This
management’s discussion and analysis is designed to provide you with a narrative explanation of our financial condition and
results of operations for the three and six months ended June 30, 2026 and 2025. This section should be read in conjunction with our
unaudited condensed consolidated financial statements and the related notes included elsewhere in this report. See Unaudited
Condensed Consolidated Financial Statements of Chaince Digital Holdings Inc. (formerly known as Mercurity Fintech Holding Inc.) as
of December 31, 2026 and June 30, 2025, and for the three and six months ended June 30, 2026 and 2025. We also recommend that you
read our management’s discussion and analysis and our audited consolidated financial statements for the fiscal year ended
December 31, 2025, and the notes thereto, which appear in our Annual Report on Form 10-K for the year ended December 31, 2025, or
the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC, on March 26, 2026.
Unless
otherwise indicated or the context otherwise requires, all references to “our company,” “we,” “our,”
“ours,” “us” or similar terms refer to Chaince Digital Holdings Inc. (formerly known as Mercurity Fintech Holding
Inc.), its predecessor entities, its subsidiaries and consolidated affiliated subsidiaries.
All
such financial statements were prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP.
We have made rounding adjustments to some of the figures included in this management’s discussion and analysis. Accordingly, numerical
figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. This discussion contains
forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors.
RECENT
DEVELOPMENTS
During
the six months ended June 30, 2026, the Company continued to focus on its financial services and advisory businesses as its primary line
of business. No material change occurred in the Company’s principal business strategy during the period.
The
Company conducts its financial services operations primarily through Chaince Securities, Inc. and its affiliated entities. Chaince Securities,
LLC, a subsidiary of Chaince Securities, Inc., is a FINRA-registered broker-dealer and registered investment advisor (“RIA”),
and continues to provide investment banking, transaction execution, brokerage-related, and other financial advisory services to clients
participating in the U.S. capital markets.
In
addition, Ucon Capital (HK) Limited, together with its PRC subsidiary, Chaince (Shenzhen) Consulting Co., Ltd., continued to provide
business consulting and advisory services to clients in the Asia-Pacific region during the quarter. These operations remain focused on
capital markets advisory, corporate consulting, and related professional services.
For
the six months ended June 30, 2026, the Company’s overall business operations remained consistent with the strategic direction
established in 2025. Management continued to focus on expanding the Company’s financial services platform, developing its client
base, and increasing revenue contribution from both IPO-related and non-IPO-related financial services engagements.
Looking
ahead, the Company expects to continue pursuing growth in its financial services and advisory businesses while maintaining operational
discipline and supporting the expansion of its customer base across multiple service lines.
As of August 11, 2026, the Company had a total
of 110,003,800 ordinary shares issued and outstanding, including 109,993,800 ordinary shares held by non-affiliates. The aggregate market
value of the registrant’s ordinary shares held by non-affiliates (or “Public Float”) as of August 11, 2026 was $337,680,966.
This amount is based on the closing price of the ordinary shares on Nasdaq of $3.07 per share on August 11, 2026. Ordinary shares held
by executive officers, directors and 10% or greater stockholders have been excluded since such persons may be deemed affiliates.
As of August 11, 2026, 86,569,508 ordinary shares
of the Company were freely tradable without contractual lock-up restrictions or other resale restrictions. The number of freely tradable
ordinary shares differs from the Company’s Public Float because Public Float excludes shares held by affiliates, while freely tradable
shares are determined based on applicable contractual and regulatory transfer restrictions.
Overview
The
Company’s continuing operations are focused on its financial services and advisory businesses, which are conducted primarily through
its wholly owned subsidiary, Chaince Securities, Inc., together with Chaince Securities, LLC and Ucon Capital (HK) Limited and its subsidiaries
in China.
These
entities are engaged in investment banking, capital markets advisory, transaction execution, brokerage-related services, and related
business consulting services.
Set
forth below is an update of the Company’s business lines as presented in the accompanying condensed consolidated financial statements
for the six months ended June 30, 2026.
47
Financial
services and advisory businesses
Since
August 2022, the Company has operated in the financial services and advisory sector. Following FINRA’s approval of Chaince Securities,
LLC’s Continuing Membership Application (“CMA”) in March 2025, the financial services and advisory business became
the Company’s primary operating focus and remains its sole continuing business line as of June 30, 2026.
These
activities are conducted primarily through the Company’s wholly owned subsidiary, Chaince Securities, Inc., and its affiliated
entities. Chaince Securities, LLC, a subsidiary of Chaince Securities, Inc., is a FINRA-registered broker-dealer and registered investment
advisor (“RIA”). Chaince Securities, LLC provides investment banking, transaction execution, brokerage-related, and other
business consulting services to companies pursuing securities offerings in the U.S. capital markets, as well as investment-related solutions
to institutional investors, high-net-worth individuals, and emerging issuers. Its operations team is based in New York and primarily
conducts business with clients located in the United States.
In
addition, Ucon Capital (HK) Limited (“Ucon”), together with its wholly owned subsidiary in the People’s Republic of
China, Chaince (Shenzhen) Consulting Co., Ltd., provides business consulting and advisory services to clients in the Asia-Pacific region,
with a focus on capital markets advisory, corporate restructuring, and related professional services.
Discontinued
Filecoin mining business
Historically,
the Company also conducted blockchain and digital asset-related activities through Mercurity Fintech Technology Holding Inc. (“MFH
Tech”), including distributed storage and computing services consisting primarily of Filecoin (“FIL”) mining operations.
In
December 2025, the Company’s Board of Directors approved a strategic decision to discontinue the Filecoin mining business, as such
operations were no longer aligned with the Company’s long-term business strategy and capital allocation priorities. Following this
decision, the Company ceased making new investments in Filecoin mining activities and initiated an orderly wind-down of that business.
On
December 12, 2025, the Company entered into a comprehensive agreement pursuant to which substantially all Filecoin mining equipment was
sold to a third party. Under the terms of that agreement, the Company leased back the equipment through April 30, 2026 solely to allow
existing Filecoin mining nodes to naturally expire. All of the mining nodes had ceased operations by June 30, 2026.
The
results of the Filecoin mining business have been classified as discontinued operations in accordance with ASC 205-20 and are presented
separately from continuing operations in the accompanying condensed consolidated financial statements. Prior-period financial information
has been reclassified to conform to the current period presentation.
MFH
Tech continues to exist as a legal entity following the Company’s decision to discontinue the Filecoin mining business and may
be used for other digital asset-related or technology-enabled activities in the future. The discontinuation relates solely to the Filecoin
mining business and does not represent a liquidation or dissolution of MFH Tech.
As
of June 30, 2026, the Company’s subsidiaries are as follows:
Date of Place of Percentage
acquisition/ establishment/ of legal
registration incorporation ownership
Subsidiaries:
Chaince Securities, Inc. April 12, 2023 United States 100 %
Chaince Securities, LLC December 6, 2024 United States 100 %
Ucon Capital (HK) Limited May 21, 2019 Hong Kong 100 %
Chaince (Shenzhen) Consulting Co., Ltd. July 23, 2025 China 100 %
Mercurity Fintech Technology Holding Inc. July 15, 2022 United States 100 %
48
Results
of Operations
Comparison
of Results of Operations for the three and six months ended June 30, 2026 and 2025
The
following summary of the unaudited consolidated financial data for the periods and as of the dates indicated is qualified by reference
to, and should be read in conjunction with, our unaudited consolidated financial statements and related notes. Our historical results
do not necessarily indicate our results to be expected for any future period.
(Amounts
expressed in U.S. dollars, except share data and per share data, or otherwise noted)
For the three months ended June 30, Variance in
2026 2025 Amount %
Revenue 463,206 233,504 229,702 98.37 %
Cost of revenue (240,651 ) (93,139 ) (147,512 ) 158.38 %
Gross profit $ 222,555 $ 140,365 $ 82,190 58.55 %
Selling and marketing expenses (12,918 ) (29,065 ) 16,147 -55.55 %
General and administrative expenses (1,482,328 ) (984,740 ) (497,587 ) 50.53 %
Research and development (83,542 ) — (83,542 ) —
Provision for doubtful accounts (41,853 ) — (41,853 ) —
Operating loss $ (1,398,086 ) $ (873,440 ) $ (524,646 ) 60.07 %
Interest income/(expenses), net 273,978 120,250 153,728 127.84 %
Other (expenses)/income, net 3 — 3 —
Gain/loss on share-based payment liability — (73,500 ) 73,500 -100 %
Gain/loss on market price of stablecoins and digital assets (110,597 ) (13,831 ) (96,766 ) 699.63 %
Gain/(Loss) from market price of short-term investment 82,191 315 81,876 25992.38 %
Loss before provision for income taxes $ (1,152,511 ) $ (840,206 ) $ (312,305 ) 37.17 %
Income tax benefits 103,779 58,786 44,993 76.54 %
Loss from continuing operations $ (1,048,732 ) $ (781,420 ) $ (267,312 ) 34.21 %
Loss from discontinued operations (56,268 ) (764,932 ) 708,664 -92.64 %
Net loss $ (1,105,000 ) $ (1,546,352 ) $ 441,352 -28.54 %
For the six months ended June 30, Variance in
2026 2025 Amount %
Revenue 970,752 258,569 712,183 275.43 %
Cost of revenue (530,172 ) (160,551 ) (369,621 ) 230.22 %
Gross profit $ 440,580 $ 98,018 $ 342,562 349.49 %
Selling and marketing expenses (34,066 ) (58,131 ) 24,065 -41.40 %
General and administrative expenses (2,626,440 ) (1,698,162 ) (928,278 ) 54.66 %
Research and development (167,084 ) — (167,084 ) —
Provision for doubtful accounts (40,795 ) — (40,795 ) —
Operating loss $ (2,427,805 ) $ (1,658,275 ) $ (769,530 ) 46.41 %
Interest income/(expenses), net 525,891 171,431 354,460 206.77 %
Other (expenses)/income, net (111 ) 15 (126 ) -840.00 %
Gain/loss on share-based payment liability — (73,500 ) 73,500 -100 %
Loss on market price of stablecoins and digital assets (388,967 ) (82,423 ) (306,544 ) 371.92 %
Gain/(Loss) from market price of short-term investment 19,119 3,474 15,645 450.35 %
Loss before provision for income taxes $ (2,271,873 ) $ (1,639,278 ) $ (632,595 ) 38.59 %
Income tax benefits 136,488 154,096 (17,608 ) -11.43 %
Loss from continuing operations $ (2,135,385 ) $ (1,485,182 ) $ (650,203 ) 43.78 %
Loss from discontinued operations (322,059 ) (1,362,648 ) 1,040,589 -76.37 %
Net loss $ (2,457,444 ) $ (2,847,830 ) $ 390,386 -13.71 %
Revenue
Our
revenues mainly represent revenues from financial services and advisory activities. Revenue previously generated from distributed storage
and computing services, consisting of Filecoin mining operations, has been classified as discontinued operations and is excluded from
the Company’s continuing revenue recognition policies.
The
following table sets forth the revenues of our different types of businesses:
For the three months ended June 30, Variance in
2026 2025 Amount %
Revenue
Financial services and advisory businesses 463,206 233,504 229,702 98.37 %
Total revenue $ 463,206 $ 233,504 $ 229,702 98.37 %
For the six months ended June 30, Variance in
2026 2025 Amount %
Revenue
Financial services and advisory businesses 970,752 258,569 712,183 275.43 %
Total revenue $ 970,752 $ 258,569 $ 712,183 275.43 %
For
the three months ended June 30, 2026 and 2025, total revenue from financial services and advisory businesses was $463,206 and $233,504,
respectively, representing an increase of $229,702, or 98.37%.
For
the six months ended June 30, 2026 and 2025, total revenue from financial services and advisory businesses was $970,752 and $258,569,
respectively, representing an increase of $712,183, or 275.43%.
49
As
disclosed in the consolidated financial statements, the Company’s revenues for 2026 and 2025 were derived entirely from financial
services and advisory businesses. Revenue previously generated from distributed storage and computing services (Filecoin mining operations)
has been classified as discontinued operations and is presented separately from continuing operations.
Revenue
Composition
Revenue
for the three months ended June 30, 2026 was diversified across multiple service categories, as follows:
● Industry Advisory & Consulting services: $354,582
● IPO-related financial advisory and consulting services: $60,000
● Transaction execution and brokerage services: $48,008
● Other services – referral services: $616
Revenue
for the six months ended June 30, 2026 was diversified across multiple service categories, as follows:
● Industry Advisory & Consulting services: $691,187
● IPO-related financial advisory and consulting services: $173,948
● Transaction execution and brokerage services: $105,001
● Other services – referral services: $616
In
contrast, revenue for the three months ended June 30, 2025 was primarily concentrated in:
● Industry Advisory & Consulting services: $75,676
● IPO-related financial advisory and consulting services: $157,828
Revenue
for the six months ended June 30, 2025 was primarily concentrated in:
● Industry Advisory & Consulting services: $75,676
● IPO-related financial advisory and consulting services: $167,893
● Other services – referral services: $15,000
The
increase in revenue during 2026 was primarily attributable to: (a) a higher volume of advisory and consulting engagements; (b) increased
transaction execution activities.
Revenue
growth reflects an expansion in both the number of engagements and the diversity of services provided during 2026 compared to 2025.
Revenue
Recognition Characteristics
Revenue
from financial services and advisory businesses is recognized in accordance with ASC 606 when performance obligations are satisfied.
Depending
on the nature of the engagement:
● IPO-related advisory and industry consulting services are generally recognized over time as services are performed;
● PIPE advisory and transaction execution services are generally recognized at a point in time upon completion of the relevant transaction milestone;
● Referral services are recognized when the referral obligation is fulfilled;
● Certain brokerage-related services may be presented on either a gross or net basis depending on the Company’s role in the transaction.
Changes
in revenue mix between 2026 and 2025 reflect an increased contribution from advisory and consulting engagements relative to referral-based
activities.
Cost
of revenue
The
following table sets forth the cost of revenue of our different types of businesses:
For the three months ended June 30, Variance in
2026 2025 Amount %
Cost of revenue
Financial services and advisory businesses (240,651 ) (93,139 ) (147,512 ) 158.38 %
Total cost of revenue $ (240,651 ) $ (93,139 ) $ (147,512 ) 158.38 %
For the six months ended June 30, Variance in
2026 2025 Amount %
Cost of revenue
Financial services and advisory businesses (530,172 ) (160,551 ) (369,621 ) 230.22 %
Total cost of revenue $ (530,172 ) $ (160,551 ) $ (369,621 ) 230.22 %
For
the three months ended June 30, 2026 and 2025, total cost of revenue from financial services and advisory businesses was $240,651 and
$93,139, respectively, representing an increase of $147,512, or 158.38%.
For
the six months ended June 30, 2026 and 2025, total cost of revenue from financial services and advisory businesses was $530,172 and $160,551,
respectively, representing an increase of $369,621, or 230.22%.
50
The
increase in cost of revenue was primarily attributable to the expansion of revenue-generating activities during 2026. As disclosed above,
total revenue increased by $712,183 for the six months ended June 30, 2026, compared with the six months ended June 30, 2025, driven
by growth in IPO-related financial advisory services, industry advisory and consulting services, and transaction execution and brokerage
services engagements. The increase in cost of revenue is consistent with the higher level of transaction volume and consulting activity
during the period.
Cost
of revenue for financial services and advisory businesses primarily consists of: (a) salaries and benefits of advisory and project execution
personnel directly involved in revenue-generating activities; (b) transaction-based compensation arrangements; (c) brokerage clearing
fees and execution-related charges; and (d) directly attributable professional service costs.
Gross
profit/(loss) and gross profit/(loss) margin
Gross
profit/(loss) represents our net revenues less cost of revenue. Our gross profit/(loss) margin represents our gross profit/(loss) as
a percentage of our net revenues.
The
following table sets forth the gross profit/(loss) and gross profit/(loss) margin of our different types of businesses:
For the three months ended June 30, Variance in
2026 2025 Amount %
Gross profit
Financial services and advisory businesses 222,555 140,365 82,190 58.55 %
Total gross profit $ 222,555 $ 140,365 $ 82,190 58.55 %
Gross profit margin
Financial services and advisory businesses 48.05 % 60.11 % -12.07 % -20.07 %
Overall gross profit margin 48.05 % 60.11 % -12.07 % -20.07 %
For the six months ended June 30, Variance in
2026 2025 Amount %
Gross profit
Financial services and advisory businesses 440,580 98,018 342,562 349.49 %
Total gross profit $ 440,580 $ 98,018 $ 342,562 349.49 %
Gross profit margin
Financial services and advisory businesses 45.39 % 37.91 % 7.48 % 19.73 %
Overall gross profit margin 45.39 % 37.91 % 7.48 % 19.73 %
For
the three months ended June 30, 2026 and 2025, gross profit from financial services and advisory businesses was $222,555 and $140,365,
respectively. The Company’s results improved by $82,190, or 58.55%.
For
the six months ended June 30, 2026 and 2025, gross profit from financial services and advisory businesses was $440,580 and $98,018, respectively.
The Company’s results improved by $342,562 for the six months ended June 30, 2026, demonstrating year-over-year improvement in
profitability.
Gross
profit margin was 48.05% for the three months ended June 30, 2026, compared to 60.11% for the three months ended June 30, 2025. This
represented a decrease of 12.07 percentage points, primarily due to a larger increase in cost of revenue.
Gross
profit margin was 45.39% for the six months ended June 30, 2026, compared to 37.91% for the six months ended June 30, 2025. This represented
an increase of 7.48 percentage points, primarily due to increased revenue scale and improved operating leverage in the Company’s
financial services and advisory businesses.
The
improvement in gross profit and gross margin was primarily driven by higher revenue generated from advisory and consulting engagements
during the 2026 period. Although cost of revenue also increased in absolute terms due to higher personnel-related and transaction-related
costs, the increase in revenue more than offset the increase in direct costs.
Sales
and marketing expenses
Sales
and marketing expenses primarily consist of (i) labor costs of sales personnel, and (ii) referral and promotion fees for businesses.
These costs are expensed as incurred.
The
sales and marketing expenses for the three months ended June 30, 2026 and 2025 amounted to $12,918 and $29,065, respectively, all of
which were attributable to labor costs of sales personnel.
The
sales and marketing expenses for the six months ended June 30, 2026 and 2025 amounted to $34,066 and $58,131, respectively, all of which
were attributable to labor costs of sales personnel.
The
definition of our main business has undergone some restructuring in recent years, and as it becomes more well-defined, and as current
structural business investments mature and begin to yield revenue, we have plans to steadily increase our marketing and promotional investment
and efforts.
51
General
and administrative expenses
The
Company’s general and administrative expenses consist primarily of (i) salaries and benefits for employees, which are the salaries
and benefits for our management, merchant service representatives and general administrative staff, (ii) office expenses, which consist
primarily of office rental, maintenance and utilities expenses, depreciation of office equipment and other office expenses, and (iii)
professional expenses, which consist primarily of legal expense and audit fees.
The
Company’s general and administrative expenses for the three months ended June 30, 2026 amounted to $1,482,328, and consisted primarily
of $303,496 in employment costs, $838,821 in professional fees, and $340,011 in other office expenses.
The
Company’s general and administrative expenses for the six months ended June 30, 2026 amounted to $2,626,440, and consisted primarily
of $567,433 in employment costs, $1,279,635 in professional fees, and $779,372 in other office expenses.
The
Company’s general and administrative expenses for the three months ended June 30, 2025 amounted to $984,740, consisting primarily
of $667,979 in employment costs, $222,136 in professional fees, and $94,625 in other office expenses.
The
Company’s general and administrative expenses for the six months ended June 30, 2025 amounted to $1,698,162, consisting primarily
of $893,372 in employment costs, $464,012 in professional fees, and $340,778 in other office expenses.
Due
to the expansion of the Company’s financial services and advisory business teams, all employee salaries and benefits, professional
expenses, and office and other miscellaneous expenses have increased significantly compared to the same period in the previous year.
Research
and development expenses
Research
and development expenses consist primarily of costs incurred in connection with the development of the Company’s tokenization platform
network and related blockchain infrastructure initiatives.
For
the three and six months ended June 30, 2026, research and development expenses were $83,542 and $167,084, respectively, compared to
nil for both the three and six months ended June 30, 2025. The increase was primarily attributable to equity-based compensation recognized
in connection with system development services provided under the Comprehensive Technology Services Agreement entered into on July 23,
2025 with Palantir Innovation Technologies Corporation.
Pursuant
to the agreement, the Company engaged the service provider to assist with the development and implementation of a tokenization platform
network, including blockchain architecture design, RWA (Real World Assets) tokenization framework development, smart contract advisory,
and related compliance-supporting technical systems. As consideration, the Company issued ordinary shares to the service provider, which
are accounted for under ASC 718, Compensation—Stock Compensation.
The
equity awards granted under the agreement have a three-year service period. Accordingly, the total grant-date fair value of the shares
issued is being recognized as an expense on a straight-line basis over the requisite service period. During the three and six months
ended June 30, 2026, the Company recognized $83,542 and $167,084, respectively, of share-based compensation expense attributable to development-related
services, which has been classified within research and development expenses in the consolidated statements of operations.
The
Company did not incur material research and development expenses in 2025, as no comparable system development agreements were in effect
during that period.
Management
believes that continued investment in technology infrastructure and tokenization-related development initiatives is strategically important
to support potential future blockchain- and digital asset–enabled service offerings. However, the Company will continue to evaluate
the scope and pace of such investments in light of its broader capital allocation priorities and financial performance objectives.
Loss
on market price of stablecoins and digital assets
Loss
on market price of stablecoins and digital assets represents changes in the fair value of the Company’s digital assets holdings
and certain cryptocurrency-denominated balances recognized in earnings during the reporting period.
Effective
January 1, 2024, the Company adopted ASU 2023-08, which requires in-scope digital assets to be measured at fair value at each reporting
date, with changes in fair value recognized in net income. Accordingly, changes in fair value are recognized in net income in the period
in which they arise.
52
Classification
Between Continuing and Discontinued Operations
For
presentation purposes, the Company classifies fair value changes based on the operational nature and business association of the underlying
digital assets:
● Digital assets held in the wallet of the parent company, Chaince Digital Holdings Inc. (“Chaince Cayman”), are associated with treasury and corporate-level activities and are therefore classified within continuing operations.
● Filecoins held in the mining node accounts of the Company’s wholly owned subsidiary, MFH Tech, which relate directly to the Filecoin mining business, are classified within discontinued operations following the Board’s decision to wind down the distributed storage and computing services business.
● Adjustments arising from FIL-denominated receivables and payables associated with the Filecoin mining business are likewise classified within discontinued operations, as such balances are directly attributable to the mining operations.
Continuing
Operations
For
the three months ended June 30, 2026, loss on market price of stablecoins and digital assets from continuing operations totaled $110,597,
consisting of: (a) loss on market price of Bitcoin of $88,694; (b) loss on market price of USD Coin of $1,959; (c) loss on market price
of Solana (SOL) of $7,900; (d) loss on market price of Filecoin (held outside the mining node structure) of $11,690; and (e) loss on
market price of Tether USD of $354.
For
the six months ended June 30, 2026, loss on market price of stablecoins and digital assets from continuing operations totaled $388,967,
consisting of: (a) loss on market price of Bitcoin of $282,124; (b) loss on market price of USD Coin of $1,669; (c) loss on market price
of Solana (SOL) of $49,280; (d) loss on market price of Filecoin (held outside the mining node structure) of $55,540; and (e) loss on
market price of Tether USD of $354.
For
the three and six months ended June 30, 2025, loss on market price of stablecoins and digital assets from continuing operations totaled
$13,831 and $82,423, respectively, both of which were solely derived from loss on market price of Filecoin (held outside the mining node
structure).
These
losses relate primarily to digital assets held in Chaince Cayman’s corporate wallet and reflect declines in market prices during
the period. These amounts are included in “Loss on market price of stablecoins and digital assets” within continuing operations
in the consolidated statements of operations.
Discontinued
Operations
For
the three months ended June 30, 2026, gain on market price of stablecoins and digital assets from discontinued operations totaled $26,742,
consisting of: (a) $25,577 gain attributable to Filecoins held in MFH Tech’s Filecoin mining node accounts; and (b) $1,165 gain
arising from fair value adjustments to FIL-denominated receivables and payables associated with the Filecoin mining business.
For
the six months ended June 30, 2026, loss on market price of stablecoins and digital assets from discontinued operations totaled $99,974,
consisting of: (a) $102,109 loss attributable to Filecoins held in MFH Tech’s Filecoin mining node accounts; and (b) $2,135 gain
arising from fair value adjustments to FIL-denominated receivables and payables associated with the Filecoin mining business.
For
the three months ended June 30, 2025, loss on market price of stablecoins and digital assets from discontinued operations totaled $105,486,
consisting of: (a) $89,232 loss attributable to Filecoins held in MFH Tech’s Filecoin mining node accounts; and (b) $16,254 loss
arising from fair value adjustments to FIL-denominated receivables and payables associated with the Filecoin mining business.
For
the six months ended June 30, 2025, loss on market price of stablecoins and digital assets from discontinued operations totaled $570,742,
consisting of: (a) $576,020 loss attributable to Filecoins held in MFH Tech’s Filecoin mining node accounts; and (b) $5,278 gain
arising from fair value adjustments to FIL-denominated receivables and payables associated with the Filecoin mining business.
The
FIL-denominated receivables and payables were settled or measured in Filecoin and were therefore subject to remeasurement based on changes
in FIL market prices. Because these balances are directly related to the mining business, the associated fair value adjustments have
been classified within discontinued operations in accordance with ASC 205-20.
Overall
Volatility Considerations
The
increase in total fair value losses in 2026 compared to prior periods was primarily driven by declines in Filecoin market prices and
continued price volatility in major cryptocurrencies. Under the fair value model required by ASU 2023-08, the Company’s results
of operations are subject to increased volatility as both upward and downward market movements are recognized in earnings each reporting
period.
Interest
income/(expenses), net
The
Company’s interest income/(expenses), net consists of (i) convertible note interest costs, and (ii) interest income from cash deposits
and short-term investments.
The
Company’s interest income/(expenses), net for the three and six months ended June 30, 2026 amounted to $273,978 and $525,891, respectively,
and consisted of nil in convertible notes interest costs, and positive $273,978 and $525,891, respectively, in interest income from cash
deposits and short-term investments.
The
Company’s interest income/(expenses), net for the three months ended June 30, 2025 amounted to $120,250, and consisted of negative
$43,630 in convertible note interest costs, and positive $163,880 in interest income from cash deposits and short-term investments and
providing loans to external parties.
The
Company’s interest income/(expenses), net for the six months ended June 30, 2025 amounted to $ 171,431, and consisted of negative
$103,767 in convertible notes interest costs, and positive $275,198 in interest income from cash deposits and short-term investments
and providing loans to external parties.
53
Gain/(loss)
from market price of short-term investment
The
gain from market price of short-term investment for the three and six months ended June 30, 2026 and 2025 consists primarily of the net
gain from the market price changes of the common stocks and ETFs held by the Company.
Loss
before income taxes
Loss
before income taxes was $1,152,511 for the three months ended June 30, 2026, compared with loss before income taxes of $840,206 for the
three months ended June 30, 2025.
Loss
before income taxes was $2,271,873 for the six months ended June 30, 2026, compared with loss before income taxes of $1,639,278 for the
six months ended June 30, 2025.
Income
tax benefits
We
recorded income tax benefits of $103,779 for the three months ended June 30, 2026 and income tax benefits of $58,786 for the three months
ended June 30, 2025.
We
recorded income tax benefits of $136,488 for the six months ended June 30, 2026 and income tax benefits of $154,096 for the six months
ended June 30, 2025.
Loss
from continuing operations
Loss
from continuing operations was $1,048,732 for the three months ended June 30, 2026, compared with loss from continuing operations of
$781,420 for the three months ended June 30, 2025.
Loss
from continuing operations was $2,135,385 for the six months ended June 30, 2026, compared with loss from continuing operations of $1,485,182
for the six months ended June 30, 2025.
Loss
from discontinued operations
For
the three months ended June 30, 2026, the Company recognized a loss from discontinued operations of $56,268, compared to $764,932 for
the three months ended June 30, 2025.
For
the six months ended June 30, 2026, the Company recognized a loss from discontinued operations of $322,059, compared to $1,362,648 for
the six months ended June 30, 2025.
The
discontinued operations relate entirely to the Company’s distributed storage and computing services business, which consisted of
Filecoin (“FIL”) mining activities conducted through its wholly owned U.S. subsidiary, Mercurity Fintech Technology Holding
Inc. (“MFH Tech”). In December 2025, the Company’s Board of Directors approved a strategic decision to discontinue
this business, and the results of the Filecoin mining operations have been classified as discontinued operations in accordance with ASC
205-20.
Operating
Results of the Mining Business
For
the three months ended June 30, 2026, revenue from the Filecoin mining operations was $11,275, compared to $91,675 in 2025. Revenue fluctuations
were primarily driven by changes in mining output and market prices of FIL at the time rewards were received.
For
the six months ended June 30, 2026, revenue from the Filecoin mining operations was $49,002, compared to $208,008 in 2025. Revenue fluctuations
were primarily driven by changes in mining output and market prices of FIL at the time rewards were received.
Cost
of revenue for the three months ended June 30, 2026 was $93,994, primarily consisting of mining equipment depreciation, facility lease
and electricity costs, software-related expenses, and other operational costs necessary to maintain node operations compared to $246,428
in 2025. The mining business continued to generate negative gross margins during the period.
Cost
of revenue for the six months ended June 30, 2026 was $269,662, primarily consisting of mining equipment depreciation, facility lease
and electricity costs, software-related expenses, and other operational costs necessary to maintain node operations, compared to $495,222
in 2025. The mining business continued to generate negative gross margins during the period.
Nature
of the Loss
The
2026 loss from discontinued operations was driven primarily by: (a) ongoing negative operating margins from mining activities; (b) impairment
charges recognized in connection with the wind-down decision; and (c) fair value volatility of FIL holdings and FIL-denominated balances.
A
significant portion of the loss relates to non-cash items, including impairment and fair value adjustments.
Following the Board’s approval in December 2025, the Company ceased making new investments in the Filecoin
mining business and initiated an orderly wind-down of the related operations. By June 30, 2026, substantially all of the related mining
nodes had expired and the majority of the pledged FIL had been released, with a substantial portion of the released FIL subsequently sold
and converted into cash. A limited amount of FIL remained pledged in connection with certain remaining nodes as of June 30, 2026 and is
expected to be released by the end of 2026. The Company does not intend to make additional investments in or resume its Filecoin mining
operations.
Net
loss
As
a result of the foregoing factors, we recorded a net loss of $1,105,000 for the three months ended June 30, 2026, as compared to a net
loss of $1,546,352 for the three months ended June 30, 2025.
As
a result of the foregoing factors, we recorded a net loss of $2,457,444 for the six months ended June 30, 2026, as compared to a net
loss of $2,847,830 for the six months ended June 30, 2025.
54
Liquidity
and Capital Resources
Primary
Sources of Liquidity
Our
primary sources of liquidity consist of existing cash and cash equivalents, cash flows from operating activities, and proceeds from financing
activities.
As
of June 30, 2026, we had cash and cash equivalents of $30,973,382, stablecoins of $562,481, digital assets of $738,653, and total equity
of $46,767,178. The decrease in cash during 2026 was primarily driven by outflows from investing activities, partially offset by cash
generated from operating and financing activities.
Subsequent to June 30, 2026, the closing of the Company’s registered direct offering (the “Offering”)
occurred on August 11, 2026. Upon the closing, the Company received aggregate gross proceeds of US$16,196,800 before deducting offering
expenses. The Company intends to use the net proceeds from the Offering for its digital asset reserve, working capital and/or general
corporate purposes. See Note 17—“Subsequent Events.”
Management
continuously monitors liquidity levels, operating cash flow trends, capital expenditure requirements, and contractual commitments to
assess the Company’s ability to meet its short-term and long-term obligations. Based on current cash balances and expected operating
activities, management believes that the Company has sufficient liquidity to fund its operations and anticipated commitments for at least
the next twelve months.
The
Company may, from time to time, pursue additional equity or debt financing to support business expansion, strategic investments, or working
capital needs. The availability and terms of such financing are subject to market conditions and the Company’s financial performance.
Issuance of additional equity securities may result in dilution to existing shareholders, while the incurrence of debt may require the
Company to allocate cash toward debt service and may impose certain operational or financial covenants.
Cash
Flows
Cash
Flows for the six months ended June 30, 2026, compared to the six months ended June 30, 2025
The
following table sets forth a summary of our cash flows for the periods indicated:
For the six months ended June 30, Variance in
2026 2025 Amount %
Net cash provided/(used) in operating activities 98,628 (1,328,938 ) 1,427,566 -107.42 %
Net cash used in investing activities (6,784,565 ) (1,094,595 ) (5,689,970 ) 519.82 %
Net cash provided by financing activities 3,839,040 3,666,900 172,140 4.69 %
Effect of exchange rate changes 210 53 157 296.23 %
Net change in cash and cash equivalents $ (2,846,687 ) $ 1,243,420 $ (4,090,107 ) -328.94 %
Cash and cash equivalents, beginning of the year 33,820,069 24,009,331 9,810,738 40.86 %
Cash and cash equivalents, end of the period $ 30,973,382 $ 25,252,751 $ 5,720,631 22.65 %
For
the six months ended June 30, 2026, the net decrease in cash and cash equivalents amounted to $2,846,687, compared to a net increase
of $1,243,420 for the six months ended June 30, 2025. Cash and cash equivalents were $30,973,382 as of June 30, 2026, compared to $25,252,751
as of June 30, 2025. The decrease in cash during the six months ended June 30, 2026 was primarily driven by outflows from investing activities,
partially offset by cash generated from operating and financing activities.
55
Operating
Activities
Net
cash provided by operating activities was $98,627 for the six months ended June 30, 2026, compared with net cash used of $1,328,938 for
the six months ended June 30, 2025.
2026
Operating Cash Flow
For
the six months ended June 30, 2026, our net cash provided by operating activities was $98,628, reflecting a combination of net cash provided
by continuing operations of $313,463 and net cash used in discontinued operations of $214,835.
The
net cash provided by continuing operations was primarily attributable to (i) our net loss from continuing operations of $2,135,385, (ii)
an adjustment of deducted non-cash profit and loss items of a positive net amount of $1,135,353, mainly provision for doubtful accounts,
inclusive of depreciation, loss from selling short-term investments, exchange gains and losses, loss on market price of short-term investment,
loss on market price of stablecoins and digital assets, loss on share-based payment liabilities, interest income/(expenses), share-based
compensations, gain from debt forgiveness, non-cash revenue or gain, non-cash expenses, gain from deregistration of subsidiaries, and
other income or loss, (iii) changes in working capital that positively affected the cash flow from operating activities, primarily including:
a decrease of $42,471 in clearing deposits, a decrease of $119,831 in accounts receivable, a decrease of $1,509,409 in other receivable,
an increase of $44,621 in prepaid expenses and other current assets, an increase of $215,991 in accounts payable, a decrease of $83,717
in advance from customers and deferred revenues, an increase of $44,137 in other payables, and a decrease of $412,441 in accrued expenses
and other current liabilities, and (iv) changes in non-current assets and liabilities negatively affected cash flows from operating activities,
primarily as a result of a decrease in right-of-use assets of $160,464, an increase in deferred tax assets of $136,488, partially offset
by a decrease in operating lease liabilities of $101,541.
Operating
cash flows also included the effects of discontinued operations. Cash flows attributable to the Filecoin mining business primarily consisted
of operating lease payments, electricity and hosting expenses, and mining-related costs incurred during the wind-down period.
Operating
cash flow remained positive as the company continued to generate advisory revenue growth in the six months ended June 30, 2026.
2025
Operating Cash Flow
For
the six months ended June 30, 2025, our net cash used in operating activities was $1,328,938, reflecting a combination of net cash used
in continuing operations of $1,031,751 and net cash used in discontinued operations of $297,187.
The
net cash used in continuing operations was primarily attributable to: (i) our net loss from continuing operations of $1,485,182; (ii)
an adjustment of deducted non-cash profit and loss items of a positive net amount of $563,499, mainly inclusive of provision for doubtful
accounts, depreciation, gain from selling short-term investments, exchange gains and losses, gain from market price of short-term investment,
Loss on market price of stablecoins and digital assets, interest income/(expenses), non-cash revenue or gain, non-cash expenses, and
other income or loss; (iii) changes in working capital that positively affected the cash flow from operating activities, primarily including:
an increase of $100,445 in clearing deposits, an increase of $118,876 in accounts receivable, a decrease of $202,703 in other receivable,
a decrease of $172,081 in prepaid expenses and other current assets, an increase of $285,307 in advance from customers and deferred revenues,
an increase of $258,740 in other payables and a decrease of $282,926 in accrued expenses and other current liabilities; and (iv) changes
in non-current assets and liabilities that negatively affected the cash flow from operating activities, primarily including: a decrease
of $158,887 in right-of-use assets, a decrease of $154,096 in deferred tax assets and a decrease of $187,281 in lease liabilities.
Operating
cash flows in 2025 also included cash outflows related to Filecoin mining activities, which were presented within discontinued operations.
The
improvement in operating cash flow of continuing operations in 2026 compared to 2025 was primarily attributable to reduced working capital
outflows and changes in other receivables.
Investing
Activities
Net
cash used in investing activities was $6,784,565 for the six months ended June 30, 2026, compared to net cash used in investing activities
of $1,094,595 for the six months ended June 30, 2025.
2026
Investing Cash Flow
For
the six months ended June 30, 2026, our net cash used in investing activities was $6,784,565, reflecting net cash used in continuing
operations of $6,784,565. The net cash used in continuing operations was primarily attributable to cash received from short-term investment
interest and dividends of $4,914, cash received from selling short-term investments of $154,871, cash received from selling cryptocurrencies
of $ 2,891,714, cash paid for purchasing digital assets of $125,828, cash paid for property and equipment of $11,336, and cash paid for
short-term investments of $9,698,900.
2025
Investing Cash Flow
For
the six months ended June 30, 2025, our net cash used in investing activities was $1,094,595, reflecting net cash used in continuing
operations of $1,094,595. The net cash used in continuing operations was primarily attributable to cash received from short-term investment
interest and dividends of $301, and cash paid for short-term investments of $1,094,896.
56
Financing
Activities
Net
cash provided by financing activities was $3,839,040 for the six months ended June 30, 2026, compared to net cash provided by financing
activities of $3,666,900 for the six months ended June 30, 2025.
2026
Financing Cash Flow
For
the six months ended June 30, 2026, our net cash provided by financing activities was $3,839,040. This cash flow was solely derived from
continuing operations and was primarily attributed to cash received from equity financing of $3,839,040.
2025
Financing Cash Flow
For
the six months ended June 30, 2025, our net cash provided by financing activities was $3,666,900. This cash flow was solely derived from
continuing operations and was primarily attributed to cash received from private placement of $8,041,900, cash paid for repaying the
convertible notes of $4,000,000, and cash paid for financing-related financial advisory fees of $375,000.
Cash
and Cash Equivalents, and Restricted Cash
As
of June 30, 2026, the Company had cash and cash equivalents of $30,973,382, compared to $33,820,069 as of December 31, 2025.
The
decrease in cash and cash equivalents in the six months ended June 30, 2026 was primarily driven by outflows from investing activities,
partially offset by cash generated from operating and financing activities.
Short-term
Investments
As
of June 30, 2026, the Company held short-term investments of $12,803,368, primarily consisting of U.S. Treasury Bills, ETFs, certificates
of deposit, and common stock received in exchange for consulting services, compared to $2,243,567 as of December 31, 2025.
Stablecoins
and Digital Assets
As
of June 30, 2026, the Company held stablecoins and digital assets from continuing operations with an aggregate fair value of $1,301,134,
consisting of USD Coin, Tether USD, Bitcoin, Solana, and Filecoin, compared to $4,027,522 as of December 31, 2025.
Effective
January 1, 2024, the Company adopted ASU 2023-08, under which digital assets are measured at fair value with changes in fair value recognized
in net income. Accordingly, the carrying amounts of digital assets as of June 30, 2026 and December 31, 2025 reflect fair value measurement
at the respective reporting dates.
As
previously disclosed, digital assets associated with the Company’s discontinued Filecoin mining operations are presented separately
within discontinued operations in the consolidated financial statements.
Contingencies
From
time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. As of June 30, 2026, management
is not aware of any pending or threatened claims that, if adversely determined, would have a material adverse effect on the Company’s
financial position, results of operations, or cash flows.
Capital
Expenditures
Capital
expenditures for the six months ended June 30, 2026 and 2025 were $6,784,565 and $1,094,595, respectively.
Capital
expenditures in the six months ended June 30, 2026 primarily related to purchases of short-term investments of $9,698,900. Capital expenditures
in the six months ended June 30, 2025 were $1,094,896, primarily related to purchases of short-term investments.
The
Company expects to fund future capital expenditures primarily through existing cash and cash equivalents. The level and timing of future
capital expenditures will depend on the Company’s strategic initiatives, operating performance, and market conditions.
57
Contractual
Obligations
The
following table sets forth our contractual obligations as of June 30, 2026:
Payment Due by Period
Total Less than 1 year 1-3 years More than 3 years
Operating lease commitments 1,015,425 190,944 791,046 33,435
Total $ 1,015,425 $ 190,944 $ 791,046 $ 33,435
Other
than those shown above, we did not have any significant capital and other commitments as of June 30, 2026.
Off-balance
Sheet Commitments and Arrangements
We
have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations
of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’
equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest
in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have
any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages
in leasing, hedging or product development services with us.
ITEM