, initiated in Q2 2025, generated $1,206 thousand in revenue for both the three and six months ended June 30, 2025, primarily from staking digital asset holdings and operating owned validators[150][151] - Operating expenses for the Treasury segment were $(16,337) thousand for both periods, resulting in a segment operating income of $17,543 thousand, largely due to a $21,194 thousand gain from changes in fair value of digital assets[150][153] - General and administrative expenses for the Treasury segment included $2.3 million in employee-related costs and $1.4 million in professional fees[152] Real Estate This section reviews the financial performance of the Real Estate segment, focusing on revenue growth and operating loss reduction - The Real Estate segment's revenue increased by 76.9% to $780 thousand for the three months and 25.3% to $1,067 thousand for the six months ended June 30, 2025, driven by increased SaaS subscription revenue[158][159] - SaaS subscription revenue for Q2 2025 was approximately $502.1 thousand (up 295% YoY), with total subscriptions increasing from 46 to 442, and Annualized Recurring Revenue (ARR) reaching $2.2 million, a 631% increase YoY[159] - Segment operating loss improved by 58.4% to $(353) thousand for the three months and 33.9% to $(1,236) thousand for the six months ended June 30, 2025, primarily due to a reduction in general and administrative payroll costs[158][161] Liquidity and Capital Resources This section discusses the company's ability to meet its short-term and long-term obligations and its sources of funding Sources of Liquidity (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $2,470 | $2,517 | | Marketable securities | $595 | $340 | | Accounts receivable (current and non-current) | $1,123 | $195 | | ELOC availability | $950,300 | $— | - Principal liquidity sources include cash and cash equivalents ($2,470 thousand), marketable securities ($595 thousand), accounts receivable ($1,123 thousand), and $950.3 million available under the Equity Line of Credit (ELOC)[162][163] - Net cash used in operating activities for the six months ended June 30, 2025, was $2.1 million, while net cash used in investing activities was $61.3 million due to digital asset purchases[165][166] - Net cash provided by financing activities was $63.3 million, resulting from equity raises and convertible notes issuance[166] Critical Accounting Estimates This section identifies key accounting estimates and assumptions that significantly impact the financial statements - The preparation of financial statements requires management to make significant estimates and assumptions, particularly concerning acquisitions, valuation of share-based compensation, contingent consideration, fixed and intangible assets, and valuation allowances[30][170] - There have been no material changes to the company's critical accounting estimates since the 2024 Form 10-K[170] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to various market risks, including interest rate risk, inflation risk, and digital asset market risk, and discusses their potential impact on financial results Interest Rate Risk This section assesses the company's exposure to fluctuations in interest rates on its cash and debt instruments - The company's cash and cash equivalents, primarily in money market and demand deposit accounts, carry interest rate risk, though historical fluctuations in interest income have not been significant[172] - As of June 30, 2025, the company had $28.9 million in fixed-rate convertible notes maturing in 2030[172] Inflation Risk This section evaluates the potential impact of inflation on the company's operating costs and financial performance - Inflation primarily affects the company by increasing labor and research and development contract costs, but it has not had a material effect on results of operations during the presented periods[173] Digital Asset Market Risk This section details the significant risks associated with the volatility, liquidity, and security of digital asset holdings - Digital asset markets are highly volatile, with limited liquidity and trading volumes, exposing the company to significant price fluctuations and potential losses if SOL cannot be sold at favorable prices[174] - A hypothetical 10% increase or decrease in the fair value of digital assets would impact Income (loss) before income taxes by approximately $9.7 million for the six months ended June 30, 2025[175] - The company faces risks related to the creditworthiness of digital asset custodians, as digital assets do not have the same protections as cash or securities in regulated institutions[174] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures, identifying material weaknesses in internal control over financial reporting, and outlining management's remediation plans Evaluation of Disclosure Controls and Procedures This section reports on the effectiveness of the company's disclosure controls and procedures - As of June 30, 2025, the company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting[176] Material Weaknesses in Internal Control Over Financial Reporting This section identifies and explains the material weaknesses in the company's internal control over financial reporting - Material weaknesses identified include the lack of a formalized system of internal control over financial reporting, insufficient documented general IT controls (access, segregation of duties, security, change management), and inadequate accounting personnel for proper segregation of duties[177][178] - These weaknesses arose because the company lacked the necessary business processes, personnel, and internal controls required for a public company's accounting and financial reporting[178] - Management plans to remediate these weaknesses by hiring additional qualified accounting and financial reporting personnel, enhancing accounting processes and risk assessment, and designing/implementing/monitoring respective controls[179] Changes in Internal Control Over Financial Reporting This section reports on any changes in internal control over financial reporting during the reporting period - There were no changes in the company's internal control procedures over financial reporting during the fiscal quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[181] PART II - OTHER INFORMATION This section provides additional non-financial information, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section states that there are no legal proceedings to report for the period - The company has no legal proceedings to report[183] Item 1A. Risk Factors This section details various risks and uncertainties that could adversely affect the company's business, financial condition, and stock price, with a significant focus on risks associated with its digital asset treasury strategy, including market volatility, regulatory developments, liquidity, security breaches, and technical challenges specific to the Solana network - The company's financial results and stock price are significantly affected by the volatile prices of digital assets, particularly SOL, and any decrease in fair value below carrying value could result in material losses[185][186] - Digital asset holdings are less liquid than cash and cash equivalents, and the company is exposed to credit risk from custodians, with no FDIC or SIPC-like protections[190] - Regulatory developments related to crypto assets, including potential reclassification of SOL as a security, could adversely impact the business, market price of SOL, and potentially classify the company as an 'investment company' under the 1940 Act[193][198][199] - The company faces risks of security breaches or cyberattacks on its digital assets, which could lead to partial or total loss of assets, harm to reputation, and significant regulatory scrutiny[205][208] - SOL faces unique technical, governance, and concentration risks, including network outages, untested consensus mechanisms, and a small number of validators, which could affect its long-term viability and value[210][211] - The Solana validator reward yield is expected to decline over time, potentially impacting financial results, and the SOL treasury strategy is dependent on the SOL Foundation and core development team[213][214] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities and use of proceeds to report[217] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities to report - There were no defaults upon senior securities[218] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[218] Item 5. Other Information This section states that there is no other information to report for the period - There is no other information to report[219] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, debt instruments, equity agreements, employment agreements, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Convertible Note forms, Warrant forms, Indenture for Convertible Senior Notes, Equity Incentive Plan, Securities Purchase Agreements, Employment Agreements, and various certifications[220][221] Signatures This section contains the required signatures of the registrant's authorized officers, confirming the filing of the report - The report is signed by Joseph Onorati, Chief Executive Officer, President and Chairman of the Board of Directors, and Fei (John) Han, Chief Financial Officer, on August 14, 2025[223]